What happens when you declare bankruptcy?

_{What happens when you declare bankruptcy, what happens when you declare bankruptcy, Alberta}

Thinking about filing for bankruptcy in Canada? You’ll start by meeting with a Licensed Insolvency Trustee (LIT). Your LIT will help assess your debts and assets, then file needed documents to stop creditor calls instantly with an automatic stay. Expect some assets to be sold, but necessary items are usually safe. After completing credit counseling, your unsecured debts can be wiped clean, though some, like child support, remain. Credit hits happen, but recovery is within reach. Not all trustees are trustworthy, so choose wisely. Reach out via phone, text, or live chat if you have any questions.

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What Happens When You Declare Bankruptcy Question

what happens when you declare bankruptcy My friend filed for bankruptcy and said it changed their life. I’m struggling with debt and want to know what happens if I declare bankruptcy, including how it affects my finances.

From: Anonymous Question
Location: Edmonton, Alberta (AB)
Category: personal bankruptcy

What Happens When You Declare Bankruptcy Answer

If you’re considering bankruptcy in Canada, the journey kicks off with a visit to a Licensed Insolvency Trustee. They’ll assess where you stand financially—looking at what you owe and what you own. Bankruptcy officially begins when they file the essential documents with the Office of the Superintendent of Bankruptcy (OSB). This filing puts an immediate halt on creditors pestering you for payment—all thanks to an automatic stay. Sure, some of your stuff might be sold off to pay back your debts, but don’t worry, you can keep some necessary items, depending on where you live. You will also need to attend two mandatory credit counseling sessions and keep your LIT updated with monthly financial check-ins.

Going through bankruptcy means you can wipe the slate clean on unsecured debts, like those nagging credit cards or personal loans, after a set time (usually 9 to 21 months if there’s extra income involved). But not all debts vanish—think child support and certain taxes. Your credit score might take a hit since the big B word sticks around on your credit report for six years from when you’re discharged. Don’t fret, though; rebuilding your credit is totally doable with the right moves.

It’s important to pick a trustworthy LIT for this journey. Not all trustees are as reliable as they should be, so choose wisely. Trustees are compensated by lenders and creditors, so they don’t represent the interests of Canadians in debt. They may also charge additional fees or bill you twice. Be mindful! We’re here to help via phone, text, or live chat.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

When you declare bankruptcy in Canada, several key things happen:

1. Automatic Stay: Upon filing, an automatic stay of proceedings is enforced under Section 69 of the Bankruptcy and Insolvency Act (BIA). This means creditors cannot pursue collection actions against you.

2. Appointment of Trustee: A licensed insolvency trustee is appointed to manage your bankruptcy case. They will help you understand your rights and obligations as outlined in the BIA.

3. Asset Liquidation: Your assets may be sold to pay creditors, although you can keep certain exempt assets as specified in Section 67 of the BIA.

4. Debt Discharge: After fulfilling your obligations (typically after 9 to 21 months depending on circumstances), you may receive a discharge from your debts, which relieves you from having to pay most unsecured debts, according to Section 178 of the BIA.

5. Credit Impact: Bankruptcy will significantly affect your credit rating. It will be noted on your credit report for at least 6 to 7 years after your discharge. To understand how this affects your financial future, you can learn about credit rebuilding.

6. Financial Education: You may be required to complete financial counselling as part of the bankruptcy process, aligning with regulations stipulated in various parts of the BIA.

Before proceeding, it is crucial to consider all alternatives, such as consumer proposals or debt management plans, which might be less impactful on your finances and credit.

From: OSB Helper

Related Questions to What Happens When You Declare Bankruptcy

Here are the top 5 most frequently asked questions related to declaring bankruptcy, based on current trends and concerns:

1. Who will know if I file for bankruptcy?

Only your trustee, creditors, and the Office of the Superintendent of Bankruptcy will typically have knowledge of your bankruptcy filing, though it is a matter of public record[5].

2. How does bankruptcy affect my credit score?

Bankruptcy information will be included in your credit report and can remain there for several years, impacting your credit score[5].

3. What assets can I keep if I declare bankruptcy?

In bankruptcy, you may have to surrender some assets, but certain assets like primary residences, vehicles, and personal effects may be exempt depending on provincial laws[5].

4. How long does bankruptcy last?

The duration of bankruptcy can vary, but typically it lasts for 9 to 21 months for a first-time bankrupt, after which you may be discharged from most of your debts[5].

5. Can I still get credit after declaring bankruptcy?

Yes, you can start rebuilding credit immediately after bankruptcy, but it may be more challenging and expensive to obtain credit, and the bankruptcy will be reflected on your credit report for several years[4][5].

If you have a question about debt see our debt questions or ask your own debt related question.

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