What happens when you file bankruptcy?

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In Canada, filing for bankruptcy triggers an automatic halt on debt collection activities, including wage garnishments and lawsuits. A Licensed Insolvency Trustee will oversee the process, managing your non-exempt assets and ensuring creditors are informed. During the 9 to 21-month process, you’ll attend credit counseling, track income, and possibly make surplus income payments. Not all debts are dischargeable, like court fines and child support. Reach out via phone, text, or live chat if you have any questions. Not all trustees can be trusted.

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_{Understanding the bankruptcy process with a Licensed Insolvency Trustee.}

What Happens When You File Bankruptcy Question

What happens when you file bankruptcy? I’m wondering what happens after filing for bankruptcy. I’d like to understand the process and its effects.

From: Anonymous Question
Location: Richmond, British Columbia (BC)
Category: personal bankruptcy

What Happens When You File Bankruptcy Answer

Once you file for bankruptcy in Canada, there’s a safety net that immediately kicks in – an automatic stay of proceedings. This protection halts any debt collection drama, stopping all creditor actions dead in their tracks, including those pesky wage garnishments and lawsuits. Enter the Licensed Insolvency Trustee. This financial superhero manages the whole bankruptcy gig, taking control of non-exempt assets, turning them into cash, and giving creditors a heads-up. But it’s not all hands-off from there. You’ve got some homework: showing up for two credit counselling sessions, keeping tabs on your income with monthly statements, and possibly shelling out surplus income payments if you’re bringing in the big bucks over certain thresholds. The LIT then plays paper pusher, filing the necessary docs with the Office of the Superintendent of Bankruptcy to lock in your bankruptcy status with a Certificate of Appointment. Typically, this whole shindig lasts anywhere from 9 to 21 months, depending on your earnings, during which a good chunk of unpaid debts can be kissed goodbye. But remember, some debts like court fines and child support don’t leave the party that easily.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

When you file for bankruptcy in Canada, several key processes and effects take place:

1. Automatic Stay of Proceedings: Upon filing, an automatic stay is initiated, which prevents creditors from pursuing debts or taking legal action against you (Bankruptcy and Insolvency Act, Section 69).

2. Appointment of a Trustee: A licensed insolvency trustee is appointed to administer your bankruptcy. The trustee’s responsibilities include overseeing the bankruptcy process, selling non-exempt assets, and distributing the proceeds to creditors (Bankruptcy and Insolvency Act, Section 16).

3. Meeting of Creditors: You may be required to attend a meeting of creditors, where they can discuss your financial situation and ask questions regarding your bankruptcy (Bankruptcy and Insolvency Act, Section 19).

4. Financial Counseling: As part of the bankruptcy process, you’ll need to complete financial counseling sessions that focus on budgeting and financial management (Bankruptcy and Insolvency Act, Section 66.1).

5. Duration of Bankruptcy: The typical duration of bankruptcy is 9 months if it’s your first time and you have no surplus income. If you have surplus income, it may extend to 21 months (Bankruptcy and Insolvency Act, Section 71).

6. Effects on Credit Rating: Filing for bankruptcy negatively affects your credit rating, typically resulting in an R9 rating, and can remain on your credit report for 6 to 7 years after discharge (Bankruptcy and Insolvency Act, Section 168).

7. Discharge from Bankruptcy: After fulfilling all requirements, including payments and counseling, you can be discharged from bankruptcy, which releases you from most debts (Bankruptcy and Insolvency Act, Section 178).

8. Ongoing Obligations: Even after discharge, you may still be required to fulfill certain obligations, such as making payments to creditors, if applicable (Bankruptcy and Insolvency Act, Section 178).

These steps outline the effect and process following the filing for bankruptcy under the Bankruptcy and Insolvency Act.

From: OSB Helper

Related Questions to What Happens When You File Bankruptcy

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

1. How long does bankruptcy last?

Bankruptcy in Canada typically lasts for 9 to 21 months, depending on whether it is a first-time bankruptcy and if there is surplus income[1].

2. What happens to my credit score if I declare bankruptcy?

Declaring bankruptcy will significantly lower your credit score, and the bankruptcy will remain on your credit report for 6 or 7 years, depending on the province[3].

3. What can I keep if I go bankrupt?

You can keep certain assets such as primary residence (up to a certain value), essential household items, and some retirement savings like RRSPs, subject to provincial exemptions[1].

4. Can I include my tax debts in bankruptcy?

Yes, you can include tax debts in your bankruptcy, but it is important to consult with a Licensed Insolvency Trustee to understand the specific implications[1].

5. How can I rebuild my credit after bankruptcy?

You can start rebuilding your credit shortly after your bankruptcy discharge by adopting positive financial habits, such as making timely payments on new credit, and seeking professional guidance[3].

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

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