Bankruptcy Court: What Is It & How Do I Avoid It?
Do I Have To Go To Bankruptcy Court?
Debt is a reality of life for many. And when our debts start to pile up over time, they can quickly spiral out of control.
When we become unable to repay our debts, people in Canada may perceive bankruptcy as the only way out.
However, what you may not have realised is that there are many different kinds of bankruptcy.
Each individual case adds depth and nuance to the laws surrounding bankruptcy in Canada.
If you’re wondering “how do I avoid Bankruptcy Court?” there’s good news.
Very few personal bankruptcy claims every go to court.
Here we’ll do our best to demystify Bankruptcy Court and explain how you can avoid it.
What is Bankruptcy Court?
First of all, it’s important to establish that Bankruptcy Court is not a criminal court.
Canada has a separate court system designed specifically to address issues of bankruptcy.
So bankrupt people do not need to worry about being tried as criminals or being “lumped in” with lawbreakers at their hearings.
Like all courts, the Bankruptcy Court is presided over by a judge.
In this case, the presiding judge will be a bankruptcy specialist who is highly conversant with the Canadian Bankruptcy and Insolvency Act.
In most instances, Bankruptcy Courts will schedule hearings that are similar to one another on the same day.
So anyone else you see there will be facing circumstances similar to yours.
It’s also important to note that you will not have to face the court on your own.
Your Licensed Trustee will be able to attend the hearing with you and advise you on the day.
How do I avoid Bankruptcy Court?
While Bankruptcy Court is not as intimidating as many people assume, we totally understand that most people would rather avoid it.
It’s important to remember that the majority of bankruptcies never see the inside of a courtroom.
A court hearing is usually only deemed necessary if the person made bankrupt fails to perform the duties that are expected of them.
In the majority of cases, bankruptcies end with an automatic discharge.
When this happens, a document is issued confirming that all debt included in the bankruptcy should be officially discharged and written off by your creditors, accordingly.
However, there are some circumstances where a creditor (or even a trustee) may oppose a bankruptcy discharge.
Here are some reasons why a creditor may oppose an automatic discharge;
- There is proof of fraudulent activity. This may make your debts collectible even after a discharge.
- If you owe a large debt to the Canada Revenue Agency. The CRA may oppose a discharge if you owe more than $200,000 and this represents 75% of your debt or more.
- Some banks may choose to oppose if you have borrowed money for professional studies such as attending medical or law school.
Know your responsibilities
Now that we know a little about automatic discharges (and how they’re the best way to avoid your bankruptcy going to court), let’s look at how you ensure one.
Basically, to attain an automatic discharge, your Trustee needs to be satisfied that you have fulfilled the duties required of you.
Usually, you will need to meet certain obligations within your first 9 months of bankruptcy.
- Providing all the necessary information to file your pre-bankruptcy and post-bankruptcy tax returns;
- Submitting your monthly income and expense reports including paystubs and receipts for expenses;
- Making all necessary payments to the state;
- The attendance of two mandatory counseling sessions;
- Reporting all of your assets to the Trustee as well as providing any requested documentation that will help to value them;
- Keeping your contact information up to date, and staying in contact with your Trustee.
If you are unable to perform these duties, your Trustee will have no choice but to oppose a discharge.
We’re here to help!
We understand that the idea of Bankruptcy Court may be a source of great apprehension and worry to many Canadians.
Although Bankruptcy Court is the exception rather than the norm for most people, we appreciate that many bankrupt Canadians need all the support and reassurance they can get.
That’s why we’re here to help ordinary people just like you.
We can help you to better understand your options and involve harsh penalties.
Our callback service is 100% confidential, risk-free, and absolutely zero-obligation.
Since we opened up in 1999 we’ve helped over 200,000 Canadians from all walks to life to get a fresh financial start.
If you’re worried about the possibility of Bankruptcy Court, please don’t hesitate to get in touch with us today on (877)879-4770!