How Bankruptcy Works
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A main purpose of the Canadian bankruptcy law is to afford a person the opportunity to get a fresh start by eliminating their overwhelming amounts of debt that they have no hope of repaying. The main requirement for filing bankruptcy in Canada is you must be insolvent which means your debts are at least $1,000 and you are unable to pay your debt as it becomes due.
When going bankrupt you can keep certain assets to help you with your “fresh financial start.”
The overview of how bankruptcy works is that most people who file bankruptcy keep all their assets and are out of bankruptcy in nine months. In most cases all unsecured debts are erased upon the discharge (when the person is out of bankruptcy).
In almost all bankruptcies the debtor must pay $200 each month for 9 months for a total cost of $1,800.
Our bankruptcy cost calculator will give you the exact bankruptcy cost based on your personal situation.
How bankruptcy works is also by providing protection for a person filing bankruptcy.
As soon as a bankruptcy or consumer proposal is filed, all actions including collection calls and wage garnishments, by law, must stop.
Protection is also provided to bankrupts by the fact that:
- A LIT (Licensed Insolvency Trustee, formerly known as a bankruptcy trustee) is the only debt relief professional that guarantees you protection from creditor harassment;
- Trustee fees are set by the Canadian government so the cost will be the same (usually about $200.00/month for nine months) no matter which trustee in Canada a person uses.
- If there is a dispute with the trustee the bankrupt can request that the dispute goes to mediation.
How bankruptcy works is also by eliminating most debts.
While going bankrupt will eliminate most of your debts, certain debts survive the bankruptcy:
- Court imposed fines;
- Money that you owe for items obtained through theft;
- Money gained through misrepresentation;
- Child support and alimony payment arrangements;
- Damages that were awarded by the court for sexual assault or intentional infliction of bodily harm;
- Student loans if going bankrupt occurs prior to or within 7 years after finishing the studies.
What you can keep:
Your province or Territory sets the equity in assets you can keep.
Remember that assets include a tax refund as at the date of bankruptcy and for the year of bankruptcy. Also included in assets are such things as inheritances, insurance settlements etc.
The cost and how long you will be in bankruptcy.
The cost and how long you will be in bankruptcy depends on:
- Your income and family situation;
- How much you earn;
- Whether you have been bankrupt before.
Our Calculator will tell you the cost and how long you will be in bankruptcy.
Overview of the Steps in a Bankruptcy
This article will give you a good overview of the steps in a bankruptcy.
How to Choose a Trustee in Bankruptcy.
Please read this to find out how to choose a trustee in bankruptcy.