Is It Possible For Me to Go Bankrupt If I’m a Medical Doctor?
You might be wondering – can a medical doctor in Canada file for bankruptcy if they still want to practice?
No matter how much you earn, you could at one point or another find yourself in financial turmoil, leading you to consider filing for bankruptcy.
And while it varies province by province, generally, your bankruptcy will have no impact on your ability to continue practicing medicine.
Of course, it’s vital that you discuss with your Licensed Insolvency Trustee (LIT) how your license could be affected in your specific province, along with the ways in which you could regain your control over your finances.
The first step that you should take the moment that you realize that you can no longer pay all of your debts in full, it will help to deal with your financial difficulties in the most suitable way possible.
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The Downside of Bankruptcy – Surplus Income
Along with having an effect on your credit rating, through bankruptcy, you’ll also have to face surplus income rules.
And as you’re a high-income earner, this results in you having to pay a hefty sum into your bankruptcy – far more than that of those who earn less.
This surplus income is put on top of what you already owe in debt, making the repayments that bit more challenging.
Not only because this can be 50% of the income that’s earned over the threshold amount, but because you’ll be considered to be legally bankrupt for far longer.
Alternatives to Filing For Bankruptcy
Although filing for bankruptcy won’t take away your medical license, the stress that comes with this decision makes it far less favorable to other options available.
A different approach you could take is to deal with your creditors, asking if there is a way that you can make your payments far more manageable.
However, if this doesn’t work, then you could try to file a Consumer Proposal instead.
Often the most popular choice for doctors wanting to avoid declaring bankruptcy, it’s procedures are set out in accordance with Canada’s federal Bankruptcy and Insolvency Act.
A way of restructuring your financial affairs, there are many benefits for medical professionals for opting for this route rather than bankruptcy.
By doing this, you’ll settle your debts with your creditors for less than you owe them and you could have the opportunity to extend how long you have to repay them (over a maximum of 5 years).
It also means that any unsecured debts (e.g. bank loans and credit card debts) are eliminated, (as well as your student loan – if you’ve been out of medical school for over 7 years) easing the financial burden that you gave.
As well as this, through successfully filling a Consumer Proposal, you can benefit from keeping all of your assets (e.g. home equity) and all of your tax debts are eliminated.
Ensuring that after you’ve made an initial lump-sum payment that you can make a series of more manageable payments, it’s a compromise between you and your creditors.
When the payments are then complete and all the debts are settled, you’ll have successfully finished the process.
Consumer Proposals – The Process
During your initial consultation with your trustee, they will assess your finances and calculate how much you’d have to pay in surplus income payments if you filed for bankruptcy.
In this stage, they will also look at the value of any assets that could be taken in the bankruptcy process.
As a way of convincing your creditors to accept your proposal, the trustee will usually recommend you to offer payments slightly higher than their fair market value.
There are two types of proposal procedures to consider –
- Consumer – debts are less than $250,000 (minus your home mortgage).
- Commercial (Division I) – debts are higher than $250,000 (minus your home mortgage)
If you find yourself in the latter category, it’s particularly vital that you ensure that the proposal is appealing, otherwise a rejection is likely.
When this occurs, you’ll find yourself in automatic bankruptcy.
When your proposal is filed, your creditors will have 45 days to accept, reject or offer a counteroffer to the proposal.
Find Out More Today
If you’re a doctor or another type of medical professional with an unsecured debt, then get in contact with Bankruptcy Canada today.
Helping to guide you in the right direction, you’ll be able to start fresh and regain your financial freedom.
Call us today on (877) 879-4770 or email us through our website.
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