Navigating the Online Bankruptcy Process in Canada: A Comprehensive Guide
In our evolving digital world, even the most daunting processes like filing for bankruptcy have become accessible online. This guide aims to provide a thorough understanding of how to file bankruptcy online in Canada, detailing each step and offering necessary resources.
1. The Emergence of Online Bankruptcy
Traditionally, declaring bankruptcy required in-person meetings with an accredited Licensed Insolvency Trustee (LIT). However, this changed due to the COVID-19 pandemic’s social distancing regulations. The Office of the Superintendent of Bankruptcy (OSB) modified its guidelines, permitting trustees to use video conferencing tools, phone calls, and electronic signatures to administer bankruptcy procedures.
This digital shift was facilitated by the Bankruptcy and Insolvency Act’s directive, 6R3, which allows LITs to use alternatives to in-person assessments during exceptional circumstances. On March 13, 2020, the OSB declared the coronavirus pandemic to be such a circumstance. Thus, trustees were encouraged to use digital means for assessments, counselling, and creditors meetings. This change made it possible for Canadians to complete all steps of the bankruptcy process online.
2. The Process Explained
Filing for bankruptcy online follows the same steps as the traditional process:
Step 1 – Consult a Licensed Insolvency Trustee
The initial step is to seek advice from a Licensed Insolvency Trustee. As the only certified professionals authorized to administer bankruptcies in Canada, LITs can guide you through the process. They assess your financial situation and recommend suitable debt relief solutions.
Even if you believe bankruptcy is your only way out, your trustee might suggest alternatives like a consumer proposal, which could be a better fit. They present all available options and potential outcomes to help you make an informed decision.
Step 2 – Complete the Required Documents
If bankruptcy is deemed the best solution, your LIT will email you the necessary documents. Once filled out and returned, the trustee will review each document, ensuring the information is correct, following which they will request your electronic signature.
Step 3 – Submit the Paperwork
Upon signing the documents, your trustee will contact your creditors, halt all debt collection efforts, wage garnishments and request the release of any frozen bank accounts. This occurs immediately.
Step 4 – Attend Mandatory Counselling Sessions
Finally, you’ll need to complete two credit counselling sessions with your trustee. These sessions, which can be conducted via video conference or phone calls, are mandatory.
3. Required Documents
Your trustee will inform you about the necessary documents for filing bankruptcy online. These typically include two distinct bankruptcy forms:
- Form 79: A Statement of Affairs, which encompasses all your assets, liabilities, and personal details.
- Form 21: An Assignment of Assets, indicating your consent to assign all your eligible assets for your creditors’ benefit.
4. Benefits of Filing Online
Choosing to file bankruptcy online in Canada offers several advantages:
Safety
In the time of COVID-19, online bankruptcy filing eliminates the need for in-person meetings, ensuring your safety.
Time Efficiency
Online filing eliminates travel time to and from your trustee’s office.
Streamlined Communication
All necessary paperwork is sent and received via email, making the process smoother.
Convenient Access
You can initiate the bankruptcy process from your home’s comfort, even if you’re currently residing outside of Canada.
5. For Canadians Residing Abroad
Even if you’re living in the United States or elsewhere, you can still file bankruptcy in Canada if you meet specific conditions. These include having most of your assets in Canada, being a resident of Canada within the last year, or conducting business in Canada in the last year.
6. Categories of Online Bankruptcy
There are several types of bankruptcy that you can file for online:
- Personal Bankruptcy: The most common type in Canada, generally filed due to loss of income, unexpected costs, or difficulties in meeting financial obligations.
- Small and Medium Businesses Bankruptcy: If your business isn’t incorporated, its debts and assets are considered yours. Therefore, the process is similar to filing personal bankruptcy.
- Corporate and Large Businesses Bankruptcy: Corporate bankruptcy in Canada is more complex and requires a trustee specializing in corporate bankruptcy.
7. Understanding Your Financial Status
Before deciding to file for bankruptcy, it’s crucial to assess your financial situation and explore other alternatives.
8. Alternatives to Bankruptcy
Several alternatives can guide you out of debt. These include liquidating personal assets, personal budgeting, debt restructuring, debt consolidation, debt management plans, informal debt settlements, and consumer proposals. Each of these options can be explored in detail with the guidance of your LIT.
9. Seeking Professional Help
If you’re struggling with debt, it’s recommended to consult a Licensed Insolvency Trustee. They can help you identify the best solution for your financial situation. Many firms offer free, confidential, virtual consultations.
10. Conclusion
Filing for bankruptcy should be a last resort after exploring all other options. With the online process now available in Canada, it has become a more accessible and convenient solution for those struggling with debt. Whether you decide to file for bankruptcy or pursue an alternative, the key is to seek professional advice and make an informed decision.
