How to File Bankruptcy
Speak to a Licensed Insolvency Trustee About Filing Bankruptcy
Filing for bankruptcy can be a daunting process, but it doesn’t have to be. In fact, it can be a positive step towards eliminating overwhelming debts and getting a fresh start. This guide will provide you with a comprehensive overview of the bankruptcy filing process in Canada, including the necessary steps and considerations.
Understanding Bankruptcy in Canada
Bankruptcy in Canada is a legal process regulated by the Bankruptcy and Insolvency Act. It allows a debtor to assign non-exempt assets for the benefit of creditors in exchange for being discharged from most debts. The purpose of this act is to provide an opportunity for an honest, but unfortunate, debtor to obtain debt relief, subject to reasonable conditions.
One important aspect of the bankruptcy process is the involvement of a Licensed Insolvency Trustee. The trustee acts as a mediator to ensure fairness between the debtor and the creditors. They play a crucial role in overseeing the bankruptcy proceedings and ensuring that both parties are treated fairly.
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Reasons for Filing Bankruptcy
There are several reasons why individuals may choose to file for bankruptcy in Canada. Here are some common motivations:
Elimination of Unsecured Debts: Filing for bankruptcy allows individuals to eliminate most of their unsecured debts, such as credit card debt and personal loans.
Protection Against Wage Garnishments: Bankruptcy puts a stop to wage garnishments, providing relief for individuals who are experiencing deductions from their paychecks.
Halt to Collection Actions: Once the bankruptcy process begins, unsecured creditors are legally prohibited from taking further legal steps to recover their debts, such as seizing property or initiating collection actions.
Credit Counseling for Financial Recovery: Bankruptcy provides an opportunity for individuals to receive credit counseling, which can help them rebuild their financial lives and make better financial decisions in the future.
Fresh Start Free from Debt: Ultimately, bankruptcy offers individuals a fresh start, free from overwhelming debt burdens, and allows them to regain control of their financial future.
Steps to Filing Bankruptcy in Canada
If you have decided that filing for bankruptcy is the right choice for your financial situation, here are the five basic steps involved:
1. Get a Free Debt Assessment
To begin the bankruptcy process, you will need to contact a Licensed Insolvency Trustee. They will assess your financial situation and explain the available debt relief options, including bankruptcy. If you decide to proceed with bankruptcy, the trustee will guide you through the necessary paperwork.
2. Sign the Bankruptcy Documents
Once you have completed the necessary paperwork, you will need to sign two important forms: the Assignment and the Statement of Affairs. The Assignment states that you are surrendering your assets to the trustee for the benefit of your creditors, while the Statement of Affairs provides a comprehensive overview of your financial information.
3. File the Bankruptcy Documents
After signing the bankruptcy documents, the trustee will file them with the Official Receiver, officially initiating the bankruptcy process.
4. Complete Bankruptcy Duties
As a bankrupt individual, you have certain duties to fulfill during the bankruptcy process. These duties may include making bankruptcy payments, providing information about your monthly budget, attending credit counseling sessions, and notifying the trustee of any significant changes in your circumstances.
5. Obtain the Certificate of Discharge
Once you have fulfilled all your bankruptcy duties, you will be eligible to receive a Certificate of Discharge. This document signifies that you have been discharged from your debts and can start afresh.
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Joint Bankruptcy Assignments
In some situations, individuals in a close financial relationship may choose to file for bankruptcy together through a joint bankruptcy assignment. This option is available if the debts of both parties are substantially the same and the bankruptcy trustee believes it is in the best interest of both debtors and creditors.
Meeting of Creditors
While a meeting of creditors is not necessary in most personal bankruptcies, there may be instances where it is required. This meeting provides an opportunity for creditors to ask questions and vote on matters related to the administration of the bankruptcy estate. If a meeting is called, you will be required to attend and answer questions about your financial affairs.
Examination with the Official Receiver
In some cases, the Official Receiver may request an examination under oath to gather more information about your bankruptcy. This examination typically occurs in about one out of every 300 bankruptcies and is usually selected at random. Your trustee will help you prepare for the examination and review the questions you are likely to be asked.
Discharge from Bankruptcy
For first-time bankrupt individuals, an automatic discharge is granted nine months after filing for bankruptcy, unless there are specific conditions or objections raised by creditors, the trustee, or the Superintendent of Bankruptcy. In cases where there is surplus income of more than $200 per month, the bankruptcy period may be extended to 21 months.
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Filing for bankruptcy in Canada can be a complex process, but with the guidance of a Licensed Insolvency Trustee, it can provide a path to financial recovery and a fresh start. By following the steps outlined in this guide, you can navigate the bankruptcy process with confidence and emerge on the other side debt-free. If you are considering bankruptcy, it is important to seek professional advice to determine the best course of action for your specific financial situation.
Schedule a free debt assessment with Bankruptcy Canada to explore your options and get the assistance you need to regain control of your financial future.