How Do I Declare Bankruptcy in BC?

Comprehensive Guide on How to Declare Bankruptcy in British Columbia (BC)

In financial distress and contemplating “how do I declare bankruptcy in BC?” Bankruptcy is a legal process that provides relief to individuals struggling with unmanageable debt. While it offers a fresh financial start, it’s critical to understand the process, implications, and alternatives before diving in. This article offers a comprehensive guide on declaring bankruptcy in BC.

Bankruptcy in BC is a legal process governed by the Bankruptcy and Insolvency Act. It offers debt relief to individuals or businesses incapable of repaying their financial obligations. Declaring bankruptcy requires the assistance of a Licensed Insolvency Trustee (LIT) who administers your assets in a trust to settle debts with creditors.

Eligibility for Bankruptcy Anyone owing at least $1,000 and unable to repay their debts immediately qualifies for bankruptcy. However, most individuals filing bankruptcy in BC possess significantly higher debt amounts.

Mechanics of Bankruptcy

Upon declaring bankruptcy, a LIT liquidates your non-exempt assets to repay creditors. Proceeds from asset sales or the assets themselves are distributed among creditors to recoup as much debt as possible. However, BC’s bankruptcy laws permit you to retain some assets, categorized under property exemptions.

Consequences of Bankruptcy

While bankruptcy removes your debt obligations, it has long-term implications. It taints your credit history for seven years (14 in some cases), making it challenging to secure loans or get favorable interest rates. Moreover, you lose a significant portion of your property during the process.

Bankruptcy in BC: Key Statistics

Despite BC’s above-average income levels, bankruptcy rates are high. In Q2 2022, the average non-mortgage debt was $57,451 in BC. Although bankruptcy rates fell between 2021 and 2022, they remain substantial compared to Ontario and Alberta.

Bankruptcy vs. Debt Relief Alternatives

Bankruptcy should be the last resort for debt management. Before deciding, consider other debt relief options, including debt settlement, debt consolidation, credit counselling, consumer proposal, and debt management programs. A LIT can help evaluate the best option for your situation.

Process of Filing for Bankruptcy

Filing for bankruptcy involves creating and signing legal bankruptcy documents, initiating the official bankruptcy process. Only a LIT has the legal authority to assist with bankruptcy in BC. The process starts with a free consultation with a LIT, followed by the preparation of bankruptcy documents.

Bankruptcy and Your Spouse

If you declare bankruptcy, it doesn’t automatically imply your spouse is also bankrupt. Unless you and your spouse have jointly held debts, your bankruptcy generally won’t impact them. If your spouse is a co-signer or co-cardholder, they remain responsible for repaying the joint debt if you file for bankruptcy.

Bankruptcy and Creditors

Once you file for bankruptcy, all collection actions against you must stop, providing immediate relief from debt collection harassment. This legal barrier, known as a stay of proceedings, prevents creditors from contacting you for payments.

Bankruptcy and Your Assets

When declaring bankruptcy, you typically retain most of your assets due to property exemptions. However, bankruptcy will force you to surrender a significant portion of your property, including vehicle equity over $5,000, home equity over $12,000 (in Vancouver and Victoria) or $9,000 (elsewhere in BC), and household items exceeding $4,000.

Cost of Filing for Bankruptcy

In a basic bankruptcy, the total cost is usually around $2,300, payable in installments over the bankruptcy term. A LIT’s fees are set by a government tariff and regulated by Industry Canada.

Discharge from Bankruptcy

To be discharged from bankruptcy, you must complete certain duties as part of your bankruptcy, including attending two financial counselling sessions, submitting a monthly “Statement of Income and Expenses,” remitting any surplus income, and providing the information required for the trustee to file your income tax returns. Once these duties are completed, you are released from your bankruptcy, freeing you from your debt obligations.

Bankruptcy is a complex process with long-lasting implications. Therefore, it’s crucial to understand the process thoroughly and consult with a LIT before taking any steps. Consider all debt relief options and choose the one that best suits your financial situation.

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