Personal Bankruptcy in BC – What You Need to Know
Understanding personal bankruptcy in British Columbia (BC) involves delving into its eligibility requirements, benefits, drawbacks, and overall impact on a person’s financial future. By exploring these dimensions, one can make an informed decision about whether this legal debt solution is the most appropriate for their unique financial circumstances.
Eligibility for Personal Bankruptcy in BC
Before delving into the specifics, it is important to understand who is eligible to file for personal bankruptcy in BC. It is a common misconception that this debt relief option is reserved for those with crippling amounts of debt. However, the reality is far from it.
The Minimum Debt Threshold
The minimum amount of debt needed to declare bankruptcy in Canada is just $1,000. This low threshold allows those struggling with even relatively small sums of debt to seek legal debt solutions. However, it is worth mentioning that it is uncommon for someone owing less than $5,000 to declare bankruptcy.
The Notion of Insolvency
Another pre-requisite for bankruptcy is being insolvent, which essentially means not being able to repay all your debts. This might be due to a lack of sufficient income, or because the total debt has grown too large to handle.
The Role of Creditors in Personal Bankruptcy
Contrary to popular belief, one doesn’t need permission from their creditors to file for bankruptcy. In fact, creditors cannot stop a person from seeking the protection and financial fresh start that bankruptcy offers. Moreover, there is no need to make a court application as part of the personal bankruptcy process.
Working with a Licensed Insolvency Trustee
In Canada, Licensed Insolvency Trustees are the only professionals authorized to assist with the administration of a bankruptcy. Unlike in some countries, one doesn’t need to hire a lawyer, nor can they ‘represent themselves’. The first step in declaring bankruptcy is to find a Licensed Insolvency Trustee in your province.
The Role of the Trustee
Once you’ve connected with a Trustee and decided to move forward with bankruptcy, you will work with them throughout the entire process. Their role is to guide you, ensuring you understand each step and what it entails. They will also assist with the preparation and filing of all necessary documents.
Debt Forgiveness and Asset Protection in Bankruptcy
One of the key advantages of filing for bankruptcy is the ability to have many types of debt forgiven. This can provide immense relief for those struggling under the weight of multiple types of debt.
Types of Debt that Can Be Forgiven
Virtually all types of debts can be discharged (forgiven) through a bankruptcy, although there are a few exceptions. These include court-imposed fines, alimony and maintenance payments, and money owed for things stolen or property obtained through false pretenses.
Protection of Assets
Contrary to common belief, filing for bankruptcy doesn’t necessarily mean that you have to give up all your assets. In fact, most people keep all their assets when they declare personal bankruptcy. BC’s Court Order Enforcement Act designates many assets as “exempt,” with personal allowances for items like clothing, household items, work tools, a vehicle, home equity, RRSPs, life insurance policies, and pension plans.
Time Frame and Credit Impact of Personal Bankruptcy
Another noteworthy aspect of personal bankruptcy in BC is the time it takes to complete and its impact on one’s credit history.
Time to Complete Bankruptcy
While many people believe that bankruptcy lasts for seven years, in most cases, the process is much shorter. In fact, you could be granted an automatic discharge or exit from bankruptcy just nine months after starting, provided you have successfully completed the required duties.
Impact on Credit History
Filing for bankruptcy does have a temporary impact on your credit history. However, this impact is not permanent. Your bankruptcy will only be reflected on your credit report for six years from the date of discharge. During this time, you can still apply for and receive new credit.
Cost and Privacy of Personal Bankruptcy in BC
Lastly, it’s important to understand the cost and privacy aspects of filing for personal bankruptcy in BC.
Cost of Bankruptcy
The cost of bankruptcy is minimal, especially when compared to repaying debt with interest. In most bankruptcies, the direct cost to the person filing is $2,300. This fee covers everything, from the filing fee to register the bankruptcy in Canada, to the costs for financial counselling sessions, and the preparation and filing of related income tax returns.
Privacy of Bankruptcy
Bankruptcy in Canada is a relatively private process. Usually, only your creditors, your Licensed Insolvency Trustee, and the Office of the Superintendent of Bankruptcy are aware of your bankruptcy. Therefore, the public, including your employer, is highly unlikely to find out about it.
Conclusion
Personal bankruptcy in BC is a viable option for those dealing with overwhelming debt. It provides an opportunity to start over financially and can be a stepping stone towards a more secure and debt-free future. However, it is a significant decision that should be made only after careful consideration and consultation with a Licensed Insolvency Trustee.
