Whether you’re in a good financial place of in a state where you may need some professional debt relief help, the following bankruptcy-related terms are ones every Canadian should know and can help clarify any confusion.
Here are the Top 6 Bankruptcy Terms Every Canadian Needs to Know:
If you are completely insolvent, a bankruptcy may be suggested by your Trustee.
The process of bankruptcy takes between 9 and 21 months for first-time bankruptcies.
During this process, many of your assets will be assigned to a Trustee who will liquidate them to pay back your creditors.
Additionally, a portion of your income may be taken each month over 21 months if you have surplus income.
After this process, your debts are forgiven, but this will remain on your credit history for seven years.
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Consumer Proposals and Bankruptcies are similar in that your debt will be erased once you are released from your consumer proposal, but a consumer proposal allows you to protect your assets entirely from creditors.
During a consumer proposal, a Licensed Insolvency Trustee will provide a proposed agreement to your creditors for you to pay off a portion of your unsecured debt interest-free.
Another alternative is to pay the full amount of your debt owed over a longer period of time so you can make smaller payments as you go.
You may have up to five years to pay back the agreed-upon sum.
Licensed Insolvency Trustee
A Licensed Insolvency Trustee (LIT) is an officer of the court that will guide you through either your bankruptcy or consumer proposal.
Your LIT works on behalf of you and your creditors.
The goal of the Trustee is to find a middle ground that is relatively fair for each party involved.
In the event that you should need to claim bankruptcy or file for a consumer proposal, only a Trustee is licensed to do this Canada.
You will work directly with the Trustee during either of these processes.
Before filing for bankruptcy, your LIT will assess your financial situation including your income, debt, and assets with you over the course of just an hour or so.
During this initial assessment, the Trustee will examine which options may be ideal for your scenario and will provide you the best course of action, such as declaring bankruptcy or filing for a consumer proposal.
While your exempt assets vary by province, there are some assets that can be withheld from being seized even when you claim bankruptcy.
Some of these are your apparel, as long as it is worth under a certain amount, tools that you use directly for your line of work to create income, and a vehicle that is paid off and worth less than $5,000.
Furniture under $4,000 is exempt, and surprisingly, the first $12,000 of equity of your property after subtracting mortgage and selling fees.
In a bankruptcy, you are allowed to maintain a reasonable living standard as defined by the Bankruptcy and Insolvency Act of Canada.
Beyond that, you will have a “surplus” income.
Half of this surplus is taken by the LIT and paid to your creditors.
If you have a surplus income, your bankruptcy process is lengthened to that of 21 months, instead of the typical 9 months.
If you are struggling with debt, contact one of our debt experts a Bankruptcy Canada today.
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