Decoding Bankruptcy Protection Under the Bankruptcy Act
Bankruptcy protection is a term often heard when discussing bankruptcy. This article aims to demystify the meaning of protection under the Bankruptcy & Insolvency Act (BIA). This protection is applicable to both personal bankruptcy and consumer proposals, hence any points mentioned here will apply to both these procedures when filed with a licensed bankruptcy trustee.
Understanding Bankruptcy Protection
Bankruptcy protection is crucial when a creditor, to whom you owe money, takes legal action to recover the debt. This legal action can result in a judgment against you, thus enabling the creditor to garnish your wages or seize your assets. Bankruptcy protection ensures a halt to such proceedings, providing you with the much-needed relief.
How is Bankruptcy Protection Useful?
Bankruptcy protection is beneficial in numerous ways:
- It can halt wage garnishment.
- It can stop orders to pay from the Canada Revenue Agency (CRA) as long as they haven’t registered against your assets.
- It can unfreeze a bank account that a creditor has frozen.
These benefits provide a debtor with relief, preventing further financial strain.
How to Ensure Protection Against Creditors?
If you’re unable to negotiate a payment plan with your creditors, it’s advisable to consult a licensed bankruptcy trustee. In Canada, only a licensed trustee can file a consumer proposal or personal bankruptcy for you. Once the “stay” comes into effect, your creditors cannot initiate or continue any legal action against you.
Are There Any Exceptions?
While bankruptcy protection provides relief from most financial obligations, there are exceptions. Family support obligations such as child support or alimony are not included in the stay of proceedings.
Also, bankruptcy protection does not extend to secured debts. Most debts causing stress are unsecured – credit cards, bank overdrafts, payday loans, even income taxes. Bankruptcy protection shields you from unsecured creditors but not from secured creditors like those for a mortgage or car loan.
Is Protection From Creditors the Sole Reason for Filing Bankruptcy?
No, bankruptcy protection also aids in the elimination of unsecured debt. Even if you’re managing to keep up with your minimum payments, you may still be under a mountain of debt. Filing for bankruptcy or a consumer proposal can be your ticket to a fresh start, free from the stress of unmanageable debt.
In conclusion, understanding what bankruptcy protection does the Bankruptcy Act provide is a significant step towards financial freedom. If you find yourself under increasing debt pressure, don’t hesitate to consult with a Licensed Insolvency Trustee. They can provide you with the best options to protect yourself and eliminate your debt, allowing you to focus on the future.
