What Happens During Bankruptcy in Canada?

While you are in bankruptcy your duties and obligations are minimal.

Carry out these duties and you will be discharged without any hassle:

1.  Send in your monthly income and expense statements with the required payment;
2. Attend the two counselling sessions set by the trustee;
3. Cooperate with the trustee if and when necessary.

What Happens During Bankruptcy?

When you have gone bankrupt your LIT (Licensed Insolvency Trustee) will begin dealing with your creditors directly and you will receive an automatic stay which means your creditors won’t be able to contact you or make any collection attempts; your wages also cannot be garnished or a wage garnishment in place will end.

The bankrupt will be required to tell the trustee at all times where they are residing and also must reply to any requests the bankruptcy trustee makes and help him or her as necessary and provide any information the LIT requests.

The bankrupt must also provide the trustee with earning reports and expense reports and any change in the bankrupt’s family situation.

The trustee will provide the bankrupt with appropriate forms to be filled in that will provide the trustee with the necessary information.

A meeting of creditors is only required if the Superintendent of Bankruptcy or your creditors with 25% or more of the proven claims requests a meeting.

These meetings are usually held at the office of the trustee.

The bankrupt must also provide the trustee with earning reports and expense reports and any change in the bankrupt’s family situation.

The trustee will provide the bankrupt with appropriate forms to be filled in that will provide the trustee with the necessary information.

A creditors meeting is only required if creditors with an aggregate of 25% or more of proven claims on the debt votes for such a meeting or if the Superintendent of Bankruptcy requests one.

These meetings are usually held at the office of the trustee.

Duties of a Bankrupt During Bankruptcy

You will be responsible for completing certain duties – that you will be aware of before going bankrupt – in order to receive your bankruptcy discharge.

These duties must be completed during your bankruptcy.

The duties of a bankrupt include:

• Surrendering your credit cards;
• Attending any requested meetings of the creditors;
• Attending the required counselling sessions (2);
• Assisting the LIT (Licensed Insolvency Trustee) as requested;
• Making any required surplus income payments to the trustee.

During your bankruptcy you must continue to pay child support, attend credit counselling sessions, and check in with your trustee regularily.

Secured creditors must continue to be paid, as secured debts are not impacted by a bankruptcy filing.

Unsecured debts are wiped out by going bankrupt with very few exceptions (fines or support payments, for example).

Declaring bankruptcy is intended to give you a fresh financial start, and is often the best choice over other debt relief options that could be available.

A record that you went bankrupt will remain on your credit report for 6 or more years after your bankruptcy discharge, although it will have less of an impact on your credit rating over time.

A bankruptcy affects your financial life so it is important you speak with a licensed professional about the possibility of going bankrupt.