What Happens When You Declare Bankruptcy in Nova Scotia

Understanding Bankruptcy in Nova Scotia: A Comprehensive Guide

What Happens When You Declare Bankruptcy in Nova ScotiaDeclaring bankruptcy can be a daunting process, filled with uncertainty and anxiety. However, understanding the intricacies of the legal process and the consequences thereof can help alleviate some of this stress. In this guide, we delve into what happens when you declare bankruptcy in Nova Scotia, aiming to provide you with the essential knowledge you need to navigate this complex terrain.

Bankruptcy: Defining the Concept

Bankruptcy is a legal status for an individual or an organization that cannot repay the debts it owes to creditors. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor. It’s marked by its ability to offer a fresh start to the indebted, albeit at the cost of their credit rating.

The Role of a Licensed Insolvency Trustee

The first step in the bankruptcy process is to consult with a Licensed Insolvency Trustee (LIT). LITs are the only professionals authorized by the federal government to administer bankruptcy and proposal proceedings that legally deal with your debt. Engaging with a trustee doesn’t automatically mean you’re filing for bankruptcy. They’re there to explore all your debt relief options with you, which may include budget restructuring, asset liquidation, consolidation, filing a consumer proposal, or bankruptcy.

Advantages of Declaring Bankruptcy

Bankruptcy, albeit daunting, can offer several benefits. These include:

  • Halting collection calls from creditors.
  • Stopping garnishment and other legal actions.
  • Eliminating your debts.

The Bankruptcy Process

Initial Consultation and Decision

During your initial meeting, the trustee will discuss your financial situation and the potential options available to you. If you decide to proceed with bankruptcy, the trustee will require certain information from you before filing.

Filing for Bankruptcy

If you choose to file for bankruptcy, the trustee manages all aspects of your bankruptcy. You will meet with the trustee to sign legal documents (an Assignment in Bankruptcy), which they will file with the Office of the Superintendent of Bankruptcy. Your bankruptcy begins immediately upon filing these documents.

Notification of Creditors

The trustee will then notify your creditors that you have filed for bankruptcy. The creditors will be responsible for proving their claim against you to the trustee.

Duties During Bankruptcy

The Bankruptcy and Insolvency Act outlines your duties during bankruptcy. These include submitting monthly income and expense statements, attending two credit counselling sessions, making required contributions to your creditors, providing your income tax information, surrendering any non-exempt assets, and completing any other duties requested by the trustee.

Bankruptcy Discharge

At the end of your bankruptcy, you are eligible for an automatic discharge if you have not been bankrupt more than two times. The discharge releases you from your debts. Certain types of debts, however, are not dischargeable by bankruptcy, such as support arrears, student loan debt (if the study end date is less than seven years ago), and debt obtained by fraud.

The Aftermath of Bankruptcy

Bankruptcy has several consequences, the most notable being its impact on your credit rating. A bankruptcy will remain on your credit report for six years or more, drastically reducing your credit score. However, you may be discharged from bankruptcy only a few months after filing, at which point your debts will be cancelled.

The Cost of Bankruptcy

The cost of filing for bankruptcy depends on your income and circumstances. While Licensed Insolvency Trustees do charge for their services, these costs can often be paid in manageable monthly payments.

Is Bankruptcy the Right Choice for You?

If you are struggling with debt of more than $1,000, then declaring bankruptcy in Nova Scotia may be the best option for you. It’s important to seek advice from professionals to understand if this is the most appropriate course of action based on your financial situation.


Declaring bankruptcy is a significant decision that can have long-lasting effects on your financial situation. If you are considering this route, it is crucial to understand the process and what it means for your future. Remember, understanding your options and seeking professional advice can help you make the best decision for your individual circumstances.

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