What is Personal Bankruptcy?

Understanding Personal Bankruptcy: A Comprehensive Guide

Personal bankruptcy can be a daunting and complex concept. This guide aims to unpack the term and help you understand What is Personal Bankruptcy in depth, its advantages and disadvantages, and how to make the right decision if you find yourself considering this route.

Introduction: What is Personal Bankruptcy?

Personal bankruptcy is a formal process overseen by a Licensed Insolvency Trustee, regulated under the Canadian Bankruptcy and Insolvency Act. It involves assigning your assets to a Trustee and performing certain responsibilities to eliminate your debt, thereby providing you with a fresh financial beginning.

The Basics of Personal Bankruptcy

Filing for bankruptcy is often viewed as a last resort, but a clear understanding of how it functions can help determine if it’s the right path for you or if an alternative solution is more suitable.

To apply for bankruptcy, you must have debts exceeding $1,000 that you’re unable to repay. A Stay of Proceedings is automatically activated once you file for bankruptcy, instantly halting wage garnishments and any harassing creditor calls.

Duties During Bankruptcy

Post filing for bankruptcy, you are required to perform certain duties. These include:

  • Providing your Trustee with all T-4 slips to finalize outstanding tax returns.
  • Giving monthly updates on your household income.
  • Attending two credit counselling sessions.

Upon the successful completion of all required duties, you’ll be discharged from bankruptcy either at the 9- or 21-month mark.

Pros and Cons of Personal Bankruptcy

Personal bankruptcy comes with its set of advantages and disadvantages. One of the key benefits is the immediate halt of creditor contact or lawsuits once you file for bankruptcy. Any existing garnishments are also lifted.

However, bankruptcy does have its drawbacks. It stays on your record for at least six years post-discharge. Filing for bankruptcy will assign you the lowest level on your credit score, potentially making it difficult to acquire credit or loans. Additionally, you may even have to sell assets to repay creditors.

“Be sure to weigh all the pros and cons before deciding if personal bankruptcy is the appropriate choice.”

Finding oneself in a position to consider bankruptcy is never easy. However, depending on your situation, it might be the best route to a fresh financial start. If you’re unsure or have questions, it’s recommended to consult with experienced Licensed Insolvency Trustees. They can guide you through the bankruptcy procedure, enabling you to make an informed decision.

Making the Right Decision

In conclusion, understanding What is Personal Bankruptcy is crucial if you’re in a financial bind. It’s not an easy decision, but with the right guidance and consideration, it can provide a much-needed fresh start.

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