Why The Timing of Your Bankruptcy Matters
People in debt can face some tough choices to get out of it.
One of these is bankruptcy.
Bankruptcy can be a suitable solution for dealing with serious debt, but the time you file is important in Canada.
Understanding the finer details can help you understand the bankruptcy process in more detail, helping to make sure you’re making the right decision at the right time.
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The time you file can affect your tax refunds
You might not be aware of the importance of timing when filing for bankruptcy.
The truth, however, is that the timing can mean the difference between how many tax refunds you lose.
This is because any tax refunds due to you will be handed over as part of your bankruptcy claim.
Tax refunds ten to happen in January or February, which makes these months a bad time to make a claim.
Choosing to file early in the calendar year would mean you wouldn’t have yet filed your taxes for the previous year, and your refund would be paid straight to the bankruptcy estate, as well as any refund due to you the following spring.
For many people, it could be better to wait until after you’ve filed your tax return so that you can have your refund first.
What about filing for a consumer proposal?
Consumer proposals work differently to bankruptcy.
If you file for a consumer proposal, your assets will remain yours and any tax refunds due to you will also remain yours.
The issue of timing is still important when filing a consumer proposal, as you might need to pay tax debts to the Canada Revenue Agency.
If you file for a consumer proposal at the end of the year, and tax debts owed will not be included.
If you choose to file in January, however, your tax debts for the previous year will be included in your consumer proposal.
Filing for bankruptcy and your creditors
Dealing with creditors can be one of the most difficult things about being in debt.
If you’re dealing with threatening calls and collection correspondence, it could be worth filing as soon as possible to put an end to these communications.
But in doing this, you’ll need to weigh up whether or not you want to risk losing any potential tax refund you’re owed.
If you are unemployed and looking for work, it might be worth filing for bankruptcy after you start earning again.
If you have no wages, then you might not need the Canadian bankruptcy protection.
When to file bankruptcy in Canada? Timing matters
According to bankruptcy law, property or assignment of security can be transferred up to a certain point before bankruptcy is filed.
If, for whatever reason, you’ve decided to sell or transfer assets, or decided to borrow money or make a big credit repayment, – timing can mean everything.
Up to a certain point, your trustee will need to investigate these transactions.
Your trustee will be able to advise you on the best time to file, but you’ll need to be upfront about these transactions.
They’ll also be able to provide advice as to whether bankruptcy is the best form of action to deal with your debts.
Sponsorship issues and bankruptcy
Sponsoring another person will mean that you assume all financial responsibility for the person wishing to enter Canada.
There can be issues surrounding sponsorship and bankruptcy, and means that someone who hasn’t completed their bankruptcy notice can be disqualified from sponsoring wanting to enter Canada.
You will not be able to act as a sponsor until you’ve been discharged from your bankruptcy.
The decision around whether to file for bankruptcy or a consumer proposal can depend on many factors, and they are unique to the individual.
It’s important to understand what each action means before you make the decision.
This is where a licensed insolvency trustee can help you.
A licensed insolvency trustee can help you establish all of your options for dealing with debt.
Bankruptcy or a consumer proposal can be effective solutions, but they will provide you with information and advice to help you work out which is the most appropriate.
If you’re dealing with debt and struggling to afford repayments, then get in touch with us today.
Our team are ready and waiting to take your call and help you put an end to your debt situation.
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