Navigating Financial Hardships

In times of significant financial hardship, declaring bankruptcy might seem like the primary option. However, bankruptcy is a serious decision with long-lasting effects on your credit and job prospects. Fortunately, there are numerous alternatives available. Our experts specialize in guiding individuals through these options. It’s essential to understand both bankruptcy and its alternatives before making a decision that could impact various aspects of your life.

Considering Bankruptcy

Contemplate declaring bankruptcy only after exploring all alternative avenues for addressing your debt. This includes situations where:

  • You cannot meet debt repayment obligations within a reasonable timeframe.
  • You cannot settle debts through the sale of assets.
  • You are ineligible for or unwilling to enroll in a debt management program.
  • You are ineligible for or unwilling to obtain a debt consolidation loan.
  • You have been rejected for or chosen not to initiate a consumer proposal.
  • You have outstanding debts to the government that are eligible for inclusion in a bankruptcy.
  • You risk potential jeopardy of assets or income if you do not address your debt issues.

Before deciding on bankruptcy, ensure you’ve thoroughly explored the aforementioned alternatives. If all else fails, bankruptcy remains an option. For assistance in understanding your debt repayment options and avoiding bankruptcy, feel free to give us a call—we’re here to help.

How to File for Bankruptcy in Canada

Initiating bankruptcy in Canada is a legal procedure regulated by the Bankruptcy and Insolvency Act. A licensed insolvency trustee in your province will handle the paperwork and guide you through the 9-21 month process. For individuals filing bankruptcy for the second time, the process may extend up to 36 months.

Upon declaring bankruptcy, all collection activity on your debts ceases, and creditors will agree to new payment terms outlined in the court-approved bankruptcy agreement. This arrangement applies exclusively to unsecured debt. Secured debts are not covered by bankruptcy.

Who Can File for Bankruptcy?

Bankruptcy is an option for those unable to meet their debt obligations. The evaluation considers various factors such as assets, income, expenses, and existing obligations. Individuals with a consistent income seeking to reorganize their debts can file for bankruptcy under the Bankruptcy and Insolvency Act. Consulting with an attorney is advisable for a more informed understanding of the process.

Managing Your Income and Assets

If you possess equity in assets like a vehicle or residence, your trustee may need to liquidate these assets to settle your debts. Alternatively, if financially viable, you can “buy back” your assets by remitting the surplus value to your trustee.

Various assets may be forfeited in bankruptcy, including RESPs, tax refunds, RRSP contributions from the past 12 months, and other valuables. Each province outlines bankruptcy exemptions, designating items you can keep, such as business tools and household effects up to a specified value.

Bankruptcy also imposes income restrictions. Depending on your family size, 50% of any income exceeding a specific threshold must be remitted to your trustee, who will distribute it to your creditors.

Steps to File for Bankruptcy

  1. Determine whether personal bankruptcy is necessary.
  2. Complete the required paperwork with a licensed insolvency trustee.
  3. Liquidate your assets.
  4. Inform creditors of your bankruptcy.
  5. Attend a creditor meeting if convened.
  6. Meet with an officer from the Office of the Superintendent of Bankruptcy (OSB), if required.
  7. Attend two bankruptcy counseling sessions.
  8. Your trustee petitions the OSB for approval or denial of your bankruptcy discharge.
  9. Your bankruptcy will be discharged either automatically or by court ruling.
  10. Commence your life after bankruptcy.

Debts Not Covered by Bankruptcy

Bankruptcy does not resolve all debts. Exclusions include:

  • Outstanding child support payments
  • Unsettled spousal support obligations
  • Court-imposed fines
  • Debts from fraudulent activities
  • Government-issued student loans less than 7 years old (with some exceptions)
  • Specific government overpayments

If any of the debts you aim to eliminate are included in this list, bankruptcy may not be the best choice. Explore all alternative options with a non-profit credit counselor to determine the most appropriate path forward.

Is Bankruptcy for You?

If you’re contemplating bankruptcy due to financial difficulties, know you’re not alone. Many face similar challenges.

Fortunately, there are alternative, less drastic options. Connect with one of our counselors to explore all available avenues. They will assess your financial situation in detail, addressing any questions you may have. Conversations with our certified counselors are free, confidential, and carry no obligation. Our aim is to provide assistance and support.

The Cost of Bankruptcy

When struggling to cover your bills, the cost of bankruptcy can be significant, typically involving around $1,800 for administrative, court, and filing expenses. The overall cost varies case by case.

Once committed to the bankruptcy paperwork, reversing the decision is extremely challenging. Ensure bankruptcy is genuinely the most suitable choice for your situation. We can assist you in determining your optimal options at no cost, and if bankruptcy is the best route, we can direct you to a trustworthy trustee in your area.

Your Options

Numerous options exist between financial hardship and bankruptcy. Our credit counselors specialize in guiding you through these alternatives, helping you identify the most suitable option for your circumstances.

Connect with Us

During challenging times, it can be beneficial to speak with an informed credit counselor who can discuss all available options and devise a plan to overcome your challenges. By gaining clarity on your path forward, you can restore peace of mind and progress with confidence.