Declaring bankruptcy is not something you do on a whim. Before someone declares bankruptcy, they give this decision a lot of thought. They consider their options and learn more about what to expect from doing so.

What You Need to Know About Declaring Bankruptcy

If this is a decision you have weighed for yourself, you do not want to miss the rest of this post. Today, we will cover what you need to know before declaring bankruptcy in Canada.

know about your bankruptcy options

Who Can Declare Bankruptcy?

Some several reasons and circumstances can lead to someone declaring bankruptcy.

These include:

  • Inability to pay debts as they come due within a reasonable amount of time
  • Cannot reach a settlement or an informal agreement with your creditors
  • Garnished wages or bank accounts
  • Constant calls from creditors
  • Loss of employment
  • Deteriorating health

However, even with these circumstances in place, not everyone can file for bankruptcy.

To do so, you must:

  • Have some property and conduct business within Canada
  • Have liabilities of over $1,000.00 to creditors, according to the BIA (Bankruptcy and Insolvency Act) – and meet one of the following conditions:
  1. Are unable to meet current financial obligations as they become due
  2. You have stopped paying the current obligations
  3. Current financial obligations exceed the fair market value of your property

How Does Declaring Bankruptcy Work?

Generally speaking, there is a 10-step process you can expect to follow for declaring bankruptcy:

  1. Scheduling a consultation with a licensed bankruptcy trustee
  2. Reviewing the current financial situation with your trustee
  3. The trustee thoroughly explains the bankruptcy process and applicable laws
  4. Reviewing how bankruptcy will work for you considering all your debt obligations
  5. Further reviewing of bankruptcy laws, you must follow during the entire process
  6. Assessing the duties, you must follow as the applicant
  7. Discharging your debt upon completing the required applicant duties under the Bankruptcy and Insolvency Act.
  8. At this point, you will be debt-free
  9. Bankruptcy remains on your credit bureau score for six years
  10. During the six-year window, you can start rebuilding your credit score (Learn more about credit scores and how they work in this post.)

The Impact of Declaring Bankruptcy

It’s also imperative to understand what it means to file for bankruptcy. Specifically, what are the circumstances for declaring bankruptcy in Canada?

These will vary depending on whether this is your first or second time filing.

First Time: A first-time bankruptcy may only be nine months in duration. That is, if you meet all your responsibilities and have no surplus income. If surplus income does occur, the time frame extends to a 21 months monitoring period. With the bankruptcy occurrence appearing on your credit bureau scores for six additional years, there is a misconception you will have lousy credit during this entire six-year time frame. In truth, once discharged from bankruptcy and debt-free, you can start rebuilding your credit.

(We have seven great tips for rebuilding your credit after filing for bankruptcy right here.)

Second Time: If it is your second time declaring bankruptcy, the monitoring period is a minimum of 24 months. Thirty-six months before a discharge could occur In the instance of surplus income. (We know you might also be curious about what you can keep after declaring bankruptcy.  Visit this post next to find out.)

What to Expect During the Bankruptcy Process

When bankruptcy occurs, you will work with the Licensed Insolvency Trustee (LIT) to complete your assessment. Your bankruptcy becomes active after filing with the Office of the Superintendent of Bankruptcy (OSB).

Then, the following occurs:

  • All payments paid to unsecured creditors and, depending on circumstances, secured as well will stop
  • Any garnishes against wages or bank accounts will stop
  • Lawsuits against you will cease, with exceptions according to Bankruptcy and Insolvency Act

Schedule Your Free Debt Consultation Today

Now you know a lot more about what to expect when declaring bankruptcy. However, we understand you may still have questions or want to explore other options, including debt consolidation or credit counselling. No matter what, it’s time to clear debt out of your life and get the fresh financial start you deserve!

If you are considering personal bankruptcy, contact Fox-Miles & Associates to schedule your free consultation.