Details on the Bankruptcy Process
If you are unable to pay your debts as they become due, filing for bankruptcy may be an option for you. If you are considering bankruptcy, it is very important that you understand the process and what happens when you choose to file. Here is detailed information on the bankruptcy process that can help you decide if this is the right process for you.
The first step of the bankruptcy process is to sit down with a licensed trustee in bankruptcy. A trustee is a person who has received years of training and is registered and licensed to administer bankruptcy processes. When you meet with a trustee, he or she will review your financial situation and provide you with information on the options that are available to you. Depending on your situation, bankruptcy may be one of these options.
If you decide that filing for bankruptcy is the route that you would like to take, your trustee will ensure that all of the required paperwork is completed and submitted. Your trustee will also work to ensure that you are able to keep all of your assets that are considered exempt. When you file for bankruptcy, you may have to give up some assets to satisfy your creditors. However, each province maintains lists of assets that are deemed necessary to live a basic lifestyle and conduct your work ( tools of the trade) and the values of these assets. These assets are considered exempt, so you will not lose them if you file for bankruptcy. Many people are able to keep most, if not all of their assets, unless they have a large number of valuable assets.
Your trustee will let you know which of your assets are considered exempt before you file.
Once you File for Bankruptcy
Once you have filed for bankruptcy, you receive legal protection from your unsecured creditors. They are not able to contact you directly, meaning that all communication with them must be done through your trustee. In addition, they cannot send collection agencies after you or take any civil legal action against you. Most wage garnishments stop as well. However, court ordered legal action and wage garnishment (such as in the case of alimony or child support) will not stop.
During your bankruptcy, you are required to complete certain duties. One duty is that you must attend two financial counselling sessions. These sessions teach budgeting, money management and other tactics that will help you avoid financial issues in the future. You will also learn how you can rebuild your credit rating once you have been discharged from bankruptcy.
You are also required to report your income and expenses to your trustee on a monthly basis. The federal government lists how much a person is able to make while they are bankrupt. This amount is based on the number of dependents in your family. If you earn more than this listed amount, you will likely need to make surplus income payments to your trustee. These will be distributed to your creditors.
The length of your bankruptcy will depend on whether or not you need to make surplus income payments as well as if this is your first bankruptcy. If it is the first time you have filed for bankruptcy and you do not need to make surplus income payments, you will likely be automatically discharged from bankruptcy in nine months.
After you Have Been Discharged from Bankruptcy
Once you have been discharged, you are free to begin rebuilding your financial life using the tactics that you were taught during your financial counselling classes. If it is your first time filing for bankruptcy, a note listing your bankruptcy will remain on your credit report for six years after you have been discharged.
Many people worry about the effect that bankruptcy will have on their credit report. While a bankruptcy can make it more difficult to get a loan, it’s important to consider the situation that you are in right now. If you are in a position where filing for bankruptcy makes sense for you, you have likely already done damage to your credit report by missing payments or making payments late. If you continue down this path, you will only do more damage. However, if you file for bankruptcy, you put yourself in a situation where rebuilding your credit is possible.