The Process of Filing for Bankruptcy
While many people are familiar with the idea of bankruptcy, they aren’t 100 percent certain when it comes to the process and what happens when you file for bankruptcy. This unfamiliarity makes bankruptcy seem like a mysterious and even scary process, which discourages people from investigating it in detail. Unfortunately, this situation is made even worse by the rumours and myths that exist about the bankruptcy process. Sometimes creditors and collection agencies spread these myths in order to dissuade people who may think about filing for bankruptcy.
If you are having financial trouble, struggling with debt or are unable to pay your bills as they become due, it is a good idea to take the time to understand the truth about filing for bankruptcy. In order to make the right choice for your financial future, you’ll need to have accurate information.
One way to find out details about what happens when you file for bankruptcy is to speak with a licensed bankruptcy trustee. A trustee is a person who is licensed and registered by the federal government and is able to administer bankruptcies and consumer proposals. Trustees need to attend several years of training and are bound by a strict code of ethics. This means that they have the knowledge needed to provide you with information on all of the available options. They are required to do so by law.
Deciding to File for Bankruptcy
Once your trustee reviews your situation, it is entirely up to you as to how you would like to proceed. Each individual financial situation is different and each person will need to make a choice for themselves. There is no “one size fits all” option that works for everyone in every situation. If you decide that bankruptcy is the right option for you, your trustee will work with you to make sure all of the appropriate paperwork is completed and filed. Your trustee will inform your creditors of your situation. From this point on, all communication with your creditors will be handled by the trustee. They aren’t able to contact you directly or send collection agencies after you to collect on their debt.
Your trustee will also ensure that you are able to keep the assets that are considered exempt in your province. Each province in Canada maintains a list of items that are considered necessary to live a basic lifestyle. In most regions, you are able to keep personal items, furniture, tools of the trade and (in some cases) a personal vehicle up to a certain value. Your trustee will let you know which assets are exempt before you file for bankruptcy
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The Bankruptcy Process
Once you have filed, you may be asked to attend a meeting of creditors. If you are, you are required to attend. However, in personal bankruptcies, such meetings are becoming increasingly rare.
During the bankruptcy process, you will be responsible for reporting your income and expenses to your trustee each month. The trustee will use this information to determine whether or not you need to make surplus income payments. The government sets certain limits on how much a person who filed for bankruptcy can make each month without making surplus income payments that will be distributed to your creditors only during the period of your bankruptcy. The more you earn over this limit, the more you will be required to pay. Your trustee will let you know if you have to make these payments.
You will also be required to attend two financial counselling sessions. In these sessions, you will learn money management and budgeting tips that will help you avoid financial issues in the future. You will also learn what you can do to rebuild your credit rating once you have been discharged from bankruptcy.
In most cases, you will be automatically discharged from bankruptcy after a certain period of time. The length of your bankruptcy will depend on whether or not it is your first time filing for bankruptcy and whether you need to make surplus income payments.
The decision to file for bankruptcy or not is an important one that will be different for each person. For those who are in financial trouble and who cannot pay their bills, it can be a way to get a fresh start and a chance to rebuild your financial life. If you think bankruptcy may be beneficial for you, schedule a free consultation with a trustee to find out more information.