The Bankruptcy Process

The Bankruptcy Process in 8 Steps

When you file for bankruptcy, the process takes at least nine months. The good news is that any harassing phone calls from creditors, wage garnishments or legal proceedings against you stop as soon as you file. You get immediate protection and start the process to get you back to financial stability. Here are the steps involved in filing for bankruptcy:

1.Set up an appointment with a Licensed Insolvency Trustee (LIT).

The LIT will listen carefully as you describe your situation and explain every debt relief option that’s available to you. In many cases, they can find an alternative to filing for bankruptcy.

2.Fill out an application.

This does not have to be on the day of your appointment, and only occurs after you have explored all your options and have decided that a bankruptcy is the most effective solution for your situation.

3.Filing for bankruptcy.

After you fill out and sign the required paperwork, your LIT will file the documents with the federal government. Once you have filed the bankruptcy, your creditors cannot make harassing phone calls or take further legal action against you. You are protected and your LIT will deal with your creditors.

4.Your LIT notifies your creditors on your behalf.

When your LIT notifies your creditors that you’ve filed for bankruptcy, they may call a meeting to learn more details about the situation. However, this usually doesn’t happen for most personal bankruptcies.

5.Any non-exempt assets will be sold.

While there are provincial exemptions to the bankruptcy law, which allow you to keep some of your belongings, some of your possessions might be sold in order to repay your creditors some of the money owed to them.

6.Monthly payments to your LIT.

When you file for bankruptcy, you may need to make minimum monthly payments to compensate the LIT for the professional services they provide you during the bankruptcy proceedings. You may also need to make “surplus income payments” according to guidelines set by the federal government if your income exceeds a certain amount. Find out more about the costs of bankruptcy.

7.Attend credit counselling.

In order to be discharged from bankruptcy, you must attend two credit counselling sessions. These sessions will review various strategies around debt management and help you plan to rebuild your credit after you’ve been discharged from bankruptcy.

8.You are now discharged from bankruptcy.

If you attend your credit counselling sessions and make all your monthly payments, you can be discharged from bankruptcy as early as nine months after you file (the process may take longer if you need to make surplus income payments or this is a repeat bankruptcy). This means you no longer have to repay any of the debts that were listed in your bankruptcy filing and can start to take control of your financial future.

Before you are discharged, your LIT might need to prepare a final report, and you could have to attend a discharge hearing. Although these are sometimes part of the bankruptcy process, they are not required in all cases.

To learn more about filing for bankruptcy, or to set up an appointment with a Licensed Insolvency Trustee, please contact your local BDO office.