Personal bankruptcy is a legally binding agreement under the Bankruptcy and Insolvency Act, which is designed to provide financial protection to individuals who can no longer repay their debts. If you are facing financial challenges, you are within your rights to ask for debt forgiveness.
Filing for bankruptcy is sometimes a necessary solution to a debt problem.
For people who need immediate relief from unmanageable debt, personal bankruptcy can be an important step towards financial recovery. However, it is always a last resort option. A Licensed Insolvency Trustee (LIT) will only recommend bankruptcy after all other debt relief options have been explored.
When you decide to file for bankruptcy, a stay of proceedings is issued, and you receive immediate protection from your creditors. This means that all collections activities will stop. Creditors are prohibited from contacting you or pursuing legal action against you. Your LIT will now deal with your creditors on your behalf.
The bankruptcy process usually takes nine months. At the end of your bankruptcy, you are legally discharged from your debts.
Secured debts that are backed by an asset — as well as some other financial obligations are excluded from bankruptcy.
| Examples of secured debts |
|---|
| Mortgage |
| Car loans |
| Alimony |
| Child support |
| Court fines |
To be eligible to file for bankruptcy in Canada you must meet certain requirements:
| Pros | Cons |
|---|---|
| Unsecured debts are erased | Potential loss of non-exempt assets |
| Protection from creditors | Note on credit report for up to 7 years |
| Process can be completed in 9 months | Monthly payments based on income |
| Credit counselling sessions | Monthly budgeting statements |
Freedom from debt | Some debts are excluded |
Deciding to file for bankruptcy is a big decision. It involves careful counselling from a Licensed Insolvency Trustee, who is your best resource for understanding how bankruptcy will affect your own financial situation.
There are many bankruptcy myths and they can actually hinder someone from exploring their debt relief options. Let’s answer some frequently asked questions about filing for bankruptcy.
Everyone's financial situation is different, but it helps to hear about other people's stories.
This real-life debt story is about a couple who were dealing with a health crisis illustrates the relief that a debt relief program, like bankruptcy or consumer proposal, can provide to people who are going through tough times.
