Our goal is to help you turn the page on debt and to do so your best option may be bankruptcy. We understand that filing for bankruptcy is a very difficult decision and when faced with that decision you will want as much information as possible. Our Licensed Insolvency Trustees will be there with you through this difficult time, explaining the process, answering any questions you might have. However, we also know that it can be overwhelming and you may want to revisit some of the questions you had in your consultation or do some research before you book a free consultation with an LIT, so we created a list of frequently asked questions.
There are some debts that cannot be forgiven through bankruptcy. Even if you file for bankruptcy, you will still be responsible for the following debts:
Secured loans such as a car loan
Spousal or child support payments
A debt arising out of fraud
Any court-imposed fines and penalties including traffic and parking tickets
Student loans if you have not been out of school for seven years
In some instances, gambling debts
While these debts cannot be included in a bankruptcy filing, bankruptcy can alleviate the stress caused by your unsecured debts and may make it easier to keep up with your secured debt payments.
Your home is likely your most valued possession and worrying about your home and your family is a common fear when discussing bankruptcy. Most provinces have exemptions that allow you to keep some of the equity in your home when you file for bankruptcy, however, if you’ve already paid off a large portion of your mortgage (i.e., you have built up equity in your home), filing for bankruptcy might not be the best solution for you. Bankruptcy law requires you to use that equity to pay off some of the money you owe to your creditors.
To keep your home when filing a bankruptcy, you would need to pay a Licensed Insolvency Trustee (LIT) the amount of equity you have in your home, minus any provincial exemptions. Home equity is calculated by subtracting the remaining amount of your mortgage, along with any outstanding taxes you owe, from what your house is currently worth on the market.
Your discharge could be opposed by a creditor, an LIT, or the Superintendent of Bankruptcy. Generally, a bankruptcy discharge is opposed when the debtor has not fulfilled the requirements of the bankruptcy process. This might be due to:
Not making the required monthly payments
Failing to attend two mandatory credit counselling sessions
Committing an offence related to the bankruptcy claim
There are a few other reasons why a bankruptcy claim could be opposed. For instance, if the bankruptcy was caused by gambling or a creditor suspects fraudulent activity, the bankruptcy could be opposed by the creditor.
If the bankruptcy discharge was opposed, the debtor would have to attend a court hearing to determine the conditions they would need to fulfil in order to be discharged from bankruptcy.
Relationship breakdown is one of the many life events that can lead to financial stress and overwhelming debt. While filing for bankruptcy will eliminate your unsecured debts, any alimony and child support payments will still have to be paid if you file for bankruptcy.
Two major factors will determine the length of the bankruptcy process: whether it’s your first filing and whether you have what is known as ‘surplus income.’ A person who files for bankruptcy for the first time without surplus income can be discharged from bankruptcy after nine months. If you do have surplus income, it can take 21 months for you to be discharged from bankruptcy.
A second bankruptcy takes 24 months to receive a discharge if you don’t have surplus income, or 36 months with surplus income. In any case, the bankruptcy process could take longer than expected if the bankruptcy is opposed by a creditor or the court.
If you file for bankruptcy three or more times, the length of the bankruptcy will vary depending on your circumstances.
A wage garnishment is a legal action that allows a creditor to take money directly from your paycheque before you receive it. A creditor would need to file a lawsuit, receive a court decision that you owe them money, and then apply for a wage garnishment.
If your wages are being garnished by a creditor, you can stop wage garnishments by repaying the debt you owe, appealing to the court to release the garnishment, or appointing a Licensed Insolvency Trustee to file a consumer proposal or bankruptcy. Both a consumer proposal and bankruptcy put a stop to wage garnishments from the date they are filed. No other debt relief strategies can legally stop a wage garnishment.
Losing everything is one of the most common misconceptions about bankruptcy. You will not lose everything when you file for bankruptcy in Canada. Each province and territory has exemptions to the bankruptcy law that allows you to keep some of your belongings.
Personal exemptions by province/territory
Find out what is exempt in your province by clicking on a link below: