Bankruptcy Questions

Answers to bankruptcy questions

If you are struggling with debt and considering your options, it’s likely you have bankruptcy questions. Whether you want to know if bankruptcy is your best option, what to expect, or how to rebuild your credit after bankruptcy, you need answers you can rely on from a source you can trust.

What questions should I ask?

Bankruptcy can be overwhelming. You may not even know what to ask or where to begin. The Internet has made searching for information on just about anything a relatively easy task, but what kind of answers to bankruptcy questions can you expect on the Internet?  Here are three things you need to know:

  1. Some of the information you find on the Internet is out-of-date
  2. Many websites have a vested financial interest in keeping you from declaring bankruptcy
  3. You can only expect general answers to bankruptcy questions on the Internet.

For specific answers to bankruptcy questions, there is no substitute for meeting with a licensed bankruptcy trustee in your area.  There are differences in the way bankruptcies are managed across the Provinces, so make sure you meet with one or more licensed in the Province in which you live.  Some of the most common questions people have during their initial meeting with a bankruptcy trustee include:

▪   What happens during a bankruptcy?

▪   Do I qualify for bankruptcy?

▪   How much does a bankruptcy cost and where do I go to file?

▪   How long does a bankruptcy take?

▪   What will I lose if I file?

▪   Who will know that I’ve filed for bankruptcy?

▪   Which debts will be erased?

▪   What happens to my credit after bankruptcy?

▪   How can I tell if bankruptcy is right for me

If you have bankruptcy questions, trustees are the best resource for help. They can provide you with personalized answers to your specific questions, so you know exactly what to expect if you do end up filing for bankruptcy.  Schedule your free consultation to get your important questions answered. In the meantime, here is some general information you might find helpful.

What happens during a bankruptcy?

During bankruptcy, you must give your trustee all your credit cards and any assets that aren’t exempt. Your trustee will sell the things you surrender. Then, he uses the money to pay your creditors.  From the moment you file bankruptcy, your creditors can no longer try and collect money from you. This includes wage garnishment, phone calls, and lawsuits. You also must report your income and monthly expenses to your trustee. Any “surplus” income will be paid to the trustee.

Do I know if I qualify for bankruptcy?

If you have more than $1,000 in debt and you are “insolvent”, you qualify.  Insolvency means you can’t pay your bills through your income or the sale of things you own.  If your unsecured debt is $50,000 and the total value of everything you own is less than that, you qualify.

How much will my filing cost and where do I go to file?

Bankruptcies in Canada are facilitated by licensed bankruptcy trustees. There are certain costs you must pay when filing for bankruptcy. These include court fees, admin costs, and government-regulated fees. The overall amount you pay depends on what you own, what you owe, what you earn, and the size of your family. Most bankruptcies in Canada are filed as Summary Estates. Most Summary Estates carry a fee of 1800. Your trustee will go over the specific costs for your bankruptcy filing. If you cannot afford to file, you may be able to get help from the Bankruptcy Assistance Program.

How long am I “bankrupt?”

If you have never filed for bankruptcy before, you can usually be eligible for an automatic discharge from your bankruptcy in nine months. From here, you can start fresh with no debts. If you have filed bankruptcy before, or if you have additional surplus income, the amount of time it takes to discharge your bankruptcy will be longer and can take up to 36 months. Your trustee will advise you how long your bankruptcy will take based on your financial situation.

What will I Lose if I File for Bankruptcy?

As the debtor, you are forgiven your unsecured debt in exchange for turning over things you own that you can live without.  Each Province has exemption allowances for what you can keep and what you will lose.  These exemptions were put into place to prevent bankruptcy filers from having to live in hardship.  Generally speaking, no one loses everything and some people lose nothing. A trustee in your province will tell you exactly what you can and cannot keep during a bankruptcy.

Will people know I’ve filed for bankruptcy?

According to Canada’s Bankruptcy and Insolvency Act, bankruptcies are public record. However, this doesn’t mean the information is easily accessible. In order to find out if someone has filed for bankruptcy, they must first pay a fee and request a name search from the Superintendent of Bankruptcy. Your creditors will know you’ve filed for bankruptcy, but beyond that, it most likely will not be made known to anyone unless they are actively seeking that information.

What debts go away in bankruptcy?

There are certain debts that won’t go away after a bankruptcy. Child support, student loans that are less than 10 years old, and fines are a few examples. Debts that are erased after bankruptcy include credit cards, unsecured loans and lines of credit, medical bills, and payday loans. Your bankruptcy trustee will give you a better idea of what debts will stay and what will go.

What happens to my credit after bankruptcy?

The thought of living the rest of your life without access to credit is pretty scary.  If you have read or heard that bankruptcy destroys your ability to get credit forever, that is simply not true.  You can rebuild your credit rating once discharged from bankruptcy.

A secured credit card will help you re-establish your credit.  It is reported to the credit reporting agencies just as a normal credit card would be. When you pay the balance off in full every month your credit rating will gradually improve.

How can I tell if bankruptcy is right for me?

A bankruptcy can only be handled by a licensed bankruptcy trustee. If you are considering bankruptcy, make an appointment with a trustee. He or she will ask you some questions about your finances. This includes your debts, assets, and income. After your consultation, your trustee will tell you whether you should file bankruptcy. He or she may also recommend an alternative, such as debt counseling or a consumer proposal.

While you probably have many more bankruptcy questions, these are some of the most common. Your bankruptcy trustee can answer any questions you may have at your first initial consultation.

The decision to file for bankruptcy is a major one that will affect you, your family, and your finances for years. In order to know whether or not this is the right choice for you, it’s important to get the answers to your important bankruptcy questions so you can make an educated decision that works for you and your family.

About - David was initially drawn to accountancy because he was ‘good with numbers’. He has been an insolvency professional since 1993. Soon after he began to work with debt issues he discovered that the most satisfying part of his role was the ability to make a positive difference in other people’s lives. It is the person, not the numbers that continues to guide his approach toward helping others deal with debt issues.