In Canada, the Canadian Bankruptcy and Insolvency Act (BIA) is federal legislation enacted to allow “honest but unfortunate debtors” a chance to make a fresh financial start. In other words, it’s a legal process designed to give help someone start over with a clean slate financially should they find themselves overwhelmed by too much debt.
Bankruptcy protection is only available through the services of a licensed bankruptcy trustee. When you file for bankruptcy, your trustee takes over your assets (with the exception of certain exemptions which differ from province to province). The trustee then sells those assets and divides the money between your creditors.
In order to be able to file for bankruptcy, you must meet the following criteria:
- You must owe at least $1,000.
- You are not be able to make your payments as they come due.
- You do not have sufficient assets to pay off your debt.
Generally speaking, the upside of bankruptcy is that it doesn’t affect your employment, it lets you cease making payments to unsecured creditors, it prevents your wages from being garnished, and it stops the harassment of collection calls and legal proceedings.
However, while bankruptcy may seem to be a straightforward solution to your financial problems, it isn’t a process to be taken lightly. In addition to surrendering your assets to your trustee, you will also have to meet other obligations set forth by the government:
- You must give up all your credit cards.
- You must attend two financial counselling sessions during your bankruptcy term.
- You must file monthly statements of income and expenses to your trustee for the duration of your bankruptcy period.
- You may be required to make surplus income payments to your trustee each month that you’re in bankruptcy. Surplus income payments are determined according to set rules depending on your level of income and number of dependents. These payments will be distributed to your creditors.
In addition, if you’re considering bankruptcy as a possible solution to your financial situation, you should also be aware of the following:
- Not all debts are released by bankruptcy. If you are paying child or spousal support, those payments will continue. Certain student loans, debts arising from fraud, and court fines are also not included in a bankruptcy and must still be paid in full.
- If your employment requires you to be bonded, bankruptcy could make it more difficult to obtain bonding.
- Filing for bankruptcy will have a negative impact on your credit rating. It will remain on your record for approximately seven years after you complete your bankruptcy term.
The length of time you will be in bankruptcy varies depending on your circumstances. If this is your first bankruptcy, you have no surplus income, and you meet all of your obligations, you’ll receive an automatic discharge after nine months. If you do have surplus income, you’ll be required to make payments for an additional 12 months after that. For second-time bankrupts, the term is 24 months if you have no surplus income, and 36 months if you do.
To determine whether you’re eligible to declare bankruptcy in Ottawa and the sorrounding areas —or if doing so is even your best option—you’ll need to speak with a licensed bankruptcy trustee. At Doyle Salewski, your first consultation is free, confidential, and carries no obligation, so call one of our professionals today, and let us help you find your path to financial relief.