What happens if you claim bankruptcies in Canada?

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Starting a bankruptcy journey in Canada involves working alongside a Licensed Insolvency Trustee (LIT). You’ll start by discussing your finances to initiate paperwork that pauses creditor demands. After filing, you’ll manage meetings with creditors and might need to sell non-essential assets. Most unsecured debts are erased, though student loans and taxes may not be. Bankruptcy impacts your credit long-term. Not all trustees can be trusted. Trustees work for creditors and lenders, not for Canadians in debt. They may even charge you twice or add extra costs. Stay sharp! Contact us by phone, text, or live chat if you need guidance.

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Claim Bankruptcies In Canada Question

What happens if you claim bankruptcies in Canada? I’ve heard different stories about bankruptcy and I’m curious about the long-term effects. I want to understand what really happens in Canada.

From: Anonymous Question
Location: Brampton, Ontario (ON)
Category: personal bankruptcy

Claim Bankruptcies In Canada Answer

Filing for bankruptcy in Canada starts a journey with a Licensed Insolvency Trustee (LIT) at the helm. Here’s how it works: You’ll first sit down with the trustee to chat about your financial picture. This leads to filing the necessary paperwork, which quickly halts creditors from making demands. You’ll then need to attend a must-go meeting with those who are owed money. Post-filing, you might part with non-essential assets to pay off debts while keeping protected essentials, like your main residence, under certain conditions. While navigating bankruptcy, you’ll still need to stay on top of important debts, such as child support, and manage payments to the trustee, which are income-dependent. Most unsecured debts are wiped clean, but watch out for exceptions like student loans and taxes. And here’s a critical pointer: Bankruptcy, though offering temporary relief from creditors, leaves a lasting mark on your credit report, making future credit harder to come by for quite a while.

Since lenders and creditors pay trustees, they aren’t advocates for Canadians in debt. Trustees can also charge you twice or add unexpected fees. Stay cautious! Contact us by phone, text, or live chat with any concerns.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

When you claim bankruptcy in Canada, the following occurs:

1. Stay of Proceedings: An automatic stay is put in place, halting most legal actions against you regarding debts as per the Bankruptcy and Insolvency Act, RSC 1985, c 11, Section 69.

2. Appointment of Trustee: A Licensed Insolvency Trustee is appointed to administer your bankruptcy process according to Section 13 of the Act.

3. Asset Liquidation: Your non-exempt assets may be sold to repay creditors as outlined in Section 67 of the Act, though certain necessary assets may be exempt.

4. Debt Discharge: If you meet all obligations, including making necessary payments, you may be discharged from your debts typically after 9 months to 21 months, depending on your situation, following Section 91 and Section 135.

5. Credit Rating Impact: Bankruptcy will affect your credit rating for up to 7 years for a first bankruptcy, as noted in the regulations, thus impacting your ability to obtain credit in the future.

6. Long-term Effects: Beyond the credit impact, it can affect employment prospects in certain sectors and may require you to disclose your bankruptcy for certain business licenses.

7. Public Record: The bankruptcy will appear on your public credit record and can be accessed by creditors and the public, as stipulated in Section 103 of the Act.

It’s crucial to consult with a Licensed Insolvency Trustee for personalized advice based on your financial situation and to understand the implications thoroughly.

From: OSB Helper

Related Questions to Claim Bankruptcies In Canada

Here are the top 5 most frequently asked questions related to claiming bankruptcy, based on current trends and common queries:

1. What debts are eligible for discharge in bankruptcy?

• Credit cards, lines of credit, store cards, unsecured bank loans, bills, and tax debts are eligible, among others[5].

2. How do I file for bankruptcy?

• You must work with a Licensed Insolvency Trustee (LIT) who will handle the necessary documentation and negotiations with creditors[5].

3. What happens to my assets if I claim bankruptcy?

• Your assets will be sold by the Licensed Insolvency Trustee to pay off creditors[5].

4. How does bankruptcy affect my credit score?

• Bankruptcy significantly impacts your credit score, but the effects can vary depending on the duration and other financial activities[2].

5. What are the immediate financial consequences of claiming bankruptcy?

• You no longer make payments on unsecured debt, wage garnishments stop, and legal proceedings against you by creditors cease[5].

If you have a question about debt see our debt questions or ask your own debt related question.

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