What happens if you file for bankruptcy?

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Navigating bankruptcy in Canada is simpler when broken down. Either start a meeting with us or a Licensed Insolvency Trustee (LIT) to assess your eligibility. After paperwork, an automatic stay prevents creditor harassment. The process lasts 9-21 months, affecting your credit for 6-7 years but offering debt relief. Consider consumer proposals as an alternative. Note - Not all trustees can be trusted. Reach out via phone, text, or live chat if you have any questions.

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File For Bankruptcy Question

What happens if you file for bankruptcy? I want to understand what happens when you file for bankruptcy and what the long-term effects are.

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

File For Bankruptcy Answer

Navigating bankruptcy in Canada isn’t as daunting as it seems when you break it down step by step. It all kicks off with an essential meeting with a Licensed Insolvency Trustee. They’ll take a look at your financial situation to see if you qualify. Once you’ve tackled the paperwork, you’ll get a breather known as an automatic stay of proceedings. This nifty little feature keeps creditors from pestering you further. The process usually spans 9 to 21 months, and during this time, you might have to part with some non-exempt assets. Most of your unsecured debt will be wiped clean at the end of it, though some debts, like taxes and child support, will stubbornly stick around.

On the downside, your credit score will take a hit, landing an R9 rating that lingers for 6 to 7 years. However, take heart; climbing back up that credit ladder is doable with responsible moves—think secured credit cards. If you’re looking for an alternative, consumer proposals are gaining traction, making up much more than half of all insolvency filings in Canada these days, where you pay back part of your debt instead of the full amount. Just tread carefully, as not every trustee is a knight in shining armor.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

When you file for bankruptcy in Canada, you undergo a legal process governed by the Bankruptcy and Insolvency Act (RSC 1985, c. B-3). Upon filing, an automatic stay of proceedings comes into effect, which halts most collection activities against you (Section 69). A Licensed Insolvency Trustee (LIT) is appointed to manage your bankruptcy process, which includes evaluating your assets and liabilities, as outlined in Section 13.

During bankruptcy, your non-exempt assets may be sold to repay creditors. The exemptions can vary, but typically, basic essentials are protected (Section 67). You must also make monthly payments based on your income and family size, as specified in the regulations.

The bankruptcy process typically lasts 9 months to 21 months, depending on your situation, such as whether this is your first bankruptcy (Section 136). A discharge from bankruptcy will relieve you of most debts, but some debts, like child support or student loans under certain conditions, persist after discharge (Section 178).

Long-term effects of filing for bankruptcy include a negative impact on your credit rating, which can remain on your credit report for up to 7 years for a first bankruptcy (Section 191). This can make it challenging to obtain credit or loans in the future. Additionally, filings can affect professional licenses in certain industries.

It is crucial to fully understand the implications and responsibilities associated with a bankruptcy filing to ensure informed decision-making throughout the process.

From: OSB Helper

Related Questions to What Happens If You File For Bankruptcy

Here are the top 5 most frequently asked questions related to filing for bankruptcy, based on the provided sources and general online trends:

1. Will I lose my house if I file for bankruptcy?

• Not likely, depending on the amount of equity in the home.

2. How long does bankruptcy last?

• It can last from 9 to 21 months, depending on surplus income.

3. How does bankruptcy affect my credit score?

• Bankruptcy can lower your credit score by around 200 points or more and remains on your credit report for 6 or 7 years.

4. What happens to my debts when I go bankrupt?

• Most debts are discharged upon receiving a bankruptcy discharge, except for non-dischargeable debts like child support or alimony.

5. Can creditors still contact me after I file for bankruptcy?

• No, creditors must stop contacting you directly once the bankruptcy documents are filed, due to a “Stay of Proceedings.”

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

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