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Most Canadian Debtors Don’t Need a Bankruptcy Lawyer – Here’s Why

Are you experiencing financial difficulties and looking for a solution? If so, you’re probably doing some online research about your debt relief options. And yet many debtors come into our offices confused about their rights, and in particular about the bankruptcy process.

This may be because a large part of our media and news consumption comes from the United States – and their process differs from ours. For example, any discussion you see about bankruptcy lawyers and Chapter 7, 11, or 13 bankruptcies pertain to the US. They don’t apply to us Canadians.

You need to be aware of your debt relief rights and options.

To help you along, we’ve set out below 3 key differences between the Canadian and American bankruptcy processes.

#1. In Canada, we have personal bankruptcy. The equivalent in the US is a Chapter 7 bankruptcy.

In the United States, an individual may file personal bankruptcy under Chapter 7, Title 11 of the United States Code, also known as the United States Bankruptcy Code. This is the most common type of personal bankruptcy in the US. Some businesses also file a Chapter 7

In Canada, we call it filing for personal bankruptcy. The process is governed by the Bankruptcy and Insolvency Act of Canada.

In this type of bankruptcy, a debtor is discharged from his or her unsecured debts. Once filed, an automatic stay goes into effect, which stops all collection efforts by creditors. This is the best solution for those debtors who cannot repay their debts.

#2. In Canada, we have Consumer Proposals. The equivalent in the US is Chapter 13 bankruptcy.

In the United States, a Chapter 13 – which is considered a form of bankruptcy – allows a debtor to repay either all or a portion of their debt over a period of five years. This is the best option for those debtors who can afford to repay at least part of their debt. The US also has a Chapter 11 option, which is typically used by businesses and corporations to reorganize their financial affairs through a restructuring process.

In Canada, we have Consumer Proposals, often considered a last resort before filing for bankruptcy. In both a Consumer Proposal and a Chapter 13, debtors are able to keep their assets, unlike in personal bankruptcy or a Chapter 7.

#3. In Canada, you need a Licensed Insolvency Trustee to file a Consumer Proposal or personal bankruptcy. In the US, you need a bankruptcy lawyer.

To file a Chapter 7, 11, or 13 bankruptcy in the US, the first step is to hire a bankruptcy lawyer. The lawyer prepares the documentation needed to apply to the Court for approval of one’s bankruptcy plan. Creditors have the right to appear in court and propose alternate arrangements. The Court then issues an order and assigns a Bankruptcy Trustee to the file.

In Canada, the process begins with a Licensed Insolvency Trustee. These are the only professionals licensed and authorized by the Canadian government to assist debtors with filing Consumer Proposals or bankruptcies. Your Licensed Insolvency Trustee takes you from the initial paperwork all the way through the process. Lawyers are only required in the most complex of cases, usually ones that involve alleged impropriety.

Contact A Licensed Insolvency Trustee Today

If you’re considering filing a Consumer Proposal or bankruptcy and want to learn more, or get started on the process, contact our offices today. We’ll review your financial circumstances and advise you on which debt relief options are available to you. You’ll also get our seasoned opinion on the best solution for you and your family. So reach out today. The quicker you do, the more options you may have available to you. Let us help you get on the path to better financial health.

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Scott Marshall BBA, C.I.R.P, L.I.T

Scott is serving as Vice President and managing partner of Allan Marshall & Associates Inc. since obtaining his License as a Trustee (LIT) in 2003. Scott graduated with a Bachelor of Business Administration (BBA) from the University of New Brunswick and is an active member of the New Brunswick business community. In past years, Scott has been a valued member of the Wallace McCain institute.