Debt is more than a dollar amount. Having to decide whether to pay your bills or put food on the table for your family is a massive burden. Trying to move money around each month and figure out what you can cut from your budget can feel unmanageable. But there is hope.
There are debt relief options available in British Columbia to help you eliminate your debts so you can start over. This article explores personal Bankruptcy in Victoria. It covers what personal Bankruptcy is, who is eligible, and how a Licensed Insolvency Trustee can help you decide if it’s the right choice for you.
What is Personal Bankruptcy in Victoria?
Bankruptcy is a legal process governed by the Bankruptcy and Insolvency Act of Canada. It is a debt relief option that allows you to surrender your non-exempt assets in exchange for the elimination of most of your unsecured debts. The goal of Bankruptcy is to give honest Canadians who are struggling with debt a second chance.
How Does Bankruptcy Work in British Columbia?
If you decide to file for Bankruptcy, you will work with a Licensed Insolvency Trustee (LIT) throughout the process. Your LIT will help you complete all of the necessary documentation and communicate with your creditors on your behalf.
Once your Bankruptcy has been filed, you can expect the following:
- Phone calls from collections will stop
- You can stop making payments to your unsecured creditors
- Any lawsuits against you from your creditors will stop
- Wage garnishments will stop
After filing for Bankruptcy, your LIT will sell your assets. Your LIT will hold on to the profits which they will then distribute to your creditors.
During the Bankruptcy process, you must attend two financial counselling sessions. The goal is to help you understand what led to your Bankruptcy, and how you can avoid a similar situation in the future.
In some cases you may have to make “surplus income” payments. If you can afford to pay more to your creditors based on your monthly income, then you will have to do this.
If you follow the rules of the Bankruptcy process and are discharged, all of your eligible debts are cleared, and you get a chance at a fresh financial start.
Who can file for Personal Bankruptcy in Victoria?
To qualify for personal Bankruptcy in British Columbia, you must meet the following criteria:
- You must be insolvent, meaning you can no longer pay your bills on time.
- You must owe at least $1,000 in unsecured debt
Will Bankruptcy eliminate all of my debts?
Bankruptcy will not eliminate all of your debts, but it can eliminate most of your unsecured debts, including:
Debts that are not eliminated in Bankruptcy include:
- Child and spousal support
- Court awarded restitution payments
- Debt arising from fraud
- Secured debts (e.g., mortgage, car loan)
- Some gambling debts
- Student loans (if you haven’t been out of school for 7 years)
Will Bankruptcy affect my credit score?
Yes, Bankruptcy will likely drop your credit score to the lowest possible rating. In British Columbia, Bankruptcy will typically stay on your Equifax and TransUnion credit reports for 6 years after the date you are discharged. If you are in your second Bankruptcy, you can expect it to appear on your credit report for 14 years.
Alternatives to Filing for Bankruptcy
While Bankruptcy is an effective debt relief option, it is not necessarily the right option (or the only option) for you. There are other debt relief and debt management strategies available and an LIT can help you determine which one makes the most sense for you and your family.
Similar to Bankruptcy, a Consumer Proposal is a legal process administered by an LIT. You work with your LIT to create a proposal for your creditors. In your proposal, you offer to pay a percentage of what you owe and/or ask your creditors to extend the time to repay your debts. You have up to five years to pay back your debts in a proposal. The main difference between Bankruptcy and a Consumer Proposal, is you get to keep more of your assets in a Proposal.
Debt consolidation is when you take out a large personal loan and use it to pay off your other debts. As a result, you streamline the debt repayment process into one easy-to-track payment. The goal is to find a loan that offers terms that are better than your other, high-interest debts. However, this can be tricky if you have a low credit score. Unlike Bankruptcy, debt consolidation won’t eliminate any of your debt, but if you are able to secure a lower interest rate, this can help.
If you have trouble keeping up with your monthly debt payments, but you’re still managing to do it, you might consider credit counselling. A credit counsellor can provide budgeting advice, assist you in creating a repayment plan, and, in some cases, they can try to negotiate with your creditors to reduce your debts. Unlike a Consumer Proposal, the negotiations with your creditors in a debt management plan are completely voluntary and don’t always end up eliminating any debt.
Is Victoria BC Bankruptcy Right For Me?
If your debt is the first thing you think about when you wake up and the last thing you think about when going to sleep, it’s time to ask for help. A Licensed Insolvency Trustee is a federally regulated professional who can provide advice and assistance across all debt relief and debt management options.
An LIT is also the only professional who can administer government-regulated proceedings like Bankruptcy or a Consumer Proposal. If you live on Vancouver Island and you can’t manage your debt, we can help. Reach out to one of our experts today for a risk-free 30-minute call at 1-888-371-8900, or fill out our online contact form.