Filing for Bankruptcy is a financial decision, but it’s also an emotional one. The thought of filing for Bankruptcy can bring up many unpleasant emotions like shame, fear, and embarrassment. However, the purpose of Bankruptcy is not meant to punish. Instead, it’s to provide honest Canadians who are down on their luck with a second chance. At Allan Marshall and Associates we understand the emotional toll that debt can take, and our team of insolvency trustees are here to help you through this difficult time.
What is Bankruptcy?
Bankruptcy is a legal process governed by the Bankruptcy and Insolvency Act in which you can be discharged from most of your unsecured debts. In exchange, you have to sell some of your assets to pay back your creditors.
Who Can File For Bankruptcy?
You can work with a Licensed Insolvency Trustee (LIT) to determine if Bankruptcy is the best debt relief solution for your situation. During your initial consultation, your LIT will assess if you meet the qualification criteria for Surrey Bankruptcy, which include:
- You owe at least $1,000
- You are insolvent (you can’t pay your debts on time)
- You reside, do business, or own Canadian property
- Your debts exceed the fair market value of your assets
How to File For Bankruptcy
The first step in filing for Bankruptcy is finding a Licensed Insolvency Trustee. An LIT is the only professional in Canada who can administer a Bankruptcy proceeding.
When you file for Bankruptcy, your LIT will help you complete the necessary documentation and submit it to the Office of the Superintendent of Bankruptcy (OSB). At this point, you are declared Bankrupt. Your LIT will deal with your creditors on your behalf throughout your Bankruptcy.
What Are Your Responsibilities in Bankruptcy?
While your LIT will handle most tasks during your Bankruptcy, you do have some responsibilities. You must:
- Disclose all of your assets and debts to your LIT
- Inform your LIT if you’ve sold or transferred any property in the past few years
- Hand over your credit cards to your LIT
- Attend two counseling sessions
- Tell your LIT in writing if your address changes
- Help your LIT throughout the Bankruptcy process
What Debts Are Eliminated in Bankruptcy?
Bankruptcy will 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 seven years)
Will You Lose All of Your Assets in Bankruptcy?
While there’s a misconception that you will lose everything you own in Bankruptcy, this is not the case. Your LIT will sell your non-exempt assets to try and recoup money for your creditors. However, there are certain assets that are exempt from sale.
Examples of Surrey Bankruptcy exemptions:
- Car up to $5,000 (or $2,000 if you owe family or child support payments)
- Home equity in primary residence up to $12,000
- Work tools up to $10,000
- Medical and dental aids
- Registered retirement saving plan (RRSP) and Registered Disability Savings Plan (RDSP)
Your LIT can advise you on what you can expect to keep and sell during your Bankruptcy.
Will Your Credit Score Drop in Bankruptcy?
Yes, your credit score will go down in Bankruptcy. Typically, you’ll be assigned the lowest possible rating, R-9.
A first-time Bankruptcy will remain on your credit score for up to six or seven years. Any subsequent Bankruptcies will stay for 14 years. Having a Bankruptcy on your credit report can make it very difficult to borrow money.
Even once your Bankruptcy is removed from your record, it can take time to rebuild your credit score.
Alternatives to Surrey Bankruptcy
While you and your LIT may decide that Bankruptcy is the right solution for your situation, it might not be your only option. Depending on the amount of debt owed, your LIT might propose other debt solutions, such as:
A Consumer Proposal is a debt relief solution that can also only be administered by an LIT. In a Proposal, you work with your LIT to develop an offer to your creditors to pay a percentage of your debt, extend the time you have to pay, or both. The main difference between a Proposal and Bankruptcy is you get to keep more of your assets.
The purpose of credit counselling is to help you improve your financial knowledge and skills. A credit counsellor can work with you to understand the root causes of your debt issues and recommend strategies to get you out of debt. They can also teach you helpful skills like how to create a budget, and use it to manage your money.
Speak to a Bankruptcy Trustee in Surrey
If you’re insolvent and considering Bankruptcy in Surrey, an LIT can help you navigate the entire process. Licensed Insolvency Trustees are debt professionals who have the qualifications and experience to help you navigate any debt situation, no matter how hopeless it might seem.