The thought of filing for personal Bankruptcy can feel scary and humiliating. You might worry about losing your assets or about friends and family learning of your financial situation. While these feelings are valid, the purpose of a personal bankruptcy is to give you a fresh financial start.
If you are contemplating filing for personal Bankruptcy, and you live on Vancouver Island, your first step is to connect with a Licensed Insolvency Trustee (LIT). An LIT is the only professional authorized to administer a Bankruptcy proceeding. When you meet with your LIT, they will assess your financial situation and help you determine if personal Bankruptcy is the right choice for you.
What is Bankruptcy – Vancouver Island?
Bankruptcy is a legal process designed to relieve insolvent individuals from most of their debts. If you and your LIT decide that personal Bankruptcy is the right choice for you, your LIT will initiate your Bankruptcy by completing and submitting the necessary documentation to the Office of the Superintendent of Bankruptcy (OSB). Once this is complete, you are formally declared bankrupt.
As soon as you are declared Bankrupt:
- You can stop making debt payments directly to your unsecured creditors
- Wage garnishment and any creditor lawsuits against you will stop
- Phone calls from creditors will stop
Who qualifies for Vancouver Island Personal Bankruptcy?
To qualify for personal Bankruptcy in Vancouver Island, you have to meet the following criteria:
- You owe at least $1,000 in unsecured debt.
- The value of your debt is greater than the sale value of your assets.
- You are insolvent, meaning you can’t pay your bills on time.
Will You Lose All of Your Assets in Bankruptcy?
After declaring Bankruptcy, your LIT is responsible for selling any assets that are eligible to help raise money to repay your creditors. A common fear is you will lose everything you have worked so hard to attain. This isn’t true.
Many people who file for personal Bankruptcy end up keeping some of their major assets. What you can keep often depends on the province you live in. There are exemptions to what can be sold, including:
- Household furnishings and personal effects
- Registered pensions and RRSPs
- Tools used to earn a living
The point of Bankruptcy is not to ensure you lose everything, it’s to try and give you a fresh start. In some situations, you may be able to keep your home or vehicle. What you can keep will vary based on your situation. A Licensed Insolvency Trustee can advise you on what assets you may be able to hold onto in British Columbia.
Will Personal Bankruptcy Affect Your Credit Score?
Filing for Bankruptcy will affect your credit score. Typically you will be assigned the lowest possible credit rating. This can make it difficult to obtain credit until the Bankruptcy is removed from your credit report. A first Bankruptcy will remain on your credit report for up to seven years. Any subsequent Bankruptcy will appear for 14 years.
Will Personal Bankruptcy Affect My Spouse?
If you file for Bankruptcy, this doesn’t mean your spouse has to file for Bankruptcy too. You can file for personal Bankruptcy alone. How much this impacts your spouse depends on how much joint debt you and your partner share.
Joint debt is when you borrow money with someone else. For instance, if you and your spouse open a joint bank account or take on a personal loan together, this is considered joint debt. In these cases, you split the debt, and you are both legally responsible. If you declare personal Bankruptcy and stop making payments on your joint loan or credit card, your spouse becomes entirely responsible for the debt.
If you know your spouse can’t take on the burden of your joint debt, you may consider filing for joint Bankruptcy. This is something you can discuss with your LIT.
What Are Your Responsibilities During Bankruptcy?
While your LIT takes care of filing all of your Bankruptcy documents and dealing with your creditors, you also have responsibilities to fulfill, including:
- Providing your LIT with financial information. You must disclose all information about your assets and debts to your LIT. You also need to tell your LIT if you’ve sold or transferred any property within the last few years.
- Handing over your credit cards. After filing for Bankruptcy, you must surrender your credit cards to your LIT.
- Telling your LIT if your address changes. If you move or your address changes, you need to inform your LIT in writing.
- Attending two financial counselling sessions. The purpose is to help you understand the cause of your Bankruptcy, and how to avoid going into debt in the future.
- Paying “surplus income.” In addition to paying LIT fees, you may have to make surplus income payments that are then distributed by your LIT to your creditors. Surplus income is any earnings that exceed the amount you and your family need to maintain a reasonable standard of living set by the OSB.
What Are Alternatives to Filing for Personal Bankruptcy?
Bankruptcy is not the only debt management option. Depending on your situation, your LIT might suggest other solutions, such as:
The purpose of credit counselling is to understand what caused you to go into debt in the first place. In a counselling session, your LIT will provide resources and tools to improve your financial literacy. Your LIT might work with you to create a budget, coach you on how to use credit or suggest a more structured debt relief solution such as a Consumer Proposal.
A Consumer Proposal is a legal process that can only be administered by an LIT. During the proposal process, you and your LIT will create an offer to your creditors to pay a percentage of what you owe, extend the time you have to pay, or both. The maximum time to repay your debts in a proposal is five years.
Vancouver Island Personal Bankruptcy – Work With an LIT
Whether you’re just scraping by or you’re struggling with insolvency on Vancouver Island and considering Bankruptcy, it’s never too soon to call a Licensed Insolvency Trustee. We are here to help, you don’t have to deal with your debt alone.
A Licensed Insolvency Trustee at Allan Marshall & Associates can help you decide if Bankruptcy is the right choice for your financial situation, or if you have other options. For a free, no-obligation consultation, give us a call at 1-888-371-8900 or book an appointment online using our contact form. We look forward to speaking with you.