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What is Bankruptcy
Bankruptcy is a legal process, designed for the honest unfortunate debtor. It is designed to assist an individual out of debt so that they may have a fresh financial start. When you file for or declare personal bankruptcy, you are voluntarily entering into a legal process that provides you with immediate protection against any further action by your creditors.
To find out more about whether bankruptcy may be your best option, please refer to our bankruptcy pages, or call Allan Marshall & Associates for a free consultation.
When financial problems arise, the appropriate information and advice are needed to resolve the problem and reduce stress before it becomes a bigger problem. If left unresolved, financial problems may contribute to other problems such as problems with health or relationships.
Myths about bankruptcy
Often one of the hardest parts about bankruptcy is dealing with inaccurate myths. Often, what people hear about the bankruptcy process is simply not true.
In an effort to dispel some of the myths we have assembled a list of common myths followed by the facts. The myths and facts listed below are a sample of questions commonly asked about Personal Bankruptcy.
Myth: An individual filing for bankruptcy will lose everything.
Fact: No. In fact, many people who file for bankruptcy keep many of their major assets.
Myth: Bankruptcy lasts for 7 years and you can’t get credit for that time.
Fact: A number of factors determine how long a bankruptcy can last, such as income, or whether you are a first-time bankrupt. This answer can vary.
Myth: Student loans cannot be released by bankruptcy.
Fact: Bankruptcy can actually help with student loan debt if you have been out of school for 7+ years.
Myth: If a husband or wife file for bankruptcy or a proposal, then their spouse will also have to file.
Fact: No. Your spouse can decide how they need to proceed based on their own finances.
Myth: Only irresponsible people file for bankruptcy and then are frowned upon by others.
Fact: No. Anyone can file for bankruptcy. Debt problems are common among all ages. The faster you deal with financial problems, the easier they are to overcome.
Myth: If my spouse and/or I file for bankruptcy, the bank will take our house.
Fact: No. Most people that want to keep their homes are able to do so, even in bankruptcy.
Myth: All bankruptcies are published in the paper.
Fact: No. Most personal bankruptcies are NOT published in newspapers, however, Business bankruptcies may be published.
Personal Bankruptcy FAQs
Bankruptcy is a legal process under the Bankruptcy and Insolvency Act that provides individuals overwhelmed by debt with a way to eliminate most of what they owe and get a fresh financial start. It stops creditor actions such as garnishments and collection calls, and most unsecured debts are discharged by the end of the process.
To file for bankruptcy, you meet with a Licensed Insolvency Trustee (LIT) who reviews your debts and assets. Once filed, you’re protected from creditors and work with your LIT to complete required duties. At the end of the process, you receive a discharge, which legally wipes out your eligible debts.
The length of bankruptcy depends on your income and other factors. For a first bankruptcy, discharge can occur in as little as 9 months or extend to 21 months. If you have surplus income or it isn’t your first bankruptcy, the timeline may be longer.
Most unsecured debts (like credit cards, personal loans, and lines of credit) are included in bankruptcy. Some debts — such as secured debts (e.g., mortgages) or certain government debts — may not be included or may operate differently, and exempt assets are protected as defined by provincial rules.
Yes. Bankruptcy is noted on your credit report with an R9 rating, and it typically remains for 6–7 years after your discharge for a first bankruptcy. This affects your credit score and your ability to borrow, but rebuilding credit is possible over time with responsible financial habits.
Some of your assets may need to be surrendered or liquidated to help pay your creditors, though exemptions allow you to keep certain items (like basic household belongings and tools of your trade) depending on your province. Your LIT will explain exemptions and what may happen to your property.
It depends on whether you still owe money on them and the amount of equity you have. In many cases, people can keep secured assets — like a car or home — if you keep making payments and your equity is exempt under provincial rules. A Licensed Insolvency Trustee will walk through your options with you.
Both bankruptcy and a consumer proposal are federal debt relief options administered by a Licensed Insolvency Trustee. A consumer proposal allows you to negotiate with creditors to repay a portion of what you owe over time while usually keeping your assets, and it generally has less impact on your credit than bankruptcy. Bankruptcy eliminates most debts but may involve surrendering assets and has a longer credit reporting impact.
Not always. Bankruptcy is often a last-resort solution when other options, like a consumer proposal or budgeting strategies, aren’t viable. A confidential consultation with a Licensed Insolvency Trustee can help you understand which debt relief solution best fits your situation.
Bankruptcy stops almost all collection activity, garnishments and interest charges immediately. Most unsecured debts are discharged by the end of the process, giving you a fresh financial start. Working with a Licensed Insolvency Trustee also provides guidance throughout the process.
There are a lot of myths about bankruptcy and proposals. For more FAQs about bankruptcy, check out our Frequently Asked Questions section.
If you have questions or concerns please get the facts before making a decision. Don’t allow yourself to make a poor decision based on inaccurate information. Contact us at Allan Marshall & Associates Inc.
Other articles about Bankruptcy
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