Aside from bankruptcy, there are several solutions available to you when you are over-indebted.
How to file bankruptcy yourself?
Are you in debt and do not know how to make ends meet? Do you think to file for bankruptcy is the solution for you? click here to read the main steps and conditions to file for bankruptcy.
Bankruptcy is a process that allows you to free yourself from the majority of your debts by handing over some of your property. In other words, bankruptcy allows you to clear your debts and put an end to your debt situation in a few months. To do this, however, you must pay certain amounts of money and give up some of your property to repay your creditors. You must also respect all stages of the bankruptcy process.
When you make the decision to go bankrupt, it is a voluntary bankruptcy. When it is your creditors who force you to do so, it is a forced bankruptcy. This last situation is however rather rare.
The conditions for making a personal bankruptcy
To go bankrupt, a person must be insolvent, that is, must:
- have debts of $ 1,000 or more
- reside or own property in Canada;
- not already being bankrupt and
- to be in one of the following situations:
- it is impossible, for one reason or another, to pay its debts on the due date; or
- it has stopped paying its debts or current bills (electricity bills, telecommunications bills, credit card balances, etc.); or
- the value of all the assets it owns (its assets) is less than the value of all its debts (its liabilities).
If you are in such a situation, you can make an appointment with a licensed insolvency trustee (a trustee in bankruptcy) to find out if bankruptcy is a good option for you.
The role of the trustee
The trustee manages your bankruptcy. As part of his duties, the trustee:
- meet you, analyze your financial situation and make recommendations to you;
- refer you to other solutions if they are more appropriate for you, such as the consumer proposal or voluntary deposit;
- determine with you the goods you will have to give back to repay your debts and those that you can keep.
If you have problems with your trustee, you can contact the Office of the Superintendent of Bankruptcy Canada. It is this body that gives him his license and has the power to monitor and supervise him.
Debts that enter and do not go into bankruptcy
Most debts can go into bankruptcy. It can be among others:
- outstanding balances on credit cards;
- debts on lines of credit;
- personal loans;
- tax debts;
- debts to collection agencies;
- student debt, under certain conditions.
Some debts, however, can not be included in the bankruptcy. This means that creditors could claim the money you owe them despite your bankruptcy. These are the debts:
- resulting from alimony;
- resulting from a fine, penalty, surrender order or other similar penalty imposed by a court;
- arising out of a civil liability lawsuit for sexual assault, assault causing injury or causing death;
- from fraud, misrepresentation or illegal acts;
- related to money that a creditor could not obtain because you did not disclose its existence to the trustee;
- related to a student loan, if you have stopped attending school for less than 7 years. A judge can, exceptionally, reduce this period to 5 years if he is convinced that you have made efforts to pay and that you will be unable to do so in the future.
The main stages of bankruptcy
To become more familiar with the personal bankruptcy process, here is an explanation of its key steps.
There are two consultation meetings that you must attend. They are offered by the trustee or an authorized advisor.
- At the first meeting, you will receive advice on how to use a budget, the first signs of insolvency and the use of credit.
- During the second meeting, you will receive help to understand the causes of your over-indebtedness and recommendations on possible solutions according to your situation.
You must attend these two meetings to be entitled to an automatic release at the end of the bankruptcy process (see below).
With the help of the trustee, you must take stock of your debts and a list of your assets. You must also complete a form to transfer your property to the trustee and initiate the bankruptcy process. The trustee is then responsible for filing the necessary documents with the official receiver.
This step corresponds to the date of your bankruptcy (the “day 1”, the opening of your bankruptcy). From that point on, your creditors can not usually sue you to pay them back.
Surrender and sale of property
The trustee uses the list of your assets to determine with you which ones will be sold to repay your creditors. Some of your property is, however, protected by law, which means that it can not be seized or sold.
You can keep:
- RRIFs and RRSPs, except amounts paid less than 12 months before bankruptcy (exceptions apply)
- Up to $ 7000 worth of items that are used for your basic needs and those of your family and are in your primary residence (or other personal items if the value of these items does not reach $ 7000). These objects will not be protected if there is a mortgage on them;
- the food, fuel, clothes, and clothes needed for your life and that of your family;
- the tools needed for your profession or trade (such as a toolbox, a computer, or even a car), unless there is a mortgage on them;
- a portion of your salary determined by law.
The trustee proceeds to the sale of the goods that are not protected. The money from this sale will be distributed to your creditors in the order prescribed by law.
It is also possible that part of your salary is seized to pay your creditors.
The meeting of creditors
The trustee must contact your creditors. In some cases, he will organize a meeting of creditors. At this meeting, they can, among other things, establish how the amounts obtained from the sale of your property will be managed.
The release of debts
The last step in the bankruptcy process is to get your debts cleared. Being released means that the debts included in your bankruptcy are erased since all the steps have been respected and completed. This release can be done automatically or by going to court.
The automatic release of your debts is usually 9 months or 21 months after the date of your bankruptcy.
To qualify, you must:
- that it is your first bankruptcy;
- that the creditors, the trustee, and the Superintendent do not oppose your release; and
- that you have participated in the consultation meetings provided by law.
The automatic release is also possible if it is your second bankruptcy, but you will have to wait 24 months or 36 months after the date of your bankruptcy.
When you are not entitled to an automatic release, you must obtain your release by going to court. After evaluating your conduct, the court may decide:
- to release you immediately from all your debts, except those that can not be included in the bankruptcy;
- to release you, but after a delay that it determines;
- to free you, but only if you respect the conditions it imposes on you;
- not to free you in some rare cases.
The credit file
A note to the effect that you went bankrupt will be put in your credit file. She will stay there for 6 to 7 years after the date of your release.
In the case of a second bankruptcy, this period could extend to 14 years.