Declaring Bankruptcy

Q.1. What is bankruptcy?

Bankruptcy is a formal process governed by the Bankruptcy and Insolvency Act. This Act was created to protect the rights of you and your creditors, and declines the powers and duties of trustees and the court. The Act not only preserves as many of the debtor’s assets as possible for the benefit of creditors but also it tries to rehabilitate debtors by forgiving the unpaid debt and restoring them as productive members of society.

Q.2. What happens when I declare bankruptcy?

With bankruptcy you sign all of your assets, except those exempt by law, over to a trustee who will sell or use those assets to pay your creditors. Once you declare bankruptcy you will stop making payments to unsecured creditors, wage garnishments will be stopped and all lawsuits against you will be stayed.

Q.3. What should I do before I think about declaring bankruptcy?

Bankruptcy will affect your life for many years. You should think about it only as a last resort. The first thing you should do is rework your budget to start paying down debts. If you cannot solve the problem yourself, get help. Talk to a credit counsellor. Provincial and territorial governments are responsible for regulating credit counselling agencies. Some charge fees so do your research about credentials, costs and services. You can also consolidate your debts. You could also call your creditors to try and rearrange a repayment plan. Finally, you could also apply for a consolidation order or make a consumer proposal under the Bankruptcy and Insolvency Act.

Q.4. How do I declare bankruptcy?

Bankruptcy, because it is a legal process, can only be filed through a trustee in bankruptcy. These trustees can be found in your local telephone directory. There are specific steps in the process including contacting a trustee and completing the required forms. The trustee sells your assets and notifies your creditors of the bankruptcy. These are the preliminary steps with others requiring a series of meetings to follow.

Q.5. If I declare bankruptcy how long will that be in effect?

The length of time you will remain in bankruptcy depends upon specific conditions. There are calculators that help you determine how long you will be in bankruptcy and how much it will cost you.