Bankruptcy in Canada is a solution to resolving debt that one cannot repay. It involves signing over to a trustee in bankruptcy all one's assets in exchange for the forgiveness of all debt. For someone who has no means to get out from under debt, it allows a clean slate. Often, other means of resolving the debt can be negotiated, but bankruptcy offers a relatively fast opportunity to start over.
Some of the reasons Canadians choose bankruptcy include loss of job or business; serious health issues; too much student loan to repay on current income. As Canadians become more debt heavy, and a with a slow job-growth economy, it is more common for people to fall under a heavy burden of un-repayable debt. In Canada, one must owe at least 00 and have no means to repay when the debt is due. Once one has declared bankruptcy, creditors cannot garnishee wages or continue to attempt collection. The period of time in bankruptcy may be as short as nine months, if one has never previously declared bankruptcy. It could impair obtaining credit for a number of years, as the bankruptcy will stay on one's credit report for anywhere between six and fourteen years, depending on the credit reporting agency.
Only unsecured debt is erased with bankruptcy; credit cards, lines of credit, personal loans, unpaid taxes. Other debt, car loans and mortgages, are secured with collateral; the creditor can repossess the car or home. Other debts that are not discharged are student loans, child support or alimony payments. The personal assets one is allowed to keep under bankruptcy are clothing, car less than a certain value, household items; what are considered necessities. All other assets, including RRSP's and RESP's, are handed over to the trustee.
Trustees are licensed by the Federal government, and are paid a fee by the debtor. In addition to the trustee's fee, all income over the thresholds set by the Federal government will be handed over to the trustee for disbursement to one's creditors. Any payments received from the government are also forfeit; GST, or tax refunds. These are over and beyond the earned income allowed under the Bankruptcy Act. Also, any unexpected money, winnings or an inheritance, during the period of bankruptcy will be forfeit.
There are some duties that the bankrupt must perform in order to be discharged after nine months. Besides surrendering all assets, there is a monthly reporting meeting with the trustee. Pay stubs must be shown, and any changes in income or family situation reported. Many find these reports onerous, but helpful in learning to track income and expenses. Another requirement is two credit counseling sessions. These could be individually or in a group. The goal of these sessions is to give the bankrupt more tools for money management, and avoid future problems with debt. Other duties include keeping the trustee informed, and assisting him or her with information when requested. One must also, if borrowing more than 0, inform the lender that one is in bankruptcy. One may also not be a director of a company during nine-month period.
Started in 1992, we are your trusted Credit counselling Pickering firm serving the Durham region. With years of experience in Oshawa Credit counselling and credit counselling, you can be assured that we get results.
Started in 1992, we are your trusted credit counselling firm serving the Durham region. With years of experience in debt consolidation and credit counselling, you can be assured that we get results.