Should I file for bankruptcy? It’s a tricky question that depends on multiple factors.

It’s a decision that you shouldn’t rush into. It requires careful consideration and consultation from a Licensed Insolvency Trustee (LIT or trustee).

You might already know that bankruptcy is a last resort, often resulting from an unfortunate and sudden change in circumstances and the need to start over.

If you’re considering bankruptcy, you may want to ask yourself the following questions:

  • Do you live, work or do business in Canada?
  • Are you unable to make payments to your creditors as they become due?
  • Do you owe at least $1,000 in unsecured debt?
  • Are the debts in question unsecured debts?
  • Are your assets worth less than your debts?

If you answered yes to the above questions, bankruptcy might solve your problems. But make sure you take the time to explore other debt-relief options too.

See also: Do I qualify for bankruptcy?

You’ll be unable to eliminate secured debts such as a mortgage or car loan in bankruptcy.

Nor will you be able to eliminate property taxes, court fines, unpaid alimony or child support, debts obtained by fraud or false pretence, and student loans less than seven years old.

While you won’t eliminate these types of debt, you can ease the financial burden by eliminating all of your unsecured debts through bankruptcy.

When it comes to secured debts, you can either continue paying them or surrender the asset instead.

See also: What types of debt does bankruptcy eliminate?

See if you qualify: speak to a Licensed Insolvency Trustee. Your free consultation includes a review of your debts to see if bankruptcy is right for you.

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What happens when I file for bankruptcy?

Bankruptcy is governed by Canada’s Bankruptcy and Insolvency Act and carried out by professionals licensed by the government Office of the Superintendent of Bankruptcy (OSB).

When you file for bankruptcy, you pay what you can afford throughout the term and surrender some assets to your Licensed Insolvency Trustee, which are sold with the money distributed to your creditors.

Here are some key things you should know about assets in bankruptcy:

  • Some assets are exempt depending on where you live (meaning you won’t lose them when you file).
  • Typically things like clothing, health aids, food, heating, household furnishings and appliances are protected.
  • In all provinces and territories, you can keep RRSP savings except for contributions made in the past twelve months.
  • Your home is protected if you have home equity within the exemption amount.
  • In most provinces, you can keep your car if it is valued below a certain amount.
  • If you have a car loan, you need to continue to make your payments towards the loan as expected.
  • If you want to keep a non-exempt asset, you can pay the asset’s value to your trustee to repurchase it.

When you have assets that you want to protect, ask a trustee about a consumer proposal that lets you keep your assets.

Bankruptcy cost to file

The cost of your bankruptcy depends on your income.

The Office of the Superintendent of Bankruptcy sets income thresholds to determine if you have surplus income.

These limits should allow you to maintain a reasonable standard of living during your bankruptcy.

By examining your income, expenses, assets and debts, a Licensed Insolvency Trustee can determine whether you have surplus income or not.

In addition, if your income goes up, your payments increase, along with the time it takes to be discharged.

Administrative fees for the trustee are collected through your surplus income payments. If you have no surplus income, you’ll probably need to make a separate payment.

If you have a high income or assets you want to protect, you should consider a consumer proposal because it allows you to pay a fixed amount to your creditors.

See also: How much does bankruptcy cost?

The benefits of filing bankruptcy

There are many benefits to bankruptcy:

  • It can eliminate most of your unsecured debts.
  • Creditors and collection agency calls stop.
  • Remove wage garnishments.
  • Creditors cannot take legal action against you.
  • You do not need creditors to approve your bankruptcy.
  • Be free from debt in as little as nine months.
  • Bankruptcy can sometimes cost less than other debt solutions.
  • A Licensed Insolvency Trustee will liaise with creditors on your behalf.
  • Financial counselling sessions to help you avoid getting into trouble again.

See also: Advantages and disadvantages of bankruptcy

Should I file for bankruptcy?

Before considering bankruptcy, ensure that you have exhausted all other debt solutions.

Bankruptcy is best suited if you cannot make your monthly payments due to an overwhelming amount of debt and your assets are worth less than your debts.

Bankruptcy helps thousands of Canadians recover from financial hardship and gives them the means to restart their lives.

If you are considering bankruptcy, you must consult a Licensed Insolvency Trustee first. A trustee acts as an intermediary between you and your creditors to ensure everyone is treated fairly.

Only a trustee can administer bankruptcy and offer creditor protection.

Let us connect you with an experienced Licensed Insolvency Trustee today. It’s fast, free, and there is no obligation.

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