If you’ve exhausted all options and need respite from the overwhelming stress of unpaid debts, you and your credit counsellor may decide that your best option is to declare bankruptcy.
Take heart — while it is a serious matter, it isn’t the end of the world. You will recover, and so will your credit, as long as you work to make good decisions and to change the habits that led you here.
Bankruptcy in Ontario provides legal protection from your creditors. It is available to anyone who owes more than $1,000 in unsecured debt and is insolvent, meaning that your debts outnumber your assets and you are having trouble repaying them.
To claim bankruptcy, you must meet with a certified credit counselor or licensed bankruptcy trustee, who will review your finances and file on your behalf.
While the vast majority of uncomplicated first-time bankruptcies are automatically discharged nine months later (meaning that your creditors are legally prohibited from any further action to collect or offset your debt to them, and you are free to start rebuilding your credit and accrue assets — your debts are permanently erased), sometimes things get a little more complicated. A creditor can object to your discharge if they think that you should have filed a consumer proposal instead, or that you have lied during the process or are hiding assets. As long as you complete your duties, it’s rare for a creditor to object. Once discharged, you’re free to start fresh. (Subsequent bankruptcies take longer to discharge.)
Your duties in bankruptcy, simply put, are to disclose to your trustee all of your assets and the details of your income, as well as supplying the trustee with required income tax returns; hand over your credit cards for cancellation; disclose the sale of any assets within one year of declaring bankruptcy, as well as any valuable gifts you bestowed within five years of declaring; attend the initial meeting of your creditors; and attend two sessions with a credit counsellor. Failure to fulfill any of these or other required duties could delay or prevent your discharge.
Until discharge, you will be required to keep track of your income and expenses, and may be required to pay a portion of your income to the trustee for disbursement to your creditors.
If your debts are overwhelming, it’s time to talk to a credit counselling professional. Even if bankruptcy turns out to be your best option, we can help you cut your expenses, plan your spending, and make better financial choices in the future. Give us a call today.