As an honest but unfortunate debtor, you may choose to use the legal process of bankruptcy, regulated by the Act, to obtain a discharge from your debts (subject to reasonable conditions). Declaring bankruptcy means that your secured creditors cannot take legal steps to recover what you owe them, such as seizing your property or garnisheeing your wages.
If you owe more than $1,000 and have carefully reviewed all your options, declaring bankruptcy may be the right choice to make.
Perhaps the most common question those considering bankruptcy ask is, “Will I lose all my assets?” Happily, the answer is no. There are several exemptions from seizure. They are:
Household furnishings to a value of $11,300
Personal effects to a value of $5,650
Tools of trade to a value of $11,300
Motor vehicles to a value of $5,650
Farmers’ business assets to a value of $28,300
Certain life insurance policies
If you’re involved in a close financial relationship, it is possible to file a join assignment that will be dealt with as one file. Your debts must be substantially the same, and the trustee must believe it is in the best interest of all parties. Talk to us
Talk to us about the services we offer for Debt Management, Consumer Proposals and Bankruptcy. There is a path that’s right for you. Together, we will find it.
GTA Credit Solutions offers free debt counselling, and a no-cost, no-obligation first consultation, in private, with one of our professional agents.
Bankruptcy Questions & Answers:
Q: What is bankruptcy?
A: Bankruptcy is a legal process that may discharge you from most of your debts, subject to reasonable conditions. Once you declare bankruptcy, your unsecured creditors cannot take any further steps to recover the money you owe them.
Q: Who can declare bankruptcy?
A: Anyone who owes more than $1,000 and is unable to pay their debts in the normal course.
Q: How much does it cost to declare bankruptcy?
A: There are administrative fees, court costs, mailing costs and government fees your trustee will require you to pay. GTA Credit Solutions charges a small fee. Q: Can I declare bankruptcy without a trustee?
A: GTA Credit will arrange the trustee.
Q: Will I lose all my assets?
A: There are a few exemptions: Household furnishings to a value of $11,300, personal effects to a value of $5,650, a personal vehicle to a value of $5,650, tools of the trade to a value of $11,300. Certain life insurance policies and RRSPs, and most pensions, are also exempt.
Q: What do I do to declare bankruptcy?
A: Call us. We will discuss with you the specifics of your unique case, including how much you owe and how much you own. (You are required to disclose all assets to your GTA consultant and trustee.) It’s important to keep us up to date on any changes to your address, phone number, employment and income. It’s a good idea to hand over to us all of your credit cards. You will also be required to attend two credit counselling sessions.
Q: What if some of my debts have a guarantor or co-signer?
A: If you declare bankruptcy, a guarantor, co-signer or supplementary credit card holder will likely be held responsible for the debt. Q: What’s a counselling session?
A: The goal is to prevent you from getting into financial trouble again. A counsellor will help you understand why and how you got into trouble, help you budget, and teach you how to properly use credit in the future.
Q: What effect does bankruptcy have on my credit rating?
A: A first bankruptcy will give you a credit rating of R9, which is the worst rating, for as long as seven years or more after your bankruptcy is discharged.
Q: Can I keep my bank account?
A: You are allowed to have a bank account, but if you owe money to the bank where your account is, you may need to open one at a different bank.
Q: Can I keep my leased car?
A: As a secured debt, it is possible to keep a leased car, but remember that monthly expenses that are simply too high are probably the biggest part of your problem. Giving up the car will reduce your expenses – not only is there the lease payment to consider, but also insurance, gas, repairs and maintenance.
Q: Can my partner and I file a joint bankruptcy?
A: Yes, when two debtors are involved in a close financial relationship and their debts are substantially the same, it is possible to file jointly for bankruptcy. Your GTA Credit advisor and trustee will advise you if they believe a joint filing is in your best interest.
Q: What are the laws pertaining to bankruptcy?
A: The laws that govern bankruptcy are contained in the Bankruptcy and Insolvency Act (the Act), which the federal government established to help unfortunate but honest debtors recover from their financial problems and get a fresh start. The Act details the responsibilities and rights of all parties involved in solving debt problems: the Superintendent of Bankruptcy, the official receivers who represent the Superintendent of Bankruptcy, the court, licensed trustees – and you. Q: Is bankruptcy my only option?
A: No! There are many options that can help you solve your money problems, including a consumer proposal. Come on in and we’ll talk you through all your options, and then we’ll help you decide which one is right for you.
Q: How does bankruptcy affect alimony or maintenance payments?
A: It doesn’t. Alimony and maintenance are provable claims that will be treated as preferred claims for any amount incurred the year before your bankruptcy. Alimony and maintenance payments must be kept up to date, and a bankruptcy will not stop any action for collection.
Q: What are the advantages of declaring personal bankruptcy?
A: Your unsecured creditors must stop any collection actions against you, including legal actions, and any garnishment on your wages or bank account stop. You are released from unsecured debt and free to make a new start.
Q: Can I go to jail for declaring bankruptcy?
A: Honest but unfortunate debtors who file truthfully don’t go to jail. There are no criminal charges associated with filing for personal bankruptcy.
Q: Will people find out about my bankruptcy?
A: It will be on public record, and all your creditors (secured and unsecured) will be notified. Your employer will only be notified if the trustee is required to stop your wages from being garnisheed.
Q: Will I lose my house?
A: It depends on the amount of equity you have in the property. You may be able to pay the value of the equity to your trustee to be distributed to your creditors. As long as you are able to keep current with your mortgage payments, you may be able to keep your home. Talk to GTA Credit advisor or your mortgage lender about your unique case.
Q: Will I have to sell my assets?
A: Not necessarily. GTA consultant will advise you about which assets may need to be sold or distributed. If you have assets in which there is no equity (if you owe more on a secured loan for an item, a car for
example, than the item is worth) and your trustee agrees, you may be able to negotiate with the lender to keep the asset.
Q: Does declaring personal bankruptcy cover all my debts?
A: No. Personal bankruptcy covers only unsecured debts, and some unsecured debts aren’t covered, such as child support, alimony, court fines and penalties, or debts that are found to be fraudulent. Student loans may be covered if you stopped being a student more than seven years ago, and can meet some other requirements. Secured debts such as mortgages are car loans are not covered by bankruptcy unless you relinquish ownership of these assets. Always discuss your unique situation with GTA Credit consultant.
Q: What happens if my bankruptcy doesn’t get discharged?
A: Once the trustee has completed the administration of your case and been discharged, if your bankruptcy isn’t discharged, you will remain responsible for your debts and your creditors can resume their collection actions.
Q: Why wouldn’t my bankruptcy be discharged?
A: Your trustee or your creditors can prevent your bankruptcy from being discharged if you don’t perform your obligations during the nine months after you declare, such as not showing up for credit counselling sessions or not provideng monthly income & expense report or failing to make the required monthly payments to your trustee.
Q: I have to leave the country for work. Can I declare bankruptcy first?
A: Talk to GTA consultant about your unique situation.
Q: How long does bankruptcy take?
A: From filing to discharge, a normal first bankruptcy takes nine months or more (if you have surplus). There are some factors that will affect that, such as if this isn’t your first bankruptcy, you have surplus income, your creditors dispute your bankruptcy or you fail to meet your obligations. Talk to your trustee about your unique case. Q: What happens if a creditor I forgot to include in the bankruptcy contacts me after I’m discharged?
A: In most cases, as long as the debt was incurred before you filed for bankruptcy and is a provable debt, your trustee will send notice to the creditor and it will be cleared. Talk to your trustee.