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Bankruptcy

What is Personal Bankruptcy?

Bankruptcy is a legal process designed to relieve honest but unfortunate debtors of their debts and obtain a fresh financial start. By filing for bankruptcy, you are voluntarily entering into a court-driven legal process to achieve relief from an unmanageable debt load. Upon completing the Bankruptcy process by obtaining a discharge from bankruptcy, the bankrupt person is released from their obligation to repay the debts existing at the time the bankruptcy was initially filed. Bankruptcy will eliminate most, if not all debts, however, there are some exceptions. Exceptions, if any, for your particular financial situation would be discussed thoroughly during your free consultation with our office.

Who files for Bankruptcy?

In any given year, approximately 140,000 Canadians will file Bankruptcy or a Consumer Proposal to deal with an unmanageable level of debt. In most cases, these filings are caused by factors beyond an individual’s control, such as:

  • Unexpected job loss;
  • Prolonged period of unemployment;
  • Prolonged period of work at a reduced income;
  • Inability to capitalize on post-secondary education;
  • Divorce or separation;
  • Individual health problems;
  • Health problems of a spouse or child or another close relative;
  • Death of a spouse, child, or other close relatives.

How do I qualify for Bankruptcy?

In Canada, a Bankruptcy can only be filed with the assistance of a Licensed Insolvency Trustee (LIT). For an individual to qualify for a Bankruptcy filing, the following conditions must be met:

  1. Owe at least $1,000 or more; and
  2. Unable to make payments as they become due; or
  3. Stopped making payments as they become due; or
  4. The total value of all assets/belongings is less than the total amount of debt.

How much does it cost to file Bankruptcy?

The cost of filing for Bankruptcy can vary substantially from one financial situation to the next. The duration and cost of bankruptcy are set according to legislation – the Bankruptcy and Insolvency Act (BIA). The BIA is a complex piece of legislation, so although there can be exceptions, for most personal bankruptcies; the duration and cost are largely determined by the following factors:

  1. Whether the Bankrupt has or will earn surplus income pursuant to regulator guidelines, while in Bankruptcy;
  2. Whether the Bankrupt has realizable assets (Example: equity in a house, land, or other non-exempt assets);
  3. Whether the Bankrupt receives any windfalls or other after-acquired assets while in Bankruptcy;
  4. Whether the individual has filed for Bankruptcy before;
  5. Whether the Bankrupt complies with their duties, as outlined, at the time of filing.

The first-time bankruptcy of an individual who does not have surplus income, realizable non-exempt assets, and complies with their duties, as outlined at the time of filing could be automatically discharged from Bankruptcy in as little as 9-months and only pay a basic administration fee.  

If that same individual were deemed to have surplus income, pursuant to regulator guidelines, during their initial 9-month period of bankruptcy; they would be subject to a 12-month extension, resulting in a 21-month bankruptcy, and be required to make surplus income payments during the 21-month period. For more information on how a Bankruptcy might look for your specific situation, please do not hesitate to contact us for a free, no-obligation consultation.

Situations where filing for bankruptcy might be the best option:

  1. Your income is fixed and insufficient to cover necessities of life, let alone debt repayment;
  2. You are retired, on a fixed income and your income is insufficient to cover necessities of life, let alone debt repayment;
  3. Your income is not fixed however you struggle to cover necessities of life, let alone debt repayment;
  4. You do not expect to receive any windfalls such as inheritance, bonuses, overtime, or other lump sums;
  5. You have no reasonable prospect to expect any significant change to your current level of income;
  6. You have never filed Bankruptcy before;
  7. Your current medical situation prevents you from being able to earn an income sufficient to cover necessities of life, let alone debt repayment;
  8. You do not have any significant assets owned free and clear, which could be sold to pay all or a significant portion of your existing debt load.

Bankruptcy Advantages:

  • Stops collection activity including harassing collection calls;
  • Stops wage garnishment (except for garnishment to collect alimony or child support);
  • Provides for two separate counselling sessions focusing on budgeting, setting goals, and obtaining and managing credit;
  • Provides a fresh financial start, free of anxiety and stress from an unmanageable debt load;
  • Generally, the lowest cost pathway to a fresh financial start provided you have no surplus income pursuant to regulator guidelines and no significant assets of value.

Bankruptcy Disadvantages:

  • Windfalls such as inheritance and lottery, go to creditors to the extent they are owed;
  • A bankruptcy filing will remain on your credit report longer than any other option to tackle debt;
  • You are not Bondable while you are bankrupt;
  • You cannot become or remain as the director of a corporation.

 

We proudly serve the following areas: Saint John, St. Stephen, St. Andrews, St. George, Grand Bay-Westfield, Welsford, St. Martins, Rothesay, Quispamsis, Hampton, Norton, Sussex and all places in between.

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