How Do You File for Bankruptcy?
When you are facing financial hardship that has caused you to consider filing for bankruptcy, the first step to seek a professional opinion to either confirm or deny that you have no better options. Aside from bankruptcy, there are a few other debt solutions that may be just as effective, while imparting less damage to your credit rating and well-being.
At F.J. Zielski & Associates, a Licensed Insolvency Trustee (“LIT”), who works under the Office of the Superintendent of Bankruptcy (“OSB”), can review your financial situation with you to help you decipher the right course of action you should take to remedy it. Your LIT will work with your creditors on your behalf and represent you in their dealings.
Organizing Your Assets & Debts
Assessing your options involves writing out all the assets you have (including any retirement savings plans and tax refunds expected), along with your income sources and the total amounts. The assets you list in your LIT meeting must also include anything else (unsecured) that you will acquire during the period of your bankruptcy, excluding those that are legally declared exempt by the government.
The inventory you make must also include a complete and organized list of your debts and creditors that reveals how much you owe and to whom. Secured debts, such as a residential mortgage or car loan cannot be absolved through bankruptcy. Additionally, you will still be responsible for any unpaid child support, student loans (unless you have not attended school in over seven years or meet earlier hardship provisions), and court fines or penalties, despite filing for bankruptcy.
If you have more than $1,000 in unsecured debt, you may be able to file for bankruptcy.
Deciding About Filing for Bankruptcy
Filing for bankruptcy in Kingston or Belleville, ON is a difficult decision to make. On one hand, bankruptcy automatically relieves some of the stress that overwhelming debt causes. On the other hand, it does not mean that you are not responsible to pay back all your possible debts. Consulting with your LIT is necessary to help clarify what debts can be wiped out and which will remain, not to mention which assets can be liquidated and which you may keep if you file for bankruptcy.
If you decide that bankruptcy is your best option, a LIT can help you through the process. Because your LIT is subject to regulations of the Bankruptcy and Insolvency Act (“BIA”) the fee you pay for the service is streamlined and derived from the amount of your liquidated assets. If you have no assets to liquidate, a specific number is usually mandated for the payments to be made monthly.
Filing with the OSB & Notifying Creditors
Your LIT begins the bankruptcy process after filling out the necessary paperwork by filing it with the OSB. This step officially signals the beginning of your bankruptcy. Your creditors will also be notified of your bankruptcy right away. If your creditors wish to schedule a meeting for any reason, your LIT will continue to represent you, but you are also required to attend.
In some cases, the OSB may evaluate the reasons for your bankruptcy and a few other matters by questioning you under oath.
Once your bankruptcy has been filed with the OSB, you will immediately no longer need to make payments to the creditors of your unsecured debts and they cannot legally garnish any of your wages or file lawsuits against you. Calls and letters from creditors and collection agencies will stop. You will need to relinquish all financial control to your LIT, including your credit cards, and report your income and expenses with proof of your statements each month for the duration of the bankruptcy.
Liquidation, Counselling and Discharges
After gathering the eligible unsecured assets in your name and holding them in trust, your LIT will sell them and distribute the proceeds to your unsecured creditors. This money is used to pay back to your creditors as much that is owed to them as possible. You will get to keep a basic amount to live off each month as set out in Ontario.
You will need to attend two financial counselling sessions (usually with your LIT) at an additional cost. The BIA requires you that you have these sessions; they are intended to help ensure you have the money management skills to help prevent you from having the same financial difficulty in the future.
If you produce more income than what is deemed acceptable (referred to as a ‘surplus’), you will need to make additional pre-determined payments until you are discharged from bankruptcy.
Most bankruptcy discharges take between nine and 21 months, depending on your individual circumstances. The process is relatively straightforward and simple if it is your first time filing and you have complied with the terms reached in your bankruptcy. However, if you have surplus income or if you have filed for bankruptcy before it will take longer to receive a discharge. Once you do receive a discharge, however, you are absolved from the obligations of the bankruptcy.
The End Result
Filing for bankruptcy is not a decision to be chosen lightly. Speaking with a licensed insolvency trustee will inform you of the many necessary elements to consider more easily and whether another debt solution may be just as effective and less impactful on your credit rating.
With bankruptcy, your credit rating will be at the lowest (R9) for at least six years. By contrast, a consumer proposal in Kingston or Belleville will put you at a R7 credit rating for three years after your proposal is completed. If you choose to file for bankruptcy, you will endure a difficult short duration, but also face necessary debt relief and help to start over financially after you are discharged.
Contact F.J. Zielski & Associates for Financial Solutions, Including Personal Bankruptcy
Our LITs (formerly Trustees in Bankruptcy) are highly experienced. We help many people routinely who are struggling with their finances. We can review your financial situation too, in confidence, assessing and discussing with you if you have other viable debt solutions available. Call us for your free consultation.