6 things you should know before filing for bankruptcy

In Canada, the process of going bankrupt is governed by the Bankruptcy & Insolvency Act. If you and your insolvency trustee believe that this is the right course of action for you, it’s normal to be left feeling a bit overwhelmed. Here are the answers to six questions that people in your situation often have.

Which debts are included?


When you file for bankruptcy, some of your debts will be eliminated, while others will survive. Unsecured debts, such as credit card debt, bank loans, and unpaid bills, will be immediately discharged. Non-dischargeable debt, including alimony, child support and student loans less than seven years old, will be maintained. Only debts of $25 or greater are eligible to be included.

What’s the cost?


Many people are surprised by just how costly this process is. There is no set fee; the cost is determined on a case-by-case basis and based on your monthly income, your family size, and your assets.

Who qualifies?


To qualify, you must be at least $1000 in debt, have a debt greater than the market value of your assets, and be unable to make payments on time. Your insolvency trustee will conduct a financial assessment to determine whether or not you meet the necessary criteria.

What’s the impact on your credit?


The record of your first-time bankruptcy will be available to the credit bureau for seven years, which can make it challenging to get credit in the years following. However, you’ll be able to recover with time.

What does the process entail?


There are some legal documents you’ll need to sign before you can be officially declared bankrupt. Your insolvency trustee will file these forms for you, after which they’ll contact your creditors to inform them of your decision. Within two months, you’ll be expected to attend the first of two counselling sessions, where you’ll learn how to manage your finances and detect red flags indicating that your situation is worsening again. Your second session will take place at least one month later and will revolve around the reasons you went bankrupt and how you can regain financial stability. After nine months, you’ll be granted an automatic discharge, meaning that debts eligible for elimination will be erased.

Where can you find reliable trustees?


For an assessment of your finances, look no further than F.J. Zielski & Associates Inc. Contact us today to book a consultation with one of our licensed insolvency trustees.

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