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How to file for bankruptcy

Filing for bankruptcy gives you a financial fresh start, discharging you from most of your debts in 9-21 months. There are also specific requirements that come with filing for bankruptcy. The process is tailored to your financial situation, and whether you decide that bankruptcy is the appropriate solution for you or that another debt solution is better, you should review your financial situation with a debt professional. Most Licensed Insolvency Trustee firms offer free consultations so you can make an informed decision before moving forward.

Step 1: Book a free personal debt consultation to discuss your financial situation, including alternatives to bankruptcy

If you are considering booking a personal debt consultation in order to learn more about the bankruptcy process, learn more about what to expect during a free consultation with a Licensed Insolvency Trustee (LIT). Licensed Insolvency Trustees (LITs) are the only professionals licensed to file for bankruptcy in your name.

Step 2: Gather all documents to file for bankruptcy

After the consultation, you and the trustee may decide that bankruptcy is the most appropriate path forward. At this time, a debt professional may provide you with a list of documents that they need in order to file your bankruptcy application. This list includes your creditors, assets, and relevant personal documents. Review these resources for preparing for your consultation, including an online workbook as well as other forms like the income and expense statements.

Step 3: Review your paperwork with your trustee 

Once all supporting documents are gathered and their accuracy is confirmed, your trustee will prepare the paperwork and review the bankruptcy process with you again. Your bankruptcy starts when you sign the papers. Additionally, your creditors must now stop all collection activity.

Step 4: Fulfill your bankruptcy duties

You are required to fulfill certain duties in order to be discharged from bankruptcy, including two mandatory financial counselling sessions, making payments to the trustee, and more. See the full list of bankruptcy duties.

Step 5: Get discharged from bankruptcy

Within 9-21 months, the bankruptcy process is finished, provided you fulfill your bankruptcy duties.

Can I go bankrupt more than once?

You can file for bankruptcy multiple times in Canada. Where personal bankruptcy generally has a discharge time of 9-21 months, a second bankruptcy can last 24-36 months. A first bankruptcy will stay on your credit report for 6 to 7 years, and a second bankruptcy may stay on your credit report for up to 14 years.

If you are potentially declaring multiple bankruptcies, a Licensed Insolvency Trustee can help you navigate the risks and help you consider possible alternatives.

What to expect if you file for bankruptcy

If you’re struggling with debt and considering bankruptcy, learn more about the bankruptcy process, how your creditors will be paid, and how a Licensed Insolvency Trustee can help you file for bankruptcy.

Video transcript: It’s been a tough time for David and Julie. David has been laid off, credit card payments have slipped, and the other bills are also falling behind. Thinking bankruptcy may be an option, he sits down and begins an online search to get information about the topic. He finds the Office of the Superintendent of Bankruptcy Canada, the federal organization licenses and regulates Licensed Insolvency Trustees, professionals who can provide the information he needs. Using the search tool, David finds a Licensed Insolvency Trustee in his area and makes an appointment. Seeing a Licensed Insolvency Trustee is a great first step.

The trustee will explain the options to Julie and David, giving them the information they need to make a well-informed decision. After an open and frank discussion about what they earn, what they own, and how much they owe, Julie and David decide that bankruptcy is, in fact, the most appropriate choice. The trustee then files the bankruptcy application with the Office of the Superintendent of Bankruptcy Canada.

Once the application is filed the trustee will take care of legal obligations and Julie and David will stop making payments directly to their creditors. As the trustee is now in charge of the file any and all legal actions against them will stop and no one will be able to garnish their wages. Julie and David will likely be able to keep some of the things they own because those assets are protected by provincial and federal laws. However, some assets may be sold by the trustee and the proceeds used to help pay the debts they owe. Their creditors will be notified of the bankruptcy and if a meeting of creditors is called, Julie and David will have to attend. They will also have to attend two counselling sessions to help them get back on their feet financially. Finally, they may have to make payments toward their debt called “surplus income payments.” These payments ensure that people who declare bankruptcy and have sufficient income contribute to paying off a portion of their debt.

Eventually, their debts will be discharged, relieving them from the obligation of repaying most of the debt they had on the day they filed for bankruptcy. While this comes as a relief to both Julie and David, the trustee also explains that some debts cannot be discharged. These include:

  • Alimony and child-support payments
  • Court-ordered fines or penalties
  • Debts arising from fraud
  • In some cases, student loans

While the bankruptcy will affect their credit rating for a number of years, the trustee tells them that once the debt is discharged, they can start to rebuild their financial future. It’s not an ideal situation, but dealing with this does lift a weight off their shoulders.

What else do I have to do during bankruptcy?

Once you file for bankruptcy, there are a number of duties and responsibilities you must complete in order to be discharged. They include:

  • Supply your trustee with a statement of assets and liabilities. This includes creditors’ names, contact information, account numbers, invoices, and amounts 
  • If you receive additional legal documents or bills, you must forward them to your trustee
  • Provide the trustee with all records related to your assets or financial affairs
  • Reveal and turn over to the trustee all non-exempt assets in your possession or control
  • Inform the trustee of the details of all property disposed of in the five years prior to the bankruptcy
  • Turn over your credit cards to your trustee so they can be cancelled 
  • Submit monthly financial statements to your trustee showing money received and money spent in your household and make payments to the trustee as required. Additionally, this includes keeping your trustee information about changes in material circumstances—for example, if you lose your job, if your earnings increase, or if you gain or lose a dependent
  • In rare circumstances, you may be required to attend a meeting with your creditors if they request one. Additionally, you are required to attend any other meetings that your trustee requests 
  • Attend two financial counselling sessions, held by the trustee or estate administrator. The sessions encompass financial management, budgeting, and causes of bankruptcy
  • Provide information to prepare tax returns
  • Provide the trustee with your current contact information until approximately a year after you have been discharged

The Office of the Official Receiver (the government representative dealing with bankruptcies) may request that you attend a meeting to be examined under oath. Most people are not required to do this when they file for bankruptcy.

What does it cost to file bankruptcy through a Licensed Insolvency Trustee?

If you decide to file for bankruptcy after a free, initial debt consultation with a Licensed Insolvency Trustee, you are required to pay a monthly fee. The monthly amount is determined by a number of factors based on government guidelines:

  • Total household income 
  • The value of assets owned that are not covered in the Bankruptcy and Insolvency Act that you wish to retain 
  • The amount of unsecured debt owed 

To learn more about how much it might cost you to file for bankruptcy, you can book a free, confidential debt consultation today.

Learn more about bankruptcy.

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