In plain language, bankruptcy is a legal process that helps a person with unmanageable debt get a financial fresh start.
Though the idea of a bankruptcy can be a bit scary, it’s sometimes the best course of action when all your debt solution options have been reviewed. It releases you from the legal obligation to repay the debts you had as of the date you filed for bankruptcy, except for specific types of debts that are excluded by law. If you decide to declare bankruptcy, no creditor may attempt to seize your assets or garnish your wages, and your trustee settles your debts via an equitable and orderly distribution of assets amongst your creditors.
Benefits of a bankruptcy
- You’ll have immediate protection from your creditors
- Your wages will no longer be garnished, your creditors will stop harassing you
- All interest payments freeze
- Some of your assets are protected
- Your debt is eliminated
- A fresh financial start
How it works
You can become bankrupt by filing an assignment in bankruptcy with your trustee. Your trustee settles all of your debts on your behalf by paying the proceeds of your non-exempt assets to your creditors. Each province provides a list of exempt assets that you can keep regardless of the fact that you declared bankruptcy. While you are bankrupt, you will likely be required to make monthly payments to your trustee.
You will likely be bankrupt for 9 or 21 months provided that it is your first bankruptcy, and you comply with all of your duties. If it is your second bankruptcy, you will be bankrupt for 24 or 36 months. If you have been bankrupt more than once previously, have not complied with your duties, or have committed one or more bankruptcy offences, you will be bankrupt for a period of time determined by the court.
After you have received an Absolute Discharge from your bankruptcy, you will no longer be responsible for any of the discharged debts. However, the fact that you filed a bankruptcy will appear on your credit rating for 6 to 7 years, depending on the province you live in.
Is it for you?
If you owe at least $1,000 and are unable to pay your debts as they become due, then bankruptcy may be your best path to financial freedom.
To learn more about bankruptcy, and to decide if it’s your best option, meet with a Grant Thornton debt professional for a free, no obligation consultation, in person or over the phone.