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Declaring Bankruptcy in Canada: What Licensed Insolvency Trustees Do?

 

About Declaring Bankruptcy in Canada and Licensed Insolvency Trustees

If you are having trouble paying your debts and feel like the situation is overwhelming, it’s important to know that there are options out there. Every situation is different, but there are ways that nearly anyone can improve their long-term financial circumstances and start living life debt free. One option is declaring bankruptcy.

The Process of Declaring Bankruptcy in Canada

While the term “declaring bankruptcy” can sound scary to many people, it’s important to know that bankruptcy in Canada is a legal process designed to give those who are struggling with debt an option eliminate their debts and start fresh. It is not a “punishment” and it is not designed to ruin your financial life.

If you determine that declaring bankruptcy is the right option for you, the process will eliminate most of your unsecured debts. You will then be in a position to start rebuilding your finances. Bankruptcy in Canada is not designed put you in a situation where you are left with nothing. That would go against the purpose of the process.

While you may have to surrender certain assets as part of the bankruptcy process, many assets are considered exempt. This means you are able to keep them. Each province and territory in Canada has different lists and limits when it comes to what is considered an exempt asset, but most people are able to keep the majority of their assets.

Declaring bankruptcy in Canada is a legal process and it can only be administered by Licensed Insolvency Trustees.

How Do you File for Bankruptcy in Canada?

If you are struggling financially, you can schedule a consultation with a trustee. Most Licensed Insolvency Trustees offer the initial consultation at no charge. During this consultation, they will review your situation and give you details on the available options. Declaring bankruptcy may not be your only option.

If you decide to file for bankruptcy in Canada, the trustee will let your unsecured creditors know. This is an important step because, once you file, you receive legal protection from your creditors.

This means they cannot contact you, they cannot send a collection agency after you, and they cannot take any legal action against you. In fact, any action that has already started must stop once you file. All communication with your creditors will be handled by the trustee.

As a part of the bankruptcy process, you will be required to take two financial counselling sessions. These sessions will give you information on budgeting, money management, and paying off debt so you can avoid financial problems in the future.

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What does Declaring Bankruptcy Cost?

As mentioned, when you file for bankruptcy, you can keep some of your assets, mainly the ones that are considered necessary for living a basic lifestyle. The trustee will make sure you are able to keep any exempt assets that you wish to keep. If you own more than is considered exempt, these assets may be sold and the proceeds will be given to your creditors.

However, you might be able to keep them if you can financially compensate your creditors for their value. Licensed Insolvency Trustees can give you more information on this process and detail which of your assets would be considered exempt prior to filing.

During the bankruptcy process, you may be required to make payments to the trustee that will be distributed to your creditors. Whether you need to make these payments will depend on your financial circumstances. When you file for bankruptcy in Canada, you will be required to give the trustee monthly income statements as well as proof of your expenses.

If your income is greater than a certain level (one that is set by the federal government), you may be required to make payments to your creditors. These payments are known as “surplus income payments” and the amount of these payments is determined by your income.

What Are Licensed Insolvency Trustees?

As mentioned, Licensed Insolvency Trustees are responsible for administering the process of bankruptcy in Canada. A trustee is an individual who has completed specific training and who has been licensed by the federal Office of the Superintendent of Bankruptcy to provide information on debt relief options and to administer certain insolvency processes.

What do Licensed Insolvency Trustees Do?

When you meet with a trustee, they will review your financial situation and let you know what options are available to you. Licensed Insolvency Trustees are required by law to provide information on all available options, not just those that they administer. Once you understand your options, it is then your decision as to how you wish to proceed.

Declaring bankruptcy in Canada may be the right choice for you, but that choice is always up to you. Licensed Insolvency Trustees will never pressure you to select a specific option.

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