How to file for personal bankruptcy

The buildup of bills persists, while the accruing interest steadily escalates. On top of that, persistent phone calls incessantly request payment for obligations you can’t pay. In that case, bankruptcy could be the solution for a fresh start.

What is bankruptcy?

Bankruptcy is a process governed by the Bankruptcy and Insolvency Act (BIA). Bankruptcy is a legal process that allows you to discharge yourself from most of your debts. During a bankruptcy, you surrender some of your assets, if applicable, and/or pay a monthly amount. During every step of the process, a licensed insolvency trustee is there to accompany you.

Who can file for bankruptcy?

Any natural person residing in Canada who :

• has debts of $1,000.00 or more; and
• is unable to pay his or her debts on the due date; and/or
• has a balance sheet deficit, i.e., the value of his or her assets is less than the value of all his or her debts.

Will all my assets be seized?

When meeting with an IAS, they will prepare a balance sheet that includes all your assets. Your trustee will sell the assets that hold value in order to repay your creditors. However, the law protects certain assets, rendering them immune to seizures. Here is a list of assets that your creditors cannot seize or sell :

• furniture in your home up to $7,000.00 for your basic needs (refrigerator, stove, bed, etc.)
• food and clothing;
• work tools required for your profession;
• your RRIFs and RRSPs, with the exception of amounts paid in the 12 months prior to filing for bankruptcy;
• a portion of your salary that is determined by the Act called “surplus income.” For example, this could be the portion of your monthly income that exceeds a certain amount. The Office of the Superintendent of Bankruptcy Canada (OSB) set this amount. It is calculated in accordance with the size of your household.

Can all debts be included in a bankruptcy?

You can add the vast majority of debts, including credit card debt, to your bankruptcy file. The only exceptions are the following :

• alimony or child support;
• fines, penalties, restraining orders or court orders;
• civil liability for sexual assault, assault causing bodily harm or death;
• fraud or misrepresentation;
• failure to include a creditor in your bankruptcy file;
• student loans, if you have been out of school for less than 7 years.

How long does bankruptcy last?

If this is your first bankruptcy and you have no surplus income, discharge is automatic after 9 months. However, you must meet all obligations. If you have surplus income, then the discharge period is 21 months.

For a second bankruptcy, if you have no surplus income, discharge is automatic after 24 months (2 years). If you do have surplus income, discharge happens after 36 months.

For a third bankruptcy, the duration is longer than 12 months with or without surplus income. On top of that, your trustee must make an application to the court to obtain a discharge.

STEPS of a bankruptcy

1- Make an appointment with one of our advisors

The first step is to meet with one of our advisors to review your current financial situation. This meeting can happen by a phone call, videoconference or in person. The first meeting is confidential, free and without obligation. The primary goal of this meeting is to take stock of your financial situation. 

Your trustee will consider the best ways to help you turn your situation around. You can reach M. Roy & Associés at 1-877-352-6661 or by completing our contact form.

2- First meeting

At your first meeting, one of our advisors will assess your financial situation and suggest possible avenues. Your trustee can advise you to choose certain alternatives to bankruptcy such as a consumer proposal. However, if declaring bankruptcy is the best option, you will need to sign and file a few documents with the OSB.

After that, the process is underway.You are now under the protection of the BIA. If applicable, we halt all collection measures, cannot initiate or continue any legal proceedings, and all interest ceases to accrue.

3- Notice to creditors

Once the trustee files the documents with the OSB, he or she must notify your creditors. Your trustee will inform them of the existence of your file within 5 days of the initial meeting. From then on, your trustee will directly handle all interactions with creditors, excluding direct involvement from you.

4- Consultation sessions

After filing your document, you must make the monthly payments. Your advisor will have previously discussed these payments with you at the initial meeting. You must also attend 2 mandatory consultation sessions as well. Credit counseling professionals have designed these sessions to help you maintain your financial health.

You must attend the first meeting within the first 2 months following the filing of your file. The second must be before your release.

5- Release

Once you complete all your obligations and meet the deadline mentioned above, the court will release you. The court releases you from all debts included in your file with the exceptions of those discussed above.

Your credit report will now have a note saying that you have filed for bankruptcy. For a first bankruptcy, this note will remain on your file for 6 years after the date of your discharge. In the case of a second bankruptcy, the note remains for 14 years.

Don’t hesitate to contact us at 1-877-352-6661 or by completing our contact form to learn more about debt relief options. Our experts can help you build a plan in accordance with your income and expenses. Get a free consultation now with one of our bankruptcy trustees to get expert advice and regain peace of mind.