There are differences between the way bankruptcy is handled in the US and Canada. Some of these differences can lead to confusion for Canadians with friends in the US who share information on their own bankruptcy experiences. For example, if a US citizen learns of a wage garnishment order about to be enforced, they may need an emergency filing to stop the garnishment.
In the same situation in Canada, an is not needed. Why is that? The quick answer is that the US system has some pre-conditions that slow down the bankruptcy filing process.
In both countries, once the bankruptcy courts receive a completed bankruptcy petition filing, a stay of proceedings is issued and sent to creditors notifying them they must stop any collection activity underway and prohibiting action in the future. In Canada, the filing process can be completed in a matter of days.
There are two problems that slow down the US process significantly. The first has to do with the requirement for formal credit counseling. Although both countries mandate the completion of two credit counseling sessions for all bankruptcy filers, in Canada both take place during the course of the bankruptcy.
In the US, however, one session is a pre-condition for filing. You cannot file a bankruptcy petition without proof of completion. Some US citizens race to the offices of a bankruptcy attorney for help stopping an impending foreclosure, vehicle repossession, or wage garnishment. They will need an emergency filing where the courts will issue the stay of proceedings stopping the creditors and allowing added time for gathering information needed for the filing or for the completion of the counseling.
It is possible for an individual US citizen to file an emergency petition on their own, but not recommended. In Canada, none of this is necessary provided the debtor can gather all the information a licensed bankruptcy trustee needs to complete the filing petition in a timely fashion.
Bankruptcy trustees in Canada frequently meet with debtors for whom the notice of a wage garnishment action or other legal action is the final straw in a long and painful process. With the appropriate information, a statement of financial affairs along with the petition paperwork can be filed with the Office of the Superintendent of Bankruptcy (BIA) in Canada within a few days. At that point the stay is issued but it sometimes takes up to five additional days for notification to reach the creditors. However, the stay of proceedings is effective retroactively to the date of issue.