frequently asked questions about bankruptcy


bankruptcy questions Canadians by the thousands are looking for answers to their questions about bankruptcy and Canada bankruptcy trustees have the answers

Here are 7 of the most frequently asked questions about bankruptcy in Canada:


  1. What are the requirements for declaring personal bankruptcy in Canada?
  2. What does a personal bankruptcy in Canada cost?
  3. Will I lose my house and other assets in bankruptcy?
  4. Does my personal bankruptcy affect my spouse?
  5. Will all my debts go away if I declare personal bankruptcy in Canada?
  6. How will bankruptcy affect my credit rating?
  7. How long will I be in bankruptcy?

calgary bankruptcy, bankruptcy in calgary, calgary bankruptcyA Calgary bankruptcy is meant to provide a fresh financial start for honest debtors who find themselves insolvent.  What is insolvency?  It simply means they no longer have the resources, either in monthly income or available assets, to pay off all they owe.  The Bankruptcy and Insolvency Act (BIA) – which is the federal law governing bankruptcies in Canada as well as all Provincial legislation supporting the Act, ensures that debtors are not left with absolutely nothing with which to start over.

The laws allow filers to keep most of the assets they need to live their daily lives without suffering undue hardship.  Retirement accounts are preserved as well.  So why do so many of us view a Calgary bankruptcy as the end of the line rather than as a new beginning?

Bankruptcy Fears

Obtaining Credit After Bankruptcy

For many, the fear is they will never be able to borrow money again at worst, or at best, it will take the 7 years or more the bankruptcy remains on their credit report before they can think of buying a car or home.

bankruptcy trusteeWhen it comes to Canadian debt professionals, most people have heard of Credit Counselors, but what do you know about Canada bankruptcy trustees?   Who are these guys anyway?

A Canada bankruptcy trustee is a skilled debt professional who undertakes a series training and licensing courses overseen by the Office of the Superintendent of Bankruptcy. Trustees are skilled in all areas of debt help and are just about the best resource available when you need financial help.

If you are wondering, "how long will I be bankrupt in Canada", the length of time you will remain in bankruptcy in Canada before being discharged varies, depending on a combination of two factors:

  1. Surplus income
  2. Prior Personal Bankruptcies.

Surplus Income

So what is surplus income?  In an attempt to be fair to both creditors and debtors, the government has established income thresholds based on family size and location.  Simply put, if your income exceeds the threshold, a portion of the surplus income must be paid to the bankruptcy trustee to pay back the creditors some of what they are owed.

If you are married and considering filing for personal bankruptcy as an individual, both you and your spouse need to knowbankruptcy canada what impact the bankruptcy filing by one partner will have on the other.

Accounts Held by One Spouse

If you have creditors threatening to force one spouse to pay off the debts of the other, it is nothing more than a common scare tactic. 

If a husband is filing and has credit card debt from accounts in his name only, the wife is not responsible for those debts.  In addition, the wife’s credit rating will not be negatively impacted by the filing. 

Accounts Held Jointly

If both names are on the credit account, however, then it is a joint account and the wife is legally responsible and her credit rating will be affected.

Similarly, if the mortgage on your home or your car loan is in the husband’s name only, the wife is not responsible.  However, if the wife co-signed the note, then legally she is seen as a guarantor of the debt and is responsible

For most Canadians, declaring personal bankruptcy is a gut-wrenching, emotionally draining process.  After a long period of struggling to stay afloat, bankruptcy can be seen as the ultimate admission of personal failure.  Filers may feel ashamedBankruptcy in Canada and embarrassed.  Should those emotions extend to guilt?

There are some individuals who charge their credit cards to the limit with cash advances and luxury items and then file for personal bankruptcy.  Then, there are the rest of us.

Guilt implies having committed some offense, or feeling responsible for some offense.  So what is the offense in personal bankruptcy and should you feel responsible for it?

The majority of Canadians filing personal bankruptcy do so because they have experienced some life changes that dramatically affect their income or expenses.  Here are three common such changes:

  1. Job Loss
  2. Marital Breakup
  3. Medical Illness or Injury

If you or your partner have lost your jobs or had your hours severely reduced, you may be on the road to bankruptcy.  But is it your fault?

Credit Counselling

What Is Credit History?One thing uppermost in the minds of many Canadians who are in dire financial straits is finding a solution that won’t destroy their ability to get credit in the future when their situation improves.  What does it mean to have “good credit?”  You’ve read about your credit rating, your credit score, and your credit report.  What do each of these terms mean? 

In most cases, a credit rating and a credit score mean the same thing and the terms are used interchangeably, although there are some differences.  It’s a summary number that tells a potential creditor how “credit-worthy” you are.  A credit report is a complete record of your credit history from which the credit rating or credit score is derived.

Personal Bankruptcy in Canada

 Your entire working life you have worked by the rules and tried to build a life for you and your family. Yet every year when tax comes due you find yourself going deeper in debt. You may already have begun to wonder if your only solution may be a personal bankruptcy in Canada. Does the tax man want me to go bankrupt?

Debt Consolidation

Consumer ProposalCanadians struggling to manage crushing debt loads have several alternative solutions available to them and one of the best is also one of the least familiar – the Consumer Proposal.           

With the exception of attempting to manage your unsecured debt by making informal repayment arrangements directly with your creditors, all debt solution alternatives have varying degrees of negative impact on a credit rating.  Before we look at what a Consumer Proposal will do to your credit rating both during the life of the proposal and after it is paid off, let’s briefly review what a proposal is. 

In Canada, the laws governing bankruptcy and other debt solution options are set out in the Bankruptcy and Insolvency Act (BIA).  About 15 years ago, the Act was amended to include a legal alternative to personal bankruptcy – the Consumer Proposal.  With this approach, the debtor makes single monthly payments allowing repayment of reduced principal of the debt owed over a maximum of 5 years.

Once you file a Consumer Proposal through a licensed bankruptcy trustee and it has been accepted by more than 50% of your unsecured creditors it becomes legally binding.  Notations are added to your credit file indicating you are in a settlement plan.  Settlement plans have a more negative impact than debt repayment plans that call for you to pay off all your debt, not a reduced amount.   However, a Consumer Proposal has a less negative effect than a personal bankruptcy. 

Hardworking people with good intentions get into debt, that’s a fact of life. If this is you, then one of your options is a Consolidation Loans consolidation loan.  If you have debt that is causing you difficulty, and no way of generating additional income to repay it in a timely fashion, then you will have you take steps to recover the situation.

Bad debt can sometimes happen to good people.  Most of us have experienced financial hardships at some point in our lives.  And there are times you need to rely on credit cards to make ends meet.

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