frequently asked questions about bankruptcy
Canadians by the thousands are looking for answers to their bankruptcy questions. Here are 7 of the most frequently asked questions about bankruptcy Canada:
A Calgary bankruptcy is meant to provide a fresh financial start for honest debtors who find themselves insolvent – they no longer have the resources either in monthly income or in accumulated 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, ensure 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 continue with 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?
For many of the younger generations 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 a condominium or a house.
When it comes to debt solution professionals in Canada almost everyone has heard of Credit Counselors and Credit Counseling Agencies and Debt Consultants; but what about Canada bankruptcy trustees? Why aren’t we saturated with Television commercials about them? And just who are these guys anyway?
Canadian bankruptcy laws come under the Bankruptcy and Insolvency Act (BIA) which stipulates that personal and business bankruptcies and proposals be administered by a licensed bankruptcy trustee.
A Canada bankruptcy trustee is a skilled professional in the field of debt solution management who undergoes a rigorous training and licensing procedure overseen by the Office of the Superintendent of Bankruptcy. The training involves five different levels of complexity and takes years to complete. In short, these men and women are simply the best resources available when it comes to all debt solutions – not just bankruptcy.
So the very first thing a Canada bankruptcy trustee can do for you is guide you in the right direction. If you talk to a Credit Counselor or Debt Consultant that specializes in debt settlement plans but doesn’t offer consolidation loans, guess what they are likely to suggest for you? And they rarely know the details of bankruptcy filings, let alone the other legally binding solution offered by a Canada bankruptcy trustee – the consumer proposal.
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:
So what is surplus income? As established by the Canadian government, our bankruptcy laws are designed to allow honest debtors who can no longer meet their financial obligations to get a fresh start. However, not all debtors are created equal as both low income earners and higher income earners often need to declare personal bankruptcy.
In an attempt to be fair to both creditors and debtors, the government has established income thresholds based on family size and location. Any monthly income that is more than $200 dollars over that threshold limit is considered surplus income and a percentage of that surplus (50% for amounts up to $1,000 and 75% of amounts over $1,000) must be paid into the asset pool available for 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 know what impact the bankruptcy filing by one partner will have on the other.
First, the non-filing spouse is NOT responsible for the legal debts incurred by the filing spouse acting alone. If you have creditors threatening you with forcing 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. 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
Over the past several years approximately 100,000 Canadians have declared personal bankruptcy every year! Some view bankruptcy as an admission of financial and personal failure. But is it a public admission?
If you are thinking of bankruptcy and are worried about this you will be happy to know that no flashing neon sign shouting out “BANKRUPTCY DECLARED HERE” will appear on your front lawn the morning after you file your paperwork. But are you worried who will know that I have filed for personal bankruptcy?
Obviously all your creditors will be informed but who else will know? And how do they find out?
Bankruptcy filings are a matter of public record so it is theoretically possible for members of the media to uncover filings for well known personages in the court records. If you are not famous, you have little to worry about.
If some of your unsecured debts have already been turned over to collection agencies, they will be informed and, by law, will have to stop contacting you regarding the debt.
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 ashamed 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:
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?
Every year, thousands upon thousands of Canadians decide to declare personal bankruptcy. Many have struggled to stay financially afloat for an extended period and simply can’t hang on any longer. Others seek the protection of a personal bankruptcy filing at the first sign of serious trouble. What are the main reasons so many Canadians find themselves in bankruptcy?
There are three principle causes upon which most professional debt management professionals agree. They are:
However, we think there are a few contributing factors that accentuate the negative impact of any of the three main causes of bankruptcy in Canada. Let’s first look at the major causes and then we’ll discuss the contributing factors.
Loss of Income
This is universally recognized as the number one cause of bankruptcy in Canada. If you or your partner have lost your job; that can be as much as a 50% or more reduction in income and few people can withstand that kind of shock over a long period of time. Even if you keep your job but your hours are reduced significantly, it can quickly become very tough to keep up with your bills.
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.
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?
Times are tough and many Canadians find themselves unable to pay all their bills every month, often through no fault of their own. Some feel bankruptcy is their only option, which is simply not true.
The facts are you have several options available to you if you are in trouble, one of which is a Consumer Proposal. This alternative has only been around for about 15 years as an amendment to the Bankruptcy and Insolvency Act. As a consequence, many Canadians are completely unaware of its existence and its benefits.
To explain what a Consumer Proposal is, let’s contrast it with another approach with which you may be familiar – a Debt Management Plan.
Unless you’ve been residing in a cave or a deep forest with no access to television, you’ve seen the ads from credit counseling agencies offering debt relief solutions.
Canadians 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 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.