What is Bankruptcy?

Bankruptcy is a formal debt relief process that legally eliminates your debt(s). Bankruptcy offers protection from creditor action and a fresh financial start. While bankruptcy is often viewed in a negative way, it may be the best debt solution for someone with limited income and assets. To file for bankruptcy protection in Canada you require the assistance of a Licensed Insolvency Trustee.

What happens to my debts?

Wage garnishments, lawsuits and collection calls are immediately stopped upon filing a bankruptcy. Once bankruptcy protection is in place, creditors are advised to stop contacting you and deal directly with your Licensed Insolvency Trustee. Once the bankruptcy process is finished (often in as few as 9 months), your debts are effectively wiped out. Most unsecured debts are included (yes, even tax debt) but there are a small group of debts that cannot be released via bankruptcy. We will review each debt with you and let you know if any of your debts fall outside of bankruptcy.

Do I qualify for bankruptcy protection?

Bankruptcy is a legal process available to all Canadians that provides immediate relief from debt collection and legal action. As defined in the Bankruptcy and Insolvency Act of Canada, the process is intended to provide the "honest but unfortunate debtor" with the ability to start over by eliminating most, if not all, of his or her debts.

To qualify you must:

• Owe at least $1,000 to creditors
• Be unable to meet your required payments as they come due; or
• Own insufficient property to pay all of your debts (the sale of your assets would not pay off your debts)

How much does bankruptcy cost?

The cost of your bankruptcy is determined by your assets and the amount of your household income. Your Licensed Insolvency Trustee will refer to specific government guidelines to determine your monthly bankruptcy payment. If your income is low and you don't have assets, a small monthly fee will be required to cover the cost of administering your bankruptcy.

What assets can I keep?

In the majority of cases you will not lose your assets. Ontario provincial law allows a bankrupt person to retain the following assets:

• Personal clothing of unlimited value
• Tools of trade up to $11,300
• One motor vehicle up to $6,600
• Household furniture, appliances up to $13,150
• Most pension plans, most life insurance policies and RRSPs (excluding recent contributions).

Alternatives to Personal Bankruptcy

• Consumer Proposal
• Debt consolidation loans
• Informal arrangements with creditors
• Budget changes

If your problems are so serious that debt consolidation or other remedies don't make sense, a Consumer Proposal or personal bankruptcy may be the solution you need to free yourself from debt.