Frequently Asked Questions about Bankruptcy
If you’re thinking about filing for bankruptcy, you probably have questions about the process and what to expect.
Below are answers to bankruptcy FAQs:
What exactly is bankruptcy?
Bankruptcy is a legal process that is governed by the Bankruptcy and Insolvency Act. When you file bankruptcy, you turn all of your assets (except items that are exempt from seizure) to a licensed insolvency trustee. The trustee then sells your assets and uses the money to help repay your debts. In return, your debts are discharged, or eliminated.
Will bankruptcy eliminate all my debts?
Bankruptcy will eliminate most debts, but not all. Unsecured debts, which include credit card debt, personal loans, income taxes, and student loans older than ten years, are discharged once your bankruptcy is complete. Secured debts, such as mortgages or car loans, are not discharged. Additionally, you are still responsible for child support, alimony, and certain court judgments and fines even if you file bankruptcy.
How much does it cost to go bankrupt?
The fees for going bankrupt are regulated by the Bankruptcy and Insolvency Act. These fees cover the filing of your documents, mandatory counseling sessions, and the services of your trustee. Overall, most people pay around $1500 to file bankruptcy in Canada.
Will I lose everything?
No. Bankruptcy is not designed to punish you or leave you destitute. Instead, it provides a fresh start. To help you start out, each province has a list of asset exemptions. These are items that are not seized during a bankruptcy. While the list of exemptions varies with each province, they include things like food, clothing, furnishings,
How long will I be bankrupt?
First bankruptcies are usually discharged after nine months provided you complete all of your requirements. Those with surplus income or previous filings can expect to be in bankruptcy for longer.
Who will know I’ve filed bankruptcy?
While bankruptcies are a matter of public record, it’s highly unlikely anyone other than your creditors will know you’ve filed bankruptcy unless you tell them. In order to find out who has filed bankruptcy, a person must pay a fee and request the information from courts.
How long will bankruptcy remain on my credit report?
A first bankruptcy will remain on your credit report for six to seven years from the date your bankruptcy is discharged, depending on the credit reporting agency. A second bankruptcy stays on your report for 14 years.
Can my wages be garnished in a bankruptcy?
No. In fact, by law, all collection activity stops when you file bankruptcy. This includes wage garnishment, attempts to contact you via phone or mail by creditors, and any other attempt to collect a debt.
Will bankruptcy affect my spouse?
Unless you have joint accounts or your spouse has co-signed on any of your accounts, your spouse will not be affected by your bankruptcy.
These bankruptcy FAQs are intended to provide general information. For answers to your specific questions about filing bankruptcy, it’s best to consult with a licensed bankruptcy trustee in your area.