Declaring Bankruptcy for the First Time

  • By Jillian Taylor-Mancusi

So, you are thinking of declaring bankruptcy for the first time. Like many people, life’s circumstances have brought you to this place. Whatever the reason, you are reaching out for help.

In Canada, bankruptcy is a legal process governed by the Bankruptcy Insolvency Act. It helps debtors who are unable to pay back what they owe. Debtors in distress can apply for a variety of insolvency proceedings with the help of a Licensed Insolvency Trustee.

These insolvency options provide relief from the heavy weight that debt can put on your life. Bankruptcy is one of the most recognizable insolvency options available in Canada.

Qualifying for bankruptcy is simple:

  • You need to owe at least $1,000.
  • You must be insolvent, meaning you are incapable of repaying your debts when they come due.

However, if you qualify for bankruptcy, this may not be your only and/or your best option. Depending on your finances and several other factors, you may prefer to file a consumer proposal, a division 1 proposal or one of the many other debt help solutions.

A Licensed Insolvency Trustee such as LCTaylor can help you review your options and decide on the best course of action for your situation.

Advantages of Bankruptcy

If you are already considering bankruptcy, you probably know that there are advantages. When you file for bankruptcy you receive:

  • An automatic stay of proceedings: This means you get immediate protection from your creditors. They can no longer contact you, take legal action against you or garnish your wages.
  • Your debts are erased: All or most of your debts from both secure and unsecured lenders will be eliminated.
  • Your credit rating will be improved: Six years after the completion of the bankruptcy.
  • You will be able to retain possession of your essential assets: RRSP’s and pensions, and in most cases, your house and your car, tools of your trade, etc.
  • Payments during our bankruptcy will be affordable: Based on your ability to pay, not the amount of your debt.
  • You will get a fresh start!

Bankruptcy advantages

There are some exemptions to bankruptcy: You may have some existing debts that will not qualify to be eliminated in a bankruptcy.

These include:
– Child/spousal support payments.
– Student loans, if the debt is less than 7 years old.
– Fines, fees and penalties of the court.
– Any debt incurred while participating in fraudulent activity.

How to Declare Bankruptcy

Now that you know what declaring bankruptcy entails, let’s talk about how to do it.

Step 1 – Contact a Licenced Insolvency Trustee (LIT)
The first step you must take when declaring for bankruptcy is finding and contacting an LIT. In Canada, the federal government requires an LIT to administer a bankruptcy proceeding.

Furthermore, your LIT will be able to tell you if bankruptcy is the best option for your situation or if you will be better off using a different insolvency strategy.

Step 2 – Set up a consultation with your LIT
Here your LIT will gather all of the information that they need from you. They will give you an in-depth rundown of your options and walk you through the strategy that you choose step by step. At LCTaylor your first consultation with one of our experienced LITs is free!

Step 3File For Bankruptcy
Once your LIT has everything they need and you have made your decision, they will prepare the paperwork.

After the paperwork is reviewed and you have signed the necessary documents, the LIT will file the bankruptcy with the federal government and inform your creditors.

Step 4 – Fulfill your obligations
Once you have filed, you will be required to provide your LIT with monthly income and expense statements for the duration of the bankruptcy.

You will also be required to attend two credit counselling sessions with your LIT. These sessions are designed to help you get a handle on your finances and plan for your future.

And that’s it!

In most cases, a first bankruptcy is discharged in just nine months. In less than a year, you will be back on your feet and able to get on with your life!

If you need help declaring bankruptcy in Winnipeg or declaring bankruptcy in Manitoba then contact LCTaylor. Our experienced LITs will provide you with the guidance you need to improve your debt issues. Contact us for a free consultation, and get on your way to a fresh start today!

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