When you realize that your debt problems aren’t going away, you may end up asking “Should I file for bankruptcy?”
If your creditors have handed your file to a collection agency, you may have already received letters threatening legal action or wage garnishments.
Filing for bankruptcy will stop all of this, provide you a fresh start, and give you legal protection from further collection attempts.
To file an Assignment in Bankruptcy, you will require the services of a Licensed Insolvency Trustee (LIT). They are the ONLY debt professionals in Canada who are licensed to administer Consumer Proposals and Bankruptcies.
An LIT will take you through the process of reviewing your situation and determining what options you have at this point. If you contact an LIT early enough, before the situation gets too out of control, you are likely to have several options to consider, including bankruptcy. Be sure to contact an LIT as soon as possible for this very reason.
A word of caution – be wary of anyone who is not an LIT, but who claims to be able to help you with your debt, protect you from your creditors, even provide a Consumer Proposal or Bankruptcy. These debt consultants will advertise something like: “See us before you see a Licensed Insolvency Trustee”. They may end up taking a hefty upfront fee and then eventually bring you to a Trustee. You can save yourself that up-front fee, and avoid the hassle and heartbreak by skipping any sort of ‘middleman” by going directly to an LIT.
Federally Licensed Insolvency Trustees are the best educated and most experienced professionals in the debt management field. They can offer you the best and most complete advice without the upfront fee.
With the support of a Licensed Insolvency Trustee, filing for bankruptcy is a very straightforward process governed by the Bankruptcy and Insolvency Act of Canada (BIA). There are three main steps:
Step One: With your Trustee, you will fully review your situation to determine what various options are available to you for debt relief. Your LIT will explain each alternative to help you decide what works best in your particular situation. The Trustee will explain what is needed to qualify for filing an Assignment in Bankruptcy:
- You must owe at least $1,000.
- You must be unable to pay your debts when they are due.
Your LIT will also explain the kinds of debts cannot be discharged in a bankruptcy:
- Alimony and child support.
- Debts that are the result of fraud or misrepresentation.
- Fines and penalties of the court, and any award of damages for bodily harm, assault or wrongful death.
- Student loans acquired less than 7 years before the bankruptcy.
Assuming that you decide that bankruptcy is the best option for you, and you qualify, then you will proceed to the next step.
Step Two: Your Trustee will gather information from you:
- Your full name, date of birth, and address and contact information.
- Details of your Income.
- Details of any garnishments that are in place.
- A list of all your creditors, with approximate amounts owed, any security held by the creditors.
- A list of all your assets.
- Information on any assets that you have disposed of recently.
The Trustee and their team will then prepare the paperwork necessary for filing the bankruptcy with the federal government. They will review the process with you again to confirm that you wish to proceed. They will provide you with a list of duties required of a bankrupt as laid out in the Bankruptcy and Insolvency Act. Then you are ready to file.
Step Three: File for Bankruptcy – once you file, several things will happen:
- You receive legal protection from your creditors, called a “Stay of Proceedings”.
- Collection agencies are no longer permitted to contact you.
- Any wage garnishments will cease, with the possible exception of child or spousal support.
- Your Licensed Insolvency Trustee will contact your creditors to inform them of the bankruptcy, and to ask them to file a claim for the exact amount owed to them. All dealings with the unsecured creditors will be done by the Trustee from this point forward.
- Any outstanding tax returns may be filed by your Trustee, as well as the tax return for the year in which your bankruptcy is filed.
During your bankruptcy you are required to:
- Provide monthly income statements.
- Make monthly payments to your LIT, based on your ability to pay according to national guidelines from the Superintendent of Bankruptcy. (The Guidelines indicate how much net income is required for a family of your size. If you have any income in excess of that amount, you are required to pay 50% of the excess to the LIT for the benefit of our creditors.)
- Attend two credit counseling sessions with your Trustee.
And that’s it – in all likelihood, if this is a first-time bankruptcy, in nine months you will receive a ‘discharge’ from your bankruptcy. The discharge is the point at which your debts are eliminated and you are released from the duties required of an undischarged bankrupt.
One thing to bear in mind – filing bankruptcy will have reduced your credit rating to R9, which is the lowest rating possible.
The good news is that your Licensed Insolvency Trustee can advise you of ways to rebuild your credit rating as quickly as possible.
So that’s it in a nutshell. There are two steps you need to seriously consider taking right now:
- Assess your debt situation realistically and
- Reach out to LCTaylor, your debt rescuer.
You can do that right now by requesting a free consultation with us – in complete confidence and with no obligation. What have you got to lose? Except perhaps your worries and a few sleepless nights.
If you are ready to take the next step and find out what all your options are, contact one of our Licensed Insolvency Trustees at LCTaylor.