Bankruptcy really is something that most people don’t understand.
Bankruptcy can give a person hopelessly overburdened with debt a chance for a fresh start and a clean slate if used correctly.
What does Bankruptcy mean?
Simply put, personal bankruptcy is when you are surrendering everything you own to a Certified bankruptcy Trustee in exchange for debt removal.
Some exceptions allow you to retain some limited necessities.
Giving up too much of your belongings might sound harsh, but bankruptcy can be a great help if your debts spiral out of control
Personal bankruptcy is a federally controlled legal procedure.
The law is designed to allow an honest but unfortunate debtor to get some relief from their debts, which also fairly treats their creditors.
Bankruptcy is a legal process that involves a ‘stay of proceedings’ which stops any legal action that prevents your creditors from coming into contact with you again.
What is a trustee
A Trustee of Licensed Insolvency is a professional who can administer a bankruptcy. Such trustees are federally licensed and their fees are limited, so it’s fair to cost them to go bankrupt.
How long can i be bankrupt
Luckily bankruptcy does not last forever. It’s a legal process designed to give your finances a new start without being a punishment.
Bankruptcy ends when a discharge is issued, an occurrence that will erase the debts.
There are many factors that influence how long a personal bankruptcy lasts.
If you’re a first-time low-income debtor, you may be eligible to get that discharge after just as short a nine-month period.
However, if you make surplus income, or have been bankrupt before, it will last longer.
At what cost is Bankruptcy
The bankruptcy expense will depend on how much you own and earn, and on your family size.
You will lose all the money and ownership, except any properties in your region that are excluded.
You would also lose a percentage of any earnings deemed to be surplus income. Surplus income is any income in excess of a statutory limit.
The limit is based on your family’s size. Your trustee needs to see your pay stubs so they can work out how much you are going to have to pay based on any surplus revenue.
Administrative expenses are also involved, including court fines, mailing costs and fees imposed by governments.
You will have to pay your trustee for managing the filing and your property.
In bankruptcy, taxes work differently.
The trustee will send you advice on how you can obtain this, such as tax refunds or HST credits, which will now go to the estate rather than to you.
You ‘re just going to lose whatever money you earn by chance, including lottery winnings or an inheritance.
What effects does a bankruptcy have on the spouse
Your spouse in Canada isn’t directly affected by your bankruptcy filing. You ‘re the sole responsibility for the debts.
When you go bankrupt your debts will be cancelled and your partner will not be responsible for it.
It’s common wisdom that your partner immediately is liable for your debts when you get married.
This is not real.
It’s a common trick on the part of collection agents to tell you that if you don’t pay, then they’ll start chasing your spouse for the money.
It is nothing more than a creepy tactic. They just can go after you.
There is one clause to it, whether your partner has co-signed your debt or promised it, then they are liable.
For example, if you have taken out a loan your partner co-signed, then they are legally liable.
If you both have a credit card on the same account then you both own the debt from those cards.
When you seek to do some finance together, such as applying for a mortgage, there may be an indirect effect on your partner later on.
You may not be able to get credit or co-sign a loan while you’re working on restoring your reputation, which may have higher interest rates.
It may be an problem for your partner should you were to jointly apply for credit in the future.
How will the house be affected?
Owning a home would cost a great deal of money. You have to pay a mortgage and the property taxes.
You’ve got gas & energy bills. So when you file for bankruptcy what happens to your house?
The rules differ somewhat from province to province but in most cases, if you have a lot of equity in it, you can not hold a house in bankruptcy.
Calculate the equity of your home by taking the house value, and deduct how much you actually owe on your mortgage and any property taxes.
For most cases, the house has to be sold during personal bankruptcies, so that this amount of equity can be used to pay the creditors.
If your house has recently been mortgaged or re-financed, you may not have a lot of equity there.
Assuming that’s the case, then you may be allowed to keep your home and continue to pay your mortgage. Speak to your trustee to explain whether you should do so.
If you have a lot of equity, holding this money while your creditor’s debts are being discharged isn’t fair for you.
Your trustee would normally have to seize your home, and sell it.
In certain cases, though, and with substantial equity, you will be able to manage to repay your equity, either by borrowing from the family, or by getting a second mortgage to buy back the trustee’s own equity.
What can i hold on to during a bankruptcy
When you file for bankruptcy you can retain some of your belongings. Such properties you can hold are known as ‘bankruptcy exemptions,’ because they are excluded from your trustee’s seizure.
Bankruptcy is a process that enables a debtor with their assets to get a clean slate.
When you file for bankruptcy, you surrender your properties to a Licensed Insolvency Trustee.
These assets are then cashed and allocated to the creditors.
To get the fresh start, though, you need to be able to maintain some important assets as a starting point for you to begin restoring your life and finances.
Those critical assets are laid down in law.
These assets vary slightly by province but the most important and substantial exemptions for most citizens are small quantities of:
- Health aids
- Your car
- Your house
- Tools you require for a trade.
- Farmland, animals, equipment, and supplies
- Pensions and retirement savings
Simply stated, exemptions are intended to help you continue living your life, making a living, and caring for your family.