Although filing for personal Bankruptcy can seem scary, it’s important to remember two things: First, Bankruptcy isn’t the only option when you’re struggling with debt. You may have other alternatives that your Licensed Insolvency Trustee can explore with you, such as debt consolidation, credit counselling, or Consumer Proposals. Second, Bankruptcy isn’t a punishment—it’s a solution, designed to help you wipe the slate clean by eliminating your debts. There are measures in place to protect certain assets and make sure you can maintain a comfortable lifestyle, going forward.

So What Happens When you File?

When you file for personal Bankruptcy…

• You will be required to provide information on your state of affairs. This includes a complete list of your assets, liabilities, income, and expenses, and information on your profession and household dependents. You will also be required to attend debt counselling sessions with your Licensed Insolvency Trustee to learn about budgeting and money management.
• You may be required to surrender some of your assets. When filing for personal Bankruptcy, you are permitted to keep assets up to a certain dollar value, called “exemptions.” Such exemptions enable you to continue a reasonable lifestyle, and include such things as household furnishings, a basic vehicle, tools of your trade, personal effects, and your primary residence, all up to a certain dollar value. Some high-value possessions beyond the exemption value may be transferred to your Licensed Insolvency Trustee, which will then be distributed amongst your creditors for repayment.
• You may be required to pay a monthly Bankruptcy Fee. The monthly payment amount is based on such factors as your income, expenses, and the size of your family. The payment amount will be manageable for your current financial situation, and will always be lower than your previously outstanding debt payments.
• Your credit rating will drop temporarily. Bankruptcy sets your credit rating to R9, which is the highest risk level, and keeps it there for 7 years after your Bankruptcy is completed. However, you can start taking steps towards rebuilding your credit, even before you have been discharged of your debts. The sooner your credit recovers, the sooner you will once again be able to obtain a loan, credit card, or mortgage.

How Am I Protected During a Bankruptcy?

Bankruptcy is meant to free you from unmanageable debt while keeping your livelihood secure. As such, there are a number of safeguards to protect you during the Bankruptcy process:

• Your RRSP contributions are safe. While there are exceptions introduced to prevent people from using RRSPs to hide money from debtors, Bankruptcy will not allow your debtors to access your RRSP savings, except for recent contributions.
• Your spouse is safe from your personal debt. However, this only applies to individually-held debt. Any co-signed loans or jointly held debt, such as the outstanding balance of jointly held mortgages, loans, or credit cards will remain, and responsibility for their payment will shift onto your spouse.
• Selected assets deemed necessary for work and life will not be touched. This includes most household furniture and other goods, transportation basic car, and tools of your trade. See our What Happens to my Assets page for details.

How Does Fuller Landau’s Bankruptcy Service Help?

Bankruptcy is usually a last resort, when all other options have been exhausted. Before you decide, our experienced Licensed Insolvency Trustees in Toronto and Hamilton will help you to explore potential alternatives, including credit counselling, debt consolidation, and Consumer Proposals. To schedule a free consultation and learn how we can resolve your debt situation, contact us today. We’re here to help you get a fresh start and lead a FULLER life.