Am I qualified for Bankruptcy?

Many Canadians are struggling with debt as inflation increases the cost of day-to-day essentials and high interest rates increase the cost of debt. You may be struggling to keep up with your debt payments and wondering if Bankruptcy is the right solution for you to achieve a fresh financial start. However, you need to meet four conditions before you qualify to file for Bankruptcy in Canada.

Let’s discuss the requirements that you need to meet before you declare Bankruptcy, and how a Licensed Insolvency Trustee (LIT) can help you choose the right option to take back control over your finances. While Bankruptcy might seem like the only option, a Consumer Proposal or other solutions might be the right fit for your specific needs.

What are the qualifications for Bankruptcy?

Certain conditions must be met under the Bankruptcy and Insolvency Act to file for Bankruptcy. These conditions include:

1. You have at least $1,000 of debt

You must have at least $1,000 of debt to file for Bankruptcy. However, it may be beneficial to review other financial options to help deal with your debt if the amount is relatively low, including:

• Negotiating a payment plan with your creditors — Creditors may agree to reduce your monthly payments, which makes it easier to manage your finances while paying off debt.
• Exploring options to reduce the interest rate on your debt — Creditors may also agree to lower the interest rates on your debt. This reduces the overall cost of your debt and allows you to pay it back more quickly.
• Reviewing your budget — This allows you to identify savings opportunities, giving you more money to pay off your debt.

If you owe a higher amount of debt, such as $25,000, you may need to consider filing for Bankruptcy or exploring other debt relief options.

2. You live, carry on business, or have property in Canada

You must live, carry on business, or have property in Canada to qualify for Bankruptcy. You do not need to be a Canadian citizen — you just need to meet any of these three conditions. Canadians living abroad and permanent residents can also file for Bankruptcy in Canada.

3. You’re unable to meet regular payments

You must not be able to meet your regular debt payments as they become due to qualify for Bankruptcy. If you are living from paycheque to paycheque but can still afford your debt payments, you may need to review your budget to avoid falling behind on your financial obligations.

However, it is likely that you are facing financial difficulties if you are living from paycheque to paycheque and are regularly falling short on meeting your debt obligations. If you have reviewed your budget and are still unable to make all your debt payments each month, it may be time to consider filing for Bankruptcy or exploring other debt relief options.

4. Selling your property can’t cover your debt

The property you own must be insufficient to pay off your debt to qualify for Bankruptcy. Consider whether you would have enough money to pay back your debt if you sold all your property or liquidated all your assets.

You have the ability to pay your debt if selling your property would pay off the amount you owe — and would not be qualified for Bankruptcy. If the sale of your property is not enough to cover your debts, then you likely qualify to declare Bankruptcy.

Take control of your financial future

Meeting each of these requirements does not mean you must file for Bankruptcy. You can explore other options, such as negotiating with your creditors, reducing the interest rates on your debt, or changing your budget.

It is important to contact an LIT if you are struggling with debt. LITs are the only federally regulated debt professionals who can assist with all the debt relief options, including Consumer Proposals and Bankruptcy, stop harassment from debt collectors, and discharge people from debt.

An LIT will sit down with you to discuss your situation and help you explore all the debt relief options available. This will help you understand each option and choose the one that works best for your unique situation. Together, we can help you take back control over your finances and achieve a fresh financial start.