Is It Difficult To Declare Bankruptcy? (MNP 3 Minute Debt Break)

2021-07-05

Bankruptcy

Is it difficult to declare bankruptcy? The short answer is, no. However, there are a few things you should know before you consider bankruptcy as a debt management resource. 

Firstly, bankruptcy is a legal way for an individual who has fallen to unfortunate circumstances, to relieve themselves from unmanageable debt, receive financial rehabilitation and make a fresh financial start. The Federal Government of Canada has established the guidelines for making an assignment into bankruptcy under legislation called the Bankruptcy and Insolvency Act (or “the Act”). This Act applies to all Territories and Provinces in Canada. Bankruptcies are administered by Licensed Insolvency Trustees who are licensed by the Federal Government and are regulated by the Office of the Superintendent of Bankruptcy. And in order to be a candidate for bankruptcy, you must be an “insolvent person” which generally means: You have unsecured debts of one thousand dollars or more, you cannot pay your bills as they generally fall due or you have insufficient assets to pay your outstanding debt.

The first step towards filing for bankruptcy, is to make an appointment with a licensed Trustee.  During this appointment, you will be asked to provide information which will allow your Trustee to make an assessment of your personal financial situation and advise you of all the options available to manage your debt problems. 

Your Trustee will be able to inform you as to potential alternatives to bankruptcy which may include a debt consolidation loan, an informal settlement with your creditors, a referral to Provincial Non-profit agencies which manage Orderly Repayment of Debt programs or a Consumer Proposal, which allows for a formal payment plan to your creditors. 

Should you decide to move forward with a bankruptcy, you will be required to swear or affirm a Statement of Affairs. This document discloses your assets, a list of your creditors, personal information such as reasons for financial difficulty and income and expense statements. While this can all sound daunting, it’s far less overwhelming than living in an overwhelming cycle of debt, and your Trustee will be there to provide assistance every step of the way.
The Trustee will then file your Assignment and Statement of Affairs with the federal government. This filing immediately stops all legal action against you, which means no creditor may sue you, continue to call you or make demands upon you to repay your debt. 

Clearly, the decision to file a bankruptcy is a crucial one and not to be taken lightly. But bankruptcy legislation is designed to provide an honest yet unfortunate debtor the ability to regain their financial stability, unfettered by the past burden of their debts. And once they receive their discharge, unsecured debts will be legally forgiven, subject to a few exceptions. 

For further information regarding Bankruptcy as a debt management solution, contact an MNP Trustee at an office near you.

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