Filing for Bankruptcy in Canada – Information You Need to Know

The actual steps involved in filing for bankruptcy in Canada are relatively easy.  The Bankruptcy and Insolvency Act (BIA) of Canada stipulates that a bankruptcy trustee, licensed by the federal government’s Office of the Superintendent of Bankruptcy, must handle all personal bankruptcies.  The entire filing process goes through a trusteeyou hire to manage your bankruptcy.

Once you have found a trustee with whom you are comfortable working, the trustee will work with you to prepare a statement of financial affairs that will demonstrate your insolvency.  If you cannot stay current with your financial obligations through either present income or assets, you are legally insolvent.

Once the statement is ready, the trustee prepares the actual paperwork needed to file your bankruptcy petition with the court.  After you sign the paperwork, the trustee files the required documentation and you are declared legally bankrupt.  Your creditors are informed and if any of them are pursuing legal collection actions against you – such as a wage garnishment or property attachment – they are ordered by the court to cease and desist from contacting you in any way. 

While the filing steps may be easy, making the decision to file is not.  For many Canadians in deep financial trouble, filing for bankruptcy is the last thing they want to do.  Popular opinion is that filing for bankruptcy in Canada is something to avoid at all costs.  Even many experts you will find on the Internet claim bankruptcy is a last resort.

As a result, some Canadians are enticed by the advertisements they hear on television offering to cut their debt in half without bankruptcy.  Although some of these programs do actually reduce the total you owe by 50% or 60% or even 70%, the fees paid for the service and the commissions charged on the reductions can make debt settlement plans like these far costlier than people realize.

If you are either at the point you can no longer keep up with your debt payments or you are approaching that point, you need to make a decision.  Doing nothing in the hopes things will get better is the worst possible course of action.

Decision- making involves evaluating all available solution options to a problem.  Why then do so many fail to consider filing for bankruptcy in Canada as a potential solution?

In some cases, people have heard stories about the consequences of bankruptcy from friends or relatives who have filed for bankruptcy that may or may not be true.

For example, if you live in Alberta and have heard from friends in Ontario that they had to give up their home in bankruptcy, that might be your biggest fear.  However, you need to know that each Province has exemption allowances that determine what assets you keep and what assets you might lose in filing for bankruptcy in Canada.  Ontario has no exemption allowance for home equity while Alberta has an allowance of $40,000.  Simply put, if you have less than $40,000 in equity in your principal residence, you will keep it.

In other extreme cases, people believe they could go to jail if they file for bankruptcy with no assets or income to contribute.  This is not true.  Insolvency is not a crime in Canada.  Nor is it true that you will never be able to get credit again once you have filed for bankruptcy. 

For many, filing for bankruptcy in Canada is actually their best choice.  To determine what a bankruptcy filing would mean in your particular financial situation, schedule an appointment with a licensed bankruptcy trustee in your Province.  Initial face-to-face consultations are free or charge so you have no reason not to see what bankruptcy is all about and how it could help you deal with your debt.