The Plain Truth about Canada Bankruptcy Laws

Posted by: Sandy Lyons on 05/29/2011

Many beliefs that Canadians have about the horrors that will befall them should they do the unthinkable and declare a Canada bankruptcy are simply not true.  The fact is, as the number of people finding themselves in debt over their heads has exploded in the last several decades, there has been an equivalent explosion in the “debt help” industry.

The advertisements you see plastered over the airwaves come from companies with a vested interest in keeping you out of bankruptcy – money.  With the very rare exception of non-profit credit counselors from community centers or charitable institutions, debt solution companies and credit counselors and even bankruptcy trustees stand to reap handsome rewards if you opt for an alternative to a Canada bankruptcy.

While some people in deep trouble can qualify for a consolidation loan to get them back on their feet, many Canadians can’t.  You need good credit, a stable income, and often, an asset of value such as equity in your home to qualify for a loan.

In many cases, bankruptcy is actually the quickest and most cost-effective solution for getting out of debt.  Despite what you may have heard from debt collectors, bankruptcy does not destroy your credit rating forever.  In fact, since completing a bankruptcy filing takes far less time than other debt solution programs, you can actually start to rebuild your credit rating faster if you do choose to file bankruptcy.

Some misguided Canadians believe bankruptcy will lead to court collections against them, when the exact opposite is true.  If your creditors are suing you or have garnished your wages, bankruptcy will stop all that. 

However, bankruptcy is not free.  If you own a lot of possessions of value, you may lose some of them in a Canada bankruptcy.  You will not lose everything you own.  Canada bankruptcy laws at both the federal and provincial laws ensure that, although some provinces do have more generous exemptions for personal assets than others.

For example, here in Alberta there is an exemption allowance of $40,000 for equity in your home, while in Ontario there is no home equity allowance.  The principal reason you should be concerned about bankruptcy is potential asset loss.  To determine exactly what your exposure is, you need to meet with a licensed bankruptcy trustee.  We offer free initial consultations so you have nothing to lose by scheduling an appointment at the first sign of debt trouble.