Bankruptcy is a process for individuals who due to a series of unfortunate financial actions are unable to pay their debts. Filing for bankruptcy is not an easy choice but it does help you in resolving your financial troubles and getting a chance at building your life again.
A bankruptcy application is filed with the Office of the Superintendent of Bankruptcy Canada (OSB) who in turn backs your claim of insolvency to ease your debts. To file for bankruptcy, you can either contact a Licensed Insolvency Trustee (LIT) or a lawyer to do the same for you.
A LIT is an OSB authorised officer who examines your financial status in detail, tabulating your current income, assets and debts that you need to pay. He then starts the process of organising your application by filling the required forms and submitting them to the office of OSB. Once these documents are tendered, you are formally declared bankrupt.
Here’s what every individual who has ever taken a loan needs to know about bankruptcy:
Bankruptcy Affects Your Credit Score
Bankruptcy shadows your life for a long time. Your credit rating falls drastically after filing for the same and you may have some major problems while consolidating a loan. You also need to inform your prospective employers of your bankruptcy. It appears on all your official documents and medical forms for over and up to 10 years.
Not All Debts Can Be Discharged
Bankruptcy is not a neat solution that makes all your debts go away. Here are some debts that can’t be discharged even after filing for insolvency:
- Alimony and Child Support
- Court ordered fines/penalties
- Debts arising from fraud
- Student loans in some cases
Your Filings Are Public
Filing your bankruptcy forms is not an easy task. Your finances are put through a wringer. Each of your assets is evaluated and every one of your financial decision is put under scrutiny. It is a cumbersome process that requires you to spend time with your LIT or lawyer. After declaring bankruptcy, your documents become public and are free for the media or any individual to access.
You Have To Make Some Additional Payments
In addition to paying your LIT officer, your attorney and counseling professional, you need to make something called ‘surplus income payments.’
A surplus income payment is the amount you have to pay your LIT officer in lieu of discharging your debts. This is the money you have left after deducting the amount required for a reasonable livelihood for you and family. The surplus income amount is determined by OSB at the start of each financial year and varies from family to family.
You Need To Attend Two Counseling Sessions
You also have to attend two mandatory sessions with a financial expert to avoid the recurrence of the situation and to help you restart your financial future.
Filing for bankruptcy is a significant decision that you need to consider carefully before acting on. Learn more about this process on our website to consult a lawyer that guides you through the way.
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