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Bankruptcy in Canada: Understanding the Process

Although filing for bankruptcy can be a difficult and stressful experience, it can also provide people the chance to start over and improve their financial life. It's essential that you understand the procedure and steps involved if you're thinking of filing for bankruptcy in Canada.
An outline of the bankruptcy procedure in Canada, including eligibility requirements, filing, and discharge, will be given in this article.

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Eligibility Requirements

To apply for bankruptcy in Canada, you must first fulfill certain eligibility requirements. They consist of:

  1. You must be a Canadian citizen or have assets or property there.
  2. You must have unsecured debt of at least $1,000.
  3. You must be unable to pay your obligations when they fall due, which is known as being insolvent.
  4. You ought to have tried your best to pay off your debts.

If you fulfill these eligibility requirements, you could be allowed to declare bankruptcy in Canada.

 

 

Filing Process

Filing the necessary documents with the Office of the Superintendent of Bankruptcy (OSB) is the first step in the bankruptcy procedure in Canada. The steps in the filing procedure are as follows:

  • Get credit counseling: You must attend two sessions with a certified credit counselor before you can declare bankruptcy. The counselor will assist you in exploring your financial situation, identifying viable solutions, and deciding whether bankruptcy is the right course of action for you throughout these sessions.


  • Hire a licensed insolvency trustee (LIT): If you choose to file for bankruptcy, you have to hire one (LIT). A licensed professional with permission to manage bankruptcy and other insolvency processes is known as a LIT. Your LIT will assist you in completing the required documentation, filing your bankruptcy claim, and serving as a mediator between you and your creditors.


  • Complete the paperwork: Your LIT will assist you with completing the required papers for bankruptcy filing. Included in this is a Statement of Affairs, which lists your assets, liabilities, and other financial data.


  • The paperwork must be submitted: Your LIT will send the paperwork to the OSB once it is finished. The bankruptcy procedure is therefore formally launched.

 

  • Attend a creditors’ meeting: You will be compelled to appear at a creditors’ meeting within a few weeks of filing for bankruptcy. Your creditors may interrogate you at this conference regarding your financial situation and bankruptcy claim. At this meeting, your LIT will be there to support you and assist with any questions you may have.


  • Assets must be surrendered: If you own any non-exempt property, you must give your LIT possession of it. Assets that are not exempt under Canadian bankruptcy law, such as a second car or a recreational property, are known as non-exempt assets.


  • Make payments: You can be compelled to pay your LIT monthly installments if you have surplus income (i.e., income that exceeds a certain level). Your creditors will get these payments.

 

 

Discharge Process

In Canada, the bankruptcy process ends with the discharge process. It is the procedure through which your bankruptcy is over and your debts are dismissed. The steps in the discharge process are as follows:

  • Complete the bankruptcy process: Many factors, including your income, assets, and obligations, affect how long the bankruptcy process will last. The bankruptcy process typically lasts nine months. You have to finish your bankruptcy during this period, which includes attending credit counseling sessions and paying any necessary payments.


  • Get a discharge order: Your LIT will apply to a discharge order on your behalf when the bankruptcy term has ended. This is a court order that cancels your obligations and extricates you from bankruptcy.


  • Attend a discharge hearing: In some circumstances, you could be obliged to do so. A judge will analyze your bankruptcy during this hearing and determine whether to grant your discharge. You will be freed from bankruptcy and have your debts dismissed if the court grants your discharge.


  • Update to credit record: Your credit report will be updated to reflect your new financial situation after your bankruptcy has been dismissed. After the date of discharge, your bankruptcy will still be included on your credit record for a period of six years.
  • Rebuilding your credit: Bankruptcy might provide you with a new start, but it can also seriously affect your credit rating. After filing for bankruptcy, it’s critical to take action to rebuild your credit. This might involve obtaining a secured credit card, paying your bills on time, and not exceeding your credit limit.

 

 

 

Take Action Against Debt

It is clear after reading this thorough guide to the bankruptcy procedure in Canada that taking charge of your financial life can be a difficult but necessary move. It’s essential to speak with a Licensed Insolvency Trustee (LIT) if you’re thinking of declaring bankruptcy in Canada in order to discuss your alternatives and thoroughly comprehend the procedure or if there are other better solutions available for you like Debt Settlement Programs in Canada.
You may get the help you need from National Debt Relief to get back on solid financial ground and repair your credit. To find out more about our debt relief services and to begin your journey toward financial independence, get in touch with National Debt Relief right away. 
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Frequently Asked Questions

A Debt Consolidation is a negotiated debt settlement offer made between you and your creditors with the help of a Debt Relief Agency in Ontario. Some key benefits of Debt Consolidation are interest-free program, no upfront fee required, combined monthly payment into one affordable amount, no lawsuits, and many more.

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