Declaring Bankruptcy In Canada
Economic hardship is a very common problem in today’s world. Since the early 2000s, many people have experienced job loss, foreclosure of their homes, and a number of other financial strains that have put them in a position to file bankruptcy.
Financial challenges have hit every corner of the globe, and Canada is no exception.
Reasons for Bankruptcy
Each year 100,000 Canadians file for bankruptcy and there are three primary reasons for declaring bankruptcy in Canada:
- Divorce. When a couple divorces and the family is forced to live in two different homes, the costs double while the income stays the same. This makes it more difficult to meet financial obligations.
- Job Loss. Without an income, bills become impossible to pay. It is important to save money and trim expenditures wherever possible, but when the job market is highly competitive it can take longer to find work and even trimming the fat cannot resolve the problem.
- Medical Problems. Citizens of Canada have few out of pocket expenses for medical care, but when health issues cause an individual to miss work for long periods of time the loss of income creates problems in paying bills.
How to File for Bankruptcy
Declaring bankruptcy in Canada begins with engaging a financial trustee licensed by the Office of the Superintendent of Bankruptcy (OSB). The trustee will act as your personal financial advisor and determine what steps you need to take to regain control of your finances.
The next step is to file an assignment in bankruptcy, which means that you are assigning all your assets to the care of the trustee. The trustee will then file your bankruptcy paperwork.
What Happens After Declaring Bankruptcy
Once the court receives your bankruptcy paperwork, it will issue at “stay of proceedings.” Creditors are no longer able to attempt to collect your debts or even contact you for information.
Five days after claiming bankruptcy, creditors will receive bankruptcy paperwork from your trustee that will allow them to file their own claims. You will be required to submit monthly income statements and attend credit counseling with your trustee.
Within approximately 9 months, your bankruptcy will be discharged and your debts will be cancelled. The bankruptcy will remain on your credit record for a minimum of 6 years from the date of discharge.
When your debts have all been cancelled, you have attended credit counseling, and your trustee has advised you about your finances, you can begin to rebuild your credit and master healthy spending habits.