Bankruptcy 101: What can I expect?
If you’re struggling to meet debt obligations, the decision to file for personal bankruptcy can weigh heavily.
While bankruptcy can provide relief from the stress of struggling to appease creditors, what will it mean for day-to-day living? How will it affect your financial future? What about your loved ones?
In weighing your options, a trustee – a professional licensed by the Office of the Superintendent of Bankruptcy (OSB) to administer the bankruptcy process – can help you explore your options, including whether bankruptcy is appropriate, or an alternative such as a consumer proposal is more appropriate for you.
Bankruptcy and Insolvency Act
In filing for bankruptcy, the Bankruptcy and Insolvency Act requires you to provide your trustee with details of all property, including joint assets, assets sold or given away in recent years and all financial documents. You will submit credit cards for cancellation, attend financial counselling, assist the trustee, and if requested, attend a creditor meeting.
Moving forward, your trustee will deal with creditors directly. Salary garnishments stop, as do your payments to unsecured creditors, and any lawsuits by them are stayed (stopped). Your trustee will dispose of your assets (may sell them back to you), other than those exempted by government regulation, and distribute the proceeds to creditors. In addition to these payments and trustee’s fees, you may also have to make surplus income payments, based on the amount you earn above what’s needed to maintain a reasonable standard of living for the size of your family, set by the OSB. Should your surplus income be more than $200 per month, you would be require to contribute only half of this surplus, the rest you may save or do what you want with.
Bankruptcies generally don’t affect secured creditors with a valid security against your property, such as a car or house, but your trustee can help you work with these creditors if you can afford the payments.
It’s important to note that while your debts belong to you, creditors can still pursue anyone who has co-signed your debts. Similarly, loan co-signers must continue making loan payments after you go bankrupt. Your spouse is not responsible for your debt as long as they have not co-signed the debt.