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What does it mean to be bankrupt in Canada?
The concept behind bankruptcy in Canada is this: you assign (surrender) everything you own to a trustee in bankruptcy in exchange for the elimination of your debts. Through bankruptcy, a person hopelessly burdened with debt gets a chance to start fresh. For a first time bankruptcy, this process is fairly easy to go through. For a repeat bankruptcy, the process is much more difficult to go through.

Personal bankruptcy is a legal process that is governed by federal law – the Bankruptcy & Insolvency Act. This law is designed to permit an honest but unfortunate debtor to obtain relief from his or her debts while treating creditors equally and fairly.

To go into bankruptcy in Canada, a person must live or do business in Canada, and must be insolvent. To be insolvent means:

1. To owe at least $1,000.
2. Not to be able to meet your debts as they are due to be paid.

Bankruptcy trustees are federally licensed and their fees are regulated and moderate, so the cost of bankruptcy is reasonable. Because bankruptcy is a legal process, there is a “stay of proceedings” that prevents a garnishment or any legal action from happening, and stops your creditors from calling.

You may be entitled to an automatic discharge from bankruptcy in 9 months, the minimum time set by the Court to be bankrupt, provided you have never been bankrupt before and you complete various duties and responsibilities as outlined through your trustee.

Your ability to obtain credit in the future could be affected, since bankruptcy will remain on your credit report for up to seven years. Continue reading What is personal bankruptcy in Canada?