As you consider the different options you have in Canada for getting out from under a heavy load of consumer debt, you must keep in mind not only the potential monetary savings each debt relief possibility offers but also the specific requirements established by law for each relief option. Some debt relief programs, such as credit counselling or debt settlement have few requirements and do not require much extra effort on your part. Others, however, have a process that is more involved. Personal bankruptcy requires more from the debtor than just about any other debt relief option in Canada. Here are the duties required of you in bankruptcy:
Unlike most other debt relief options, filing for bankruptcy means that you will have to surrender certain assets to your bankruptcy trustee. These assets are used either to pay your creditors part of what you owe them, or you surrender them to avoid taking on new debt during bankruptcy.
• Personal Property—With some exemptions that vary by province/territory, you will have to hand over your vehicles, household furnishings, jewelry, and other items of worth. You will not be left destitute, but you will have fewer assets when the bankruptcy is finally discharged. You may even have to surrender your house if it is worth a lot more than what you owe on the mortgage.
• Credit Cards—One of the leading causes of bankruptcy is credit card debt. Thus, you may be required to surrender all your credit cards except for employer-issued cards. This way, you will not rack up more debt as you seek debt forgiveness in bankruptcy.
Income and Tax Information
• Tax Return Documentation—You will supply your bankruptcy trustee with all the documents needed to complete your tax return up until the day of bankruptcy. This includes your T-4 slips and other paperwork that will help you determine your tax debt, which can be included in the bankruptcy itself.
• Monthly Income and Expenses—During the bankruptcy process, one of the costs that you may have to pay is the surplus income cost. Surplus income is the amount of income you are taking home each month over and above the income levels that Canadian law allows during bankruptcy. In other words, if you are making more than what the law has said you should be making as a person in bankruptcy, you will hand over the excess to your trustee to pay your creditors. Each month in bankruptcy, you have to supply your trustee with pay stubs and forms that document your expenses in order that the amount of surplus income you owe, if any, can be calculated.
Education and Legal Demands
• Meeting of Your Creditors—Under a consumer proposal, it is not uncommon for your creditors to call a meeting to discuss whether they should accept your offer. These meetings rarely happen during a bankruptcy, but they can occur. At the meeting of creditors, you will answer questions about your financial status and other matters in order to assure your creditors that the bankruptcy is really necessary to get back to a sound financial footing.
• Credit Counselling—Although you are in bankruptcy, in part, because you have determined that credit counselling is not right for you, two credit counselling sessions are still required during bankruptcy. This counselling will benefit you because it will teach you the skills that can help keep you from getting into financial trouble again. If you take your first session within 60 days of filing and the second within 210 days of filing, you may be eligible for a discharge of bankruptcy nine months from the date of filing.
Miscellaneous Other Requirements
In addition to the aforementioned bankruptcy duties, you will also be required to:
• pay the trustee to administer your bankruptcy trust each month
• notify any potential lender who is extending a $500 loan or more to you that you are bankrupt
• keep in contact with your trustee and provide anything he or she demands, including various forms, your current address, and so on
• abstain from serving as a company director
Look at your other Debt Relief options
Bankruptcy might be your last, best option, but it is the most difficult debt relief option to go through. Other relief options might be more appropriate for your situation, so fill out this Canadian debt relief form and get personalized guidance right away.
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