Curious about what happens during bankruptcy? As you consider the different options for getting out of debt, keep in mind the specific requirements established by law for each relief option.
Some debt relief programs 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 help to pay your creditors part of what you owe them. Otherwise, you surrender them to avoid taking on new debt during bankruptcy.
With some exemptions that vary by province/territory, you may 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.
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
Supply your bankruptcy trustee with all the documents required to complete your tax return, including your T-4 slips.
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 take home each month above the allowable income levels that Canadian law allows.
In other words, if you make more than what the law states you should be making in bankruptcy, the excess goes to your trustee to pay your creditors. Each month in bankruptcy, you must supply your trustee with pay stubs documenting your expenses. Any amount of surplus income you owe can be calculated.
Education and Legal Demands
Meeting of Your Creditors
Under a consumer proposal, your creditors may call a meeting to determine whether they should accept your offer. These meetings rarely happen during a bankruptcy, but they can occur. At the meeting of creditors, you answer questions about your financial status and other matters. Your answers inform your creditors that bankruptcy is necessary to regain sound financial footing.
What happens during bankruptcy? The law states you must have two credit counselling sessions 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. Taking your first session within 60 days of filing, and the second within 210 days of filing makes you 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
Are you considering declaring bankruptcy? If you want to know what happens during bankruptcy, we can talk to you more about it. Bankruptcy might be your last, best option, but it is the most difficult debt relief option to go through. Other relief options may be more appropriate, so fill out this Canadian debt relief form and get personalized guidance right away!