There is no one cause behind most bankruptcies in Canada. Instead, most people end up filing for bankruptcy due to a combination of reasons, many of which are outside the control of the bankrupt individual. Thus, one should not be too ashamed if bankruptcy ends up being the only debt solution left because you do not qualify for another solution such as a consumer proposal or debt consolidation.
Human nature being what it is, however, people who find themselves having to file for bankruptcy are often embarrassed and want to make sure that no one knows about their financial troubles. This guide will help alleviate your concerns over how your bankruptcy is revealed to others.
Who Must Know about Your Bankruptcy?
According to the Bankruptcy and Insolvency Act, as well as other Canadian laws, only a few individuals or other entities will inevitably know about your bankruptcy. Who are they?
• The federal government maintains official bankruptcy records. Licensed bankruptcy trustees must report their bankruptcy clients to the Office of the Superintendent of Bankruptcy. This is a slightly different from other debt solutions such as debt settlement programs and other debt relief options. Although debt settlement companies do not have to report your settlement to the Office of the Superintendent of bankruptcy, the amount of debt that is forgiven in debt settlement is taxable income that must be reported to the Canada Revenue Agency.
• Credit bureaus always learn of your bankruptcy via the Office of the Superintendent of Bankruptcy because the office sends information on new bankruptcies to credit reporting agencies each month. Credit bureaus will record the bankruptcy on your credit report, where it will remain for seven years. This is similar to what happens in a consumer proposal. The mark of bankruptcy will make creditors unlikely to extend credit to you at low interest rates, if at all.
• Individual creditors receive a report of your bankruptcy from your bankruptcy trustee, and potential new creditors will record your bankruptcy when they are considering your credit application if the bankruptcy has not yet been recorded on your credit report.
• Potential Lenders must be told you’re in bankruptcy if they’re considering loaning you $500 or more – friends and family included.
• Newspapers may report a legal notice of your filing for bankruptcy if you have a large number of assets. If your assets are not substantial, newspapers will ignore you. Generally speaking, those who will be reported as bankrupt in newspapers are those who own property that is valued quite highly, a small business and other such things.
Is Bankruptcy the right Option?
Who Will Not Find Out about Your Bankruptcy?
In truth, there is no way to prevent anyone who is curious enough about you from scouring public bankruptcy records and finding out that you have filed for bankruptcy. The records maintained by the Office of Superintendent of Bankruptcy are public records, and anyone can access them if they are interested enough in finding out your financial history. Nevertheless, this is not a concern for most people. Most of your friends and family members will be thoroughly uninterested in tracking down such information. Practically speaking, then, it is highly unlikely that anyone will ever learn about your bankruptcy apart from creditors and a few employers who need to check your credit unless you want them to.
Keep Matters Fully Private
If bankruptcy is truly the only way to get out from under your debt, don’t let potential embarrassment keep you from filing for bankruptcy and starting your financial life over. However, other debt relief options like debt settlement do not become a matter of public record and are a better option if discretion is your goal. You can learn more about various debt relief programs and how they can benefit you when you fill out this Canadian debt relief form.