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What is Bankruptcy?
Personal Bankruptcy is a legal process that provides relief to individuals who are unable to pay their debts. It is designed to give a fresh start by discharging most, if not all, of their debts. Common triggers for bankruptcy include debt collection calls, wage garnishments, and significant life events like divorce.
As a licensed insolvency trustee firm, Rusinek & Associates Inc has been providing friendly, pain-free debt relief solutions to individuals and families across Ontario since 1991. We are a trusted community partner, offering tailored debt elimination plans that are affordable and effective. In this article, we will guide you through the concept of personal bankruptcy in Canada, its implications, and how it can serve as a tool for debt relief.
Laws Governing Bankruptcy in Canada
In Canada, bankruptcy is governed by the Bankruptcy & Insolvency Act (BIA). The BIA outlines three types of insolvency proceedings: bankruptcy, consumer proposals, and Division I proposals. The Office of the Superintendent of Bankruptcy (also called the OSB), is a division of the Canadian Federal Government whose role is to oversee the bankruptcy process to ensure fairness and compliance with the law.
Qualification for Bankruptcy
To qualify for bankruptcy in Canada, you must be insolvent and owe at least $1,000. Residency requirements also apply, but non-citizens may still be eligible. At Rusinek & Associates Inc, we offer a free consultation to help determine your eligibility and guide you through the process.
Process of Filing Bankruptcy
Filing for bankruptcy involves several steps, including an automatic stay of proceedings that provides immediate protection from creditors. Provincial laws also play a role, particularly in determining which assets are exempt from seizure.
Impact of Bankruptcy
Bankruptcy does impact your possessions, debts, and credit scores. However, it is designed to help individuals rebuild financially. Secured creditors, personal belongings, and RRSPs are treated differently under bankruptcy laws.
Treatment of Debts in Bankruptcy
Bankruptcy can clear various types of debts, including credit card balances, unsecured loans, and tax debts. However, certain debts like spousal and child support payments, fraud-related debts, and court fines are exceptions to discharge and cannot be cleared through bankruptcy.
Managing Income and Duration of Bankruptcy
During bankruptcy, you may be required to make surplus income payments, which can affect the overall cost of bankruptcy. The length of bankruptcy varies based on factors like prior bankruptcies and income level. Credit counseling sessions are a crucial part of the process and are aimed at equipping you with the necessary financial management skills.
Impact on Credit Score and Rebuilding Credit
Bankruptcy will temporarily decrease your credit rating. However, it’s possible to rebuild your credit during and after bankruptcy through responsible financial practices. The bankruptcy information will remain on your credit reports for a specific duration, but with time and disciplined financial habits, you can improve your credit score.
Bankruptcy and Spouse’s Credit/Assets
An individual’s bankruptcy has limited impact on their spouse’s credit report. However, joint debts, shared assets, and co-signed loans can be affected by bankruptcy. It’s crucial to understand these implications before proceeding with bankruptcy.
Responsibilities During Bankruptcy
As a bankrupt individual, you have certain obligations, such as submitting proof of income, attending credit counseling, and participating in necessary meetings. Failing to fulfill these duties can have serious consequences.
Post-Bankruptcy and Moving Forward
At the conclusion of bankruptcy, a discharge certificate is issued, marking the end of your obligations. Post-bankruptcy, you can apply for credit, but it’s crucial to manage your credit responsibly. Regularly monitoring your credit reports and resolving any errors can ensure accurate reporting.
Exploring Debt Relief Options
Bankruptcy is often seen as a last resort. There are other debt relief options available, such as debt-consolidation, consumer proposals, and informal arrangements with creditors. At Rusinek & Associates Inc, we can help you explore these alternatives and find the best solution for your situation.
Making Informed Decisions
Before deciding on bankruptcy, it’s crucial to conduct a thorough financial assessment with a Licensed Insolvency Trustee. At Rusinek & Associates Inc, we guide you through the process and explain all available options, helping you make an informed decision.
In conclusion, while bankruptcy can provide relief from overwhelming debt, it’s essential to understand its implications and consider all available options. At Rusinek & Associates Inc, we are committed to providing low-cost, effective debt relief solutions, tailored to your unique situation. We listen, we care, and we are here to help.
Bankruptcy in Canada – Frequently Asked Questions
1. What is personal bankruptcy?
Personal bankruptcy is a legal process that provides relief to individuals who are unable to pay their debts. It is designed to give a fresh start by discharging most, if not all, of their debts.
2. Who is eligible for bankruptcy in Canada?
To qualify for bankruptcy in Canada, you must be insolvent and owe at least $1,000. Residency requirements also apply, but non-citizens may still be eligible.
3. How does bankruptcy affect my credit score?
Bankruptcy will temporarily decrease your credit rating. However, it’s possible to rebuild your credit during and after bankruptcy through responsible financial practices.
4. What are the alternatives to bankruptcy?
There are other debt relief options available, such as debt consolidation, consumer proposals, and informal arrangements with creditors.
5. How can Rusinek & Associates Inc help me with bankruptcy?
At Rusinek & Associates Inc, we guide you through the bankruptcy process, explain all available options, and help you make an informed decision. We provide low-cost, effective debt relief solutions, tailored to your unique situation.