Bankruptcy:
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Everything You Need to Know About Bankruptcy and LITs

Bankruptcy is one of the more uncomfortable topics to talk about, but sometimes, it is the best way to deal with debt when all other options are exhausted. Despite its negative reputation, personal bankruptcy is not the end of the world.

Our Licensed Insolvency Trustees (LIT) will explore all possible options to ensure that you find the right one for your situation. They are experienced bankruptcy trustees and debt solutions experts who can give advice and be by your side throughout the entire process.

Chande Debt Solutions is here to help you fix your debt problems and get a fresh start.

What Is Bankruptcy?

Bankruptcy is a legal process under the Bankruptcy and Insolvency Act designed to help individuals eliminate their debts when they are unable to repay them. It is considered the last resort for debt relief.

The bankruptcy process begins with a consultation with one of our Licensed Insolvency Trustees. During this meeting, we will assess your financial situation and suggest the best option for settling your debt. If we identify bankruptcy as the best solution, our LIT will review your assets, liabilities, income, and expenses. They will prepare the documents that will be forwarded to your creditors to notify them of your bankruptcy.

During the following months, you must complete specific duties enabling your LIT to recommend a discharge status at the end of your bankruptcy. Among the main responsibilities are:

  • Make regular payments to your bankruptcy estate
  • Report your income and expenses to your trustee every month.
  • Attend two mandatory financial counselling sessions.
  • Provide the trustee with information to file your income tax return in the year of your bankruptcy.

It is essential to know that personal bankruptcy in Canada can only be filed with a Licensed Insolvency Trustee such as Chande Debt Solutions.

Who Can File For Bankruptcy?

In Canada, in order to file for bankruptcy, you must meet certain conditions.  The conditions are:

You must be insolvent (this is a fancy way of really saying that you are unable to pay your debts as they come due);

You owe at least $1,000 and

The value of your assets (if any) is less than the value of your debts (the money that is owed to your creditors).

Advantages of Working With a Licensed Insolvency Trustee

Licensed Insolvency Trustees are the most qualified debt professionals in Canada. They are the only professionals authorized to administer government-regulated insolvency processes, such as consumer proposals and bankruptcies. Their experience in debt management allows these qualified professionals to ensure that debtors receive sound financial advice throughout the process.

A LIT will thoroughly review your financial situation to determine which debt solution is the right one for you, without any ulterior motives to promote one solution over another. Their fees are set by the Office of the Superintendent of Bankruptcy, and they work under the Bankruptcy and Insolvency Act of Canada.

Another key advantage is the legal protection that comes with working with an LIT. Once a bankruptcy or consumer proposal is filed, LITs can stop wage garnishments, stop collection calls, and prevent legal actions from creditors. They also manage all communications with your creditors and handle the legal aspects of the insolvency process to ensure compliance with the law.

Our experienced bankruptcy trustees are qualified professionals who can help you achieve a fresh financial start, as they also assist with credit counselling, rehabilitation, and financial planning to prevent you from getting into the same situation again.

What Happens When You File Bankruptcy?

When a person files for bankruptcy they are given automatic protection from their creditors.  This protection is known as a stay of proceeding.  Creditors can no longer continue or start collection actions against you, they cannot garnish your wages or pursue any legal actions against you to collect what is owed.

What does this protection from creditors mean to you?

  • They can no longer contact you (collection calls stop)
  • They cannot garnish your wages
  • They cannot sue you or take you to court; and
  • They must deal with us.

Not All Debts Get Eliminated In Bankruptcy

In most cases, all unsecured debts will be eliminated including CRA tax debts.  Common unsecured debts include:

  • credit card debt
  • lines of credit (unsecured) and overdraft
  • pay day loans (and other high interest short term loans)
  • student loans (over 7 years old)
  • various taxes (personal income taxes, HST/GST, etc)

Secured debts are debts in which the lender has taken collateral of the asset.  Examples would include mortgages and vehicle loans. These debts do not get affected in a bankruptcy because in order to keep the asset, the borrower will continue to make the payments.

The most common debts that do not get eliminated in a bankruptcy include:

  • child support payments
  • spousal support payments
  • student loans less than 7 years old (please click here to learn about the special rules related to student loans)
  • debts incurred in a fraudulent manner

Do I Have Other Options If I Do Not Want To File For Bankruptcy?

Bankruptcy may be the right option for some people, however, it is not the only option.  For many people, a consumer proposal may be a better alternative when dealing with debt challenges.  A consumer proposal provides all of the protection that a bankruptcy provides, however, it allows you to avoid filing for bankruptcy but still eliminate the majority of your debt.  Learn more about the consumer proposal process here.

Still unsure if bankruptcy is the right debt solution for you?  Get in touch with us for a free, no-obligation, consultation and we will review your current position, go over all of your debt relief options and help you be on your way to becoming debt free.

More About Personal Bankruptcy

What happens to tax refunds?

What is the cost of filing bankruptcy?

What are the advantages and disadvantages of filing bankruptcy?

Will it affect my spouse or partner?

Can I keep my car?

How will it affect my credit report?

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