Ten Common Bankruptcy Questions Answered

Information On Bankruptcies

First Published: Fab 11, 2009 ADawnJournal.com

The following article is for information purposes only. It is not intended to render professional and/or legal advice. Bankruptcy is a complex process. If you are having difficulty paying your debts and/or considering bankruptcy, I suggest you contact a Canadian Bankruptcy Trustee licensed by the federal government to discuss your situation. To find a trustee in your area, search on Google or Yahoo using these keywords: Bankruptcy, Trustees, Your Area.

What Is Bankruptcy?
Bankruptcy is a legal process that can provide you relief from unsecured creditors. When you file for bankruptcy, you surrender everything you own to a trustee in bankruptcy. In return, all your unsecured debts are discharged and you get a chance to start a new life.

How Do I Declare Bankruptcy?
A bankruptcy can be filed through a trustee in bankruptcy. A trustee in bankruptcy is a licensed individual to administer the bankruptcy process. The Office of the Superintendent of Bankruptcy (OSB) licenses and regulates trustees.

What Happens To My Debts When I Declare Bankruptcy?
Bankruptcy discharges you from unsecured debts. However, there are some debts that stay.

What Unsecured Debts Go Away?
Here are some examples:

– Payday Loans
– Credit Card Balances
– Unsecured Line of Credits
– Unsecured Personal Loans
– Unpaid Utility Bills
– Retail Store Credit Card Balances

What Debts Are Not Discharged?
Here are some debts that are not discharged:

Alimony Payments and Child Support
Student Loans (various rules and regulations apply, consult a bankruptcy trustee for more info)
Fines and Most Court Ordered Restitution Payments
Certain Government Overpayments
Debts That Arose as A Result of Fraud or Theft

Please note that whether or not a debt is discharged can be complicated. Rules can change anytime as a result of court rulings. Also, The Court has the right to refuse a discharge. Consult a bankruptcy trustee for more information.

What Happens To My Secured Debts?
Secured debts, debts secured by properties or assets, such as mortgages and car loans, are not discharged.

How Long Bankruptcy Lasts In Canada?
In general, your bankruptcy ends when you receive a discharge. Discharge cancels your debts, and it could take minimum nine months to get a discharge. However, bankruptcy court can order to extend your bankruptcy under certain circumstances.

How Long Bankruptcy Stays On My credit Report?
It depends on various factors. In general, it will remain on your credit report for six years. A second bankruptcy will remain on your credit report up to 14 years.

What Can I Keep In Bankruptcy?
You will be able to keep some assets. These are called “Bankruptcy Exemptions.” Bankruptcy is governed by federal law, but The Bankruptcy Exemptions (what you can keep) is legislated by the provinces and territories. In Ontario, you can keep the following:

– Clothing, jewelry etc up to a value of $5,650.00
– Household goods up to a value of $11,300.00
– Tools you use to earn your living up to a value of $11,300.00
– Motor Vehicle up to a value of $5,650.00

Check with your own province or a bankruptcy trustee to find out what you can keep in your province.

Does My Bankruptcy Affect My Spouse?
Contrary to popular belief, it does not affect your spouse. You are responsible for your own debts; your spouse is responsible for her/his debts. However, if your spouse co-signed for a loan or joint on your accounts, she/he may be affected. These issues can be complicated. Consult a bankruptcy trustee for further clarification.

Bonus Question

What Happens To My House When I File For Bankruptcy
If your mortgage is paid off, or if you still have mortgage but you have a lot of equity in your house, you cannot keep your house.

If your home has no or little equity, and you are able to keep up with your mortgage, you may be able to keep your house after filing bankruptcy.

Again, these issues can be complicated. Consult a licensed professional for further clarification.

NB – In Canada, Office of the Superintendent of Bankruptcy (OSB) protects the integrity of the bankruptcy and insolvency system and ensures public confidence in the marketplace. Visit their website for more information.