Personal bankruptcy is a legal process available to honest but unfortunate debtors in Canada who are struggling with overwhelming debt. It may seem daunting, but personal bankruptcy can actually provide relief from overwhelming debt and help individuals get back on their feet.

Who Qualifies for Personal Bankruptcy in Canada?

To qualify for personal bankruptcy in Canada, you must meet certain criteria. You must owe at least $1,000, be unable to pay your debts as they become due, and be a resident of Canada or have carried on business in Canada in the past year.

What Happens to Your Assets in Bankruptcy?

One of the biggest concerns for individuals considering bankruptcy is what will happen to their assets. And one of the biggest misconceptions is that you lose everything when you file for bankruptcy protection, however, this is not correct. In most cases, you can keep certain assets, such as clothing, household furnishings, your vehicle, and tools of your trade. However, any assets that are not exempt will be sold by the trustee, and the proceeds will be used to pay your creditors. This will be discussed with your licensed insolvency trustee at your initial consultation to determine which assets are exempt from seizure.

What Happens to Your Debt in Bankruptcy?

Most unsecured debts are eliminated in a bankruptcy, including credit card debt, personal loans, tax debt, student loans (if more than 7 years have passed since you stopped being a full time student), small business loans, etc. However, there are some debts that cannot be eliminated, such as court fines, child support/alimony, student loans (that less than 7 years have passed since you stopped being a student) or any debts that are caused by fraud.

What Happens to Your Income in Bankruptcy?

When you file for bankruptcy, you will be required to make payments to the trustee based on your income. This is known as surplus income and is calculated by comparing your income to the government-mandated threshold. The amount of surplus income that you are required to pay will depend on your income and the size of your family. This will be discussed in detail with your trustee at your initial consultation.

What Happens to Your Credit Score in Bankruptcy?

Filing for bankruptcy will have a negative impact on your credit score. The bankruptcy will remain on your credit report for up to seven years after you are discharged. However, it's important to remember that bankruptcy is not the end of your financial life. With time and responsible financial habits, you can rebuild your credit.

Pros of Filing for Personal Bankruptcy

• Provides a fresh start financially by eliminating most unsecured debts
• Protection from collection agencies and creditors
• Allows you to keep certain assets
• Relief from the stress of overwhelming debt

Cons of Filing for Personal Bankruptcy

• Negative impact on credit score
• Potential loss of assets that are not exempt
• Requires you to make payments based on your income
• May require you to sell assets to pay creditors
• It may not eliminate all types of debt

Conclusion

If you're struggling with overwhelming debt, personal bankruptcy may be an option to consider. While there are certainly some drawbacks to filing for bankruptcy, it can provide relief from the stress of overwhelming debt and allow you to start fresh financially. However, it's important to speak with a licensed insolvency trustee to determine if bankruptcy is the right option for your situation. A trustee can help you understand the process and provide guidance throughout the bankruptcy process.