Who is a Licensed Insolvency Trustee and what is their role?

A Licensed Insolvency Trustee (LIT) is the professional who will guide you in the process of filing bankruptcy. They provide advice and services to all individuals and businesses with debt problems. To begin with, they will understand your current financial situation, learn about your financial history, note if there are any debts, and find out the cause of your debt. Further, they will examine your assets, incomes, expenses and debt levels. With this information, they will assist you through financial difficulties. Here is what they do:

●  Arrange the paperwork and review it with you
●  File documents with the Office of the Superintendent of Bankruptcy (OSB)
●  Ensure that after filing to OSB, you are officially declared bankrupt
●  Deal with the creditors, lawsuits, and other related issues
The bottom line - they will be there with you throughout your bankruptcy period and help you get rid of debt.

Is filing for bankruptcy humiliating?

In 2018, a total of 128,864 insolvencies were filed with the Office of the Superintendent of Bankruptcy (OSB). Therefore, you need to know that you are not alone in this. If you cannot pay off your debts and face constant creditor calls and threats, affecting your mental and physical health, you should consult an insolvency trustee and file for bankruptcy. First, understand your financial situation, personal condition and capability to come out of it. For instance, if you can't manage to pay credit card bills on time or you cannot make one or more payments every month and you receive letters threatening legal action, then you need to file for bankruptcy. However, if you need more clarity, you can take a free consultation from the trustee.

When should I file for bankruptcy?

Some specific criteria and situations determine whether or not you can file bankruptcy. Some of the conditions under which you can file personal bankruptcy are listed below:

Financial struggle

You have a medical emergency at home and insurance won't cover it, plus you have lost your job, so you can't support yourself financially. Or you have spent more on designer clothes and luxurious cars than you can afford, although this is rare.

Loss of savings

You have spent all your savings on household expenses and bills instead of investing in loan payments or your children's education.

Excessive use of credit cards

Instead of using debit cards or for essential items like gas and groceries, you have used your credit card for the same.

Loan to pay off bills

You have borrowed money from friends, relatives or banks to pay your bills.

Exorbitant bills

You have piles of bills to pay, and you cannot pay all of them, which is only compounding to the next month.

Constant calls from creditors

You have been receiving constant calls from creditors, affecting your mental and physical health.

Lags with your rent payment

You have no money to pay the house or car rent bills, which can put you in legal trouble.

​These are a few out of many reasons why you should immediately consult an LIT and understand how to secure your future.

What is a free consultation with the trustee and what to expect?

If you are still baffled about when and how to file for bankruptcy, connect with a professional trustee. They offer free consultation wherein they will discuss and analyze your citation and then recommend whether personal bankruptcy is suitable for you or not. In addition, you can ask any question or clear all doubts you may have, and they will have answers for everything.
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Also, note that this consultation will be absolutely confidential, and you are not obliged to work with or come back to the same trustee again. Additionally, trustees won't take any decision on your behalf; they will just advise you and show you the right way; the rest is your decision.

How can bankruptcy help me?

Bankruptcy is developed in a way that will relieve you from all your debts and, at the same time, treat the creditors fairly. Plus, you get financial counselling from experts, which help you get out of your current debt and prevent you from falling into debt in the future. Furthermore, it features a stay of proceedings wherein any legal action against you or garnishments is stopped, and you won't get calls from your creditors henceforth. Also, your trustee will deal with your creditors and you can focus on your responsibilities laid down by law.

What is the process of filing for bankruptcy?

Once your bankruptcy process is cleared, you assign all your assets to the LIT and sell them. However, assets that are exempted by provincial and federal laws stay with you. For example, your home, car, and pension plans, among others, are not sold. During this period, you also have specific rules and responsibilities that you need to follow. Once you are released from bankruptcy, your debts will be extinguished and your creditors will be legally blocked from contacting you for future payments.

What are the things to know when filing for bankruptcy?

●  If you are filing bankruptcy for the first time and you don't have any surplus income, then the length of your bankruptcy will be nine months
●  If you are filing for bankruptcy for the second time with no surplus income, then the length of your bankruptcy will be 24 months
●  The LIT will directly deal with your creditors
●  The LIT will sell all your assets, except the ones mentioned in the province
●  A representative of OSB will examine you 
●  You will have to attend financial counselling sessions 

What are the advantages and disadvantages of filing for bankruptcy?

Filing for bankruptcy can be advantageous as it will help you get rid of all your debts, but all good things have limitations. Here are some of the advantages and disadvantages you need to know before filing for bankruptcy.

Advantages of filing for bankruptcy

→ Stay against creditors
All your debt collection activity comes on hold, and your trustee takes over the process. Here is a list of things you don't have to worry about after filing for bankruptcy:
●  Lawsuits against you 
●  Calls and letters from creditors 
●  Wage garnishments 
●  Property repossessions 
●  Home mortgage foreclosure
The best part is that if your creditor forcefully or otherwise takes money from you after declaring bankruptcy, your lawyer can file a case against them. Further, the court will stop them, impose a penalty, or ask them to repay you for the damage.
→ Dischargeable debts
You can discharge or cancel your responsibility to repay your debts. However, this applies to credit cards, personal loans, utility and medical bills.  
 → Allowance to own your property 
The law in your province allows you to protect some of your assets, so your trustees and creditors can’t sell them assets as they won't have any rights over them. These can be your property, car, wedding rings, etc.  
→ Credit scores
You can start improving your credit scores right after filing for bankruptcy and begin rebuilding it with a clean slate.  
Disadvantages of filing for bankruptcy
→ Loss of credit cards 
When you file for bankruptcy, many credit card companies cancel your cards and you lose them all. 
→ Impact on credit score
After filing for bankruptcy, it stays on your credit card report for several years, depending on the intensity of your debt.  
→ Inability to get a loan
It gets challenging to get a loan or mortgage after getting a tag of bankruptcy. 
→ Job and house stigma 
Employers and landlords ask whether you have filed for bankruptcy in the past, which can negatively impact your chances for getting a job or a house.  
However, note that if the debt amount is excessive, the advantages outweigh the disadvantages, and you must consider filing for personal bankruptcy. 

What will be impacted after filing for bankruptcy?

Along with your credit card score, your chances of getting a promotion also come to a halt. This means that you cannot be a director in a corporation, hold a professional designation or a board membership. On the other hand, your mental and physical health will be at peace, which will allow you to think more clearly and work more passionately. Additionally, if there are any medical issues at home and you don't have a job, personal bankruptcy will help you immensely. This means that you will be relieved from medical bills and other debts. Therefore, there will be a balance of positive and negative impacts on your life.

Do I have other options than filing for bankruptcy?

Yes, you do have alternate options than filing for personal bankruptcy. First, your trustee will closely assess your financial situation, salary, assets, debt depth and accordingly, suggest the alternative. They will acquaint you with its pros and cons to give you better clarity. The alternatives can be:

Negotiation
​The best alternative is to pay off your debts by negotiating the amount with your creditors. Many creditors agree on giving a significant discount if the debtor (you) pays the lump sum amount to them. Also, they allow you to pay in instalments and extend the time to pay off your debt, which can be beneficial to you and to them.

Ignorance
If you have enough assets and properties and the possibility of a better job, you may ignore the calls and letters. However, this is not the best alternative, but you can take this risk with asset security.

No matter which solution you apply for, your trustee will assist you throughout the process until your discharge.

What are some of the exceptions I need to be aware of?

Discharge in nine months 
The length of your bankruptcy can be nine months, except when:
●  You couldn't live up to the duties given by the bankruptcy, like making regular payments
●  You have a record of bankruptcy in the past 
●  An objection is filed to your discharge 
Discharge of all your debts 
You can't discharge all your debts as bankruptcy only allows unsecured debts, like credit cards, overdrafts, income tax, personal loans, etc. This does not apply to your secured debts, like a car loan or mortgage, because it becomes a medium to recover your debt if you have posted the collateral as security. However, some unsecured debts are also not discharged at times, for instance, student loans. If you attend school less than seven years from the date of bankruptcy, any sort of fraud and breach can fail to discharge your debts. 
Surrender of your assets
One of the best things about personal bankruptcy is that it does not take away all your assets. Bankruptcy aims to give a fresh start. Therefore, assets like your home, car, personal items and furnishing are generally not taken from you. You lose your non-registered investments typically, like boats, snowmobiles, motorcycles, RESPs, etc. However, you must speak to your LIT as they will make you understand the exemptions in your province in detail.  

What if I have a surplus income? 

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Depending on how much you earn, how much amount is required for your family, the size of your household, and other factors, you have to give the remaining amount to your creditors via the trustee. The point is that if you earn more than your household requires, then you have to use the remaining amount to pay off your debt.   
At Bankruptcy Canada, we have helped over 105,000 insolvencies since 2004. We offer experienced and licensed trustees who guide you through the process.