Filing for bankruptcy is a way to absolve your debts. When you cannot pay off your debts on time, they get piled up, and the interest keeps on compounding. This creates massive distress and negatively impacts your personal and professional life. Needless to add, debts take a toll on your mental and physical health. However, the Canadian government provides solutions for such people under the Bankruptcy and Insolvency Act. Each bankruptcy solution has its own terms, conditions, and intricacies that you must understand before signing. You can approach a Licensed Insolvency Trustee who will guide you further. But let’s first understand bankruptcy and its types in detail.
Types of bankruptcy
There are three types of bankruptcy:
● Personal
● Business
● Corporate
You can also opt for a consumer proposal, which is comparatively shorter than personal bankruptcy. The main highlight of the consumer proposal is that you can pay a portion of what you owe, while in personal bankruptcy, it eliminates all your debts. No matter which option you choose, you require an essential qualification to file for bankruptcy, and they include:
● You must be a Canadian citizen
● You must owe more than $1000 to creditors
● You are not able to pay your monthly bills
● Your debts are more significant than the value of your assets
Once you have all the documents and qualifications required for bankruptcy, you can approach an LIT and start further formalities.
● Personal
● Business
● Corporate
You can also opt for a consumer proposal, which is comparatively shorter than personal bankruptcy. The main highlight of the consumer proposal is that you can pay a portion of what you owe, while in personal bankruptcy, it eliminates all your debts. No matter which option you choose, you require an essential qualification to file for bankruptcy, and they include:
● You must be a Canadian citizen
● You must owe more than $1000 to creditors
● You are not able to pay your monthly bills
● Your debts are more significant than the value of your assets
Once you have all the documents and qualifications required for bankruptcy, you can approach an LIT and start further formalities.
Types of bankruptcy solutions
The Canadian government wants each individual to be a productive citizen and live a quality life. Therefore, they provide solutions for those under debt and promise a fresh start. Here are some bankruptcy solutions you need to know:
Personal bankruptcy
Personal bankruptcy is not uncommon in Canada. When you are unable to pay off your debts, plus your assets and property are at stake, you must consider filing bankruptcy. However, you must know in which situations personal bankruptcy is ideal. Listed below are a few situations that will help you decide whether you want to file for personal bankruptcy:
● You lost your job
● You are experiencing a loss of income
● Your debts pile on despite making payments
● Your borrowing potential has reached its limit and you cannot borrow anymore
● You have to rely on credit cards for essentials like gas and household bills
Once you fit these categories, you can approach your LIT, and they will assess your situation and advise which personal bankruptcy is better for you. There are several options under personal bankruptcy too, such as:
● You lost your job
● You are experiencing a loss of income
● Your debts pile on despite making payments
● Your borrowing potential has reached its limit and you cannot borrow anymore
● You have to rely on credit cards for essentials like gas and household bills
Once you fit these categories, you can approach your LIT, and they will assess your situation and advise which personal bankruptcy is better for you. There are several options under personal bankruptcy too, such as:
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Administration bankruptcy● It is common for individuals
● Your trustee fees are determined by bankruptcy legislation ● Your assets, like equity in home and property or investments, will be included, but selected ones will be free from exempt seizure ● People with incorporated businesses can also file for this type ● You don't need to advertise in newspapers |
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Ordinary Administration bankruptcy● It is mainly for business people
● Your trustees' fees are determined by your asset sales and trustees’ time investment ● You will be involved in more paperwork ● You will have to advertise in a newspaper ● You will have to call a creditors’ meeting After completing your personal bankruptcy time, you may get four kinds of discharges, such as: |
● Absolute discharge
This is the best outcome as you will be released from all kinds of legal obligations to repay your debts. However, note that you will have to pay obligations such as child support, fines and alimony.
● Conditional discharge
Under this type, you will have to fulfil the conditions mentioned in the legislation to achieve absolute discharge.
● Suspended discharge
You won't directly get an immediate discharge; instead, you may get it on a future date.
● Discarded refusal
This rarely happens, and if it does, you will have to coordinate with your trustee, fix things and ensure you get discharged, or you will have to apply again.
This is the best outcome as you will be released from all kinds of legal obligations to repay your debts. However, note that you will have to pay obligations such as child support, fines and alimony.
● Conditional discharge
Under this type, you will have to fulfil the conditions mentioned in the legislation to achieve absolute discharge.
● Suspended discharge
You won't directly get an immediate discharge; instead, you may get it on a future date.
● Discarded refusal
This rarely happens, and if it does, you will have to coordinate with your trustee, fix things and ensure you get discharged, or you will have to apply again.
Small business bankruptcy
Personal bankruptcy and small business bankruptcy are generally treated in the same way. This is because, as an individual, you are running a business; therefore, assets, debts and loans taken by you are your personal assets, debts and so on, which can't be separated from your company. They are one entity.
On the other hand, if your business is incorporated, your personal bankruptcy process will be distinct from simple personal bankruptcy. In this case, it will be more challenging, and you need to ensure that the trustee you hire has extensive experience in this kind of bankruptcy. However, incorporated provides protection to your personal assets.
On the other hand, if your business is incorporated, your personal bankruptcy process will be distinct from simple personal bankruptcy. In this case, it will be more challenging, and you need to ensure that the trustee you hire has extensive experience in this kind of bankruptcy. However, incorporated provides protection to your personal assets.
Corporate bankruptcy
You will require a trustee who specializes in this particular subject matter. Since this is an independent legal entity, you will be protected from liabilities. This means only your business assets will be forfeited. However, note that if you have included your personal assets, they are subjected to forfeiture.
Which bankruptcy solution is right for me?
Your trustee will guide you in this case. To begin with, they will assess your financial situation, assets, expenses, salary, and debt levels, and accordingly, suggest solutions for you. They will explain all the bankruptcies in detail, give the pros and cons of each option, and recommend which option will be more advantageous to you.
What is the alternative to bankruptcy?
A consumer proposal can be an alternative to personal and other bankruptcies. It is preferable because it has a fixed amount of monthly payment, meaning that your payment value won't increase even if your salary does. Additionally, it is interest-free, and your credit card score will recover faster than in personal bankruptcy.
If you wish to live a debt-free life and want to secure your future, connect with Bankruptcy Canada. Our experienced LIT will understand your situation and recommend a beneficial solution. So reach out to us and we will guide you through the process.
If you wish to live a debt-free life and want to secure your future, connect with Bankruptcy Canada. Our experienced LIT will understand your situation and recommend a beneficial solution. So reach out to us and we will guide you through the process.