Filing for personal bankruptcy in Canada is a legal process that can only be done through a Licensed Insolvency Trustee (LIT). Here’s how the process typically works:
Get advice from a Licensed Insolvency Trustee
The first step is to speak with an LIT, like our team here at Baigel Corp. This free initial consultation will help determine whether bankruptcy is the right option or if other debt relief solutions, like a consumer proposal or debt consolidation, may be more appropriate for your financial situation.
The trustee assigned to your file will review your financial circumstances including income, expenses, assets, and debt levels to provide you with advice based on your facts.
Have a bankruptcy trustee appointed for you
If bankruptcy is chosen, your bankruptcy is registered with the Office of the Superintendent of Bankruptcy (OSB), the federal agency that oversees all insolvency proceedings in Canada and confirms that the protection has started and the LIT’s appointment. The LIT handles all this for you.
The LIT will assist you by preparing all the documents and sending notice to your creditors that they must, by law, now deal with the LIT and cannot pursue you.
Bankruptcy filing
When you file for bankruptcy, you are legally protected from your creditors. This means problems like wage garnishments, lawsuits, and creditor contact should stop immediately.
You must no longer required to make direct payments to unsecured creditors. You may be required to make payments to the LIT (also referred to as the bankruptcy trustee). The law sets how these fiunds are to be used: a formula calculates what the LIT is paid for his/her work and the rest is distributed farly by the LIT to the creditors.
You must also surrender any non-exempt assets (you can make arrangements to buy such assets back from the bankruptcy estate) and provide detailed financial information, including for income tax and monthly income and expense reports.
How to complete the bankruptcy process
When you have completed all your duties you receive a Certificate of Discharge from Bankruptcy. These duties may include:
- Submitting proof of income each month.
- Make all required payments (including surplus income contribution requirements if your income exceeds a set government threshold). Every bankruptcy is different, based on your facts and the law, so please ask your LIT to explain. Generally though, the payments are affordable and fair to you and your creditors.
- Attending two mandatory counselling sessions (at no extra charge).
- Assisting your trustee with asset valuation and recovery if requested.
- Filing and providing documents for your income tax returns.
- Attending meetings of creditors if required.
- Attending for examination under oath – if required.
- Keeping the LIT informed of changes in contact information such as address.
Following these conditions ensures that the process goes as smoothly and quickly as possible.
Discharge from bankruptcy proceedings
A first-time bankruptcy generally lasts nine months, provided you meet all your duties and do not have surplus income. At the end of this period, you may receive an automatic discharge, which legally releases you from the debts included in your bankruptcy.
For repeat bankruptcies or cases involving surplus income, the discharge will take longer. Please discuss with your LIT.
Your discharge certificate can be issued by the LIT unless: you fail to do your duties (as explained above) or another party (usually a creditor) opposes your discharge in which case the LIT must ask the court for a hearing where a Registrar, Master, Associate Judge or Judge will decide when and on what conditions you will be discharged from your bankruptcy.