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Bankruptcy

Filing for personal bankruptcy is a legal debt solution that provides you with an opportunity to eliminate your debts and move forward with a fresh financial start. Bankruptcy affords an honest person who happens to be in an unfortunate situation the dignity to eliminate their debts and focus on building a brighter future.

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Personal Bankruptcy

Overview

Many individuals who file for bankruptcy are honest, hard-working people who file as a last resort.

After years of struggling to pay their bills or after an unexpected life event takes place, such as job loss or divorce, bankruptcy can help a person begin to turn their finances around.

One of the main benefits of filing for bankruptcy is that upon filing, you will receive immediate protection from your creditors. This is referred to as a “stay of proceedings” and will bring an end to stressful collection calls, interest payments, wage garnishments and legal actions.

LEARN WITH SMYTHE Bankruptcy vs. Consumer Proposals

BANKRUPTCY

Suitable for anyone who has more than $1,000 of unsecured debt. No upper limit.

Keep up to $32,000 in “exempt” assets.

Monthly payments based on your income.

All tax refund(s) and/or GST credits must be surrendered (not including child tax credits).

Cannot act as a director of a limited company; however, can be self-employed.

Must submit reports of all income and expenses to the trustee monthly.

R9 credit rating. Affects rating for the period of bankruptcy plus six years after discharge for a first bankruptcy.

CONSUMER PROPOSALS

Suitable for as little as $1,000 of unsecured debt to as much as $250,000 (excluding mortgage).

Keep your assets, such as your house, vehicle and RRSPs.

Fixed monthly payments until end of proposal (up to five years).

Keep all of your tax refund(s) and/or tax credits.

Can continue to act as a director of a limited company.

No income and expense reporting required.

R7 credit rating. Affects your credit report for 3 years after you’ve completed your payments or 6 years from the date it was filed, whichever comes first.

Surplus Income

Surplus income is a calculation that determines whether or not you are required to contribute a portion of your net monthly earnings to your bankruptcy.

The Office of the Superintendent of Bankruptcy sets income thresholds based on your family size. If your average net income is over the limit by $200 or more per month, you will be required to pay surplus income.

If you’re filing for bankruptcy for the first time and you have surplus income, your bankruptcy period will be 21 months. For second-time filers with surplus income, the bankruptcy period is 36 months.

Surplus Income

Find out how much surplus income you would pay

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Bankruptcy & Surplus Income Payments

For more information about surplus income, watch our short video or use our online calculator above to determine how much surplus income you will pay based on your circumstances.

How to File for Bankruptcy

Our team makes filing for bankruptcy simple and straightforward and we pride ourselves on our empathetic,  non-judgmental approach. To learn more about the process, check out our guide on how to file for bankruptcy in British Columbia.

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The Downside of Filing for Bankruptcy

If you’re considering filing for bankruptcy, you need to know exactly what it means and what the financial repercussions are. While our team provides help with bankruptcy, we also encourage you to explore all your other options, including filing a Consumer Proposal, which is often the better solution. Let’s take a look at some of the negative consequences associated with filing for bankruptcy in Canada:

Cost

You will be required to make bankruptcy payments based on your income. Depending on your income each month, you may need to make something called “Surplus Income Payments”, which can be quite substantial.

Credit

Filing for bankruptcy will negatively affect your credit rating. It will be on your credit report for 6 years after you’re discharged for the first time and for 14 years if you’ve been bankrupt more than once.

Assets

If you file for bankruptcy, you will either lose your assets or you will have to pay the value of your non-exempt assets. You may be able to keep your vehicle and some additional non-exempt assets. A Licensed Trustee will explain all this to you in detail.

Duties

In order to be discharged from your bankruptcy, you have to perform certain duties. These include reporting your monthly income, making your payments, attending two insolvency counselling sessions and providing your income tax information.

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Bankruptcy Alternatives

Our debt experts will explore with you all of your debt relief options to see if you can avoid filing for bankruptcy. The majority of our clients choose to file a Consumer Proposal after thoroughly discussing the many solutions available.  

Contact one of our experienced Licensed Insolvency Trustees today or click here for information on other alternatives.

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Bankruptcy FAQs

Filing for bankruptcy can feel overwhelming and stressful, mostly because the average person doesn’t have a lot of information about the subject. We’ve put together a list of some common questions we get about bankruptcy, as well as their answers, to help you gain a better understanding of how it works so that you don’t feel so in the dark about this debt relief option.

More Questions

Filing for bankruptcy in BC is confidential and private. In most cases, when you file for personal bankruptcy, only your Licensed Insolvency Trustee, the Office of the Superintendent of Bankruptcy (OSB), your creditors and credit reporting agencies will know about the proceedings.

In many cases, you will not have to go to court for bankruptcy proceedings. If you are eligible for an automatic discharge, there is no court hearing necessary. You will be released automatically, and your trustee will send you a copy of your discharge papers. You can qualify for an automatic discharge if you complete all your bankruptcy duties and no one opposes the discharge. On the other hand, if you do not qualify for an automatic discharge, you may have to appear in court with your trustee to review the discharge before it is finalized.

Following notification of your bankruptcy, most credit card companies will cancel your card, so you can no longer use them. This means you will not be able to keep current credit cards after you file and may have to wait several months before you’re eligible for another. However, you can apply for a pre-paid credit card for situations where a credit card is necessary.

There are certain circumstances where you may be able to keep your credit card. There are stipulations and risks that come with keeping your existing credit cards, as you will be signing a new contract with the company. This essentially means you are again personally liable for the debt you accrue. Your insolvency trustee will be able to help you determine if keeping your current cards is a good idea. Usually, it isn’t.

All bankruptcy fees are regulated by the federal government and are consistent from LIT to LIT. The fees do vary depending on each individual’s unique financial situation. You can discuss what the costs of filing for bankruptcy would look like for you with a LIT during your free, initial consultation.