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How to File for Bankruptcy in British Columbia

When you’re facing overwhelming debt, it’s easy to get discouraged and feel like there is no way out of your financial situation. But the good news is, there are debt relief options available to help you turn things around. In many cases, the best way to eliminate debt is to declare personal bankruptcy. Though there is sometimes a stigma surrounding this process, there absolutely shouldn’t be. 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. Their financial difficulty may be the result of a divorce, the loss of a job, a failed business venture, a serious illness, or even a family emergency. The idea behind personal bankruptcy is to permit an honest person in an unfortunate situation the option to eliminate their debts and focus on building a brighter financial future.

Smythe Insolvency is here to help guide you through the process, so you can learn how to file for bankruptcy in British Columbia. Our team is here to answer any questions you have and will ensure the process goes smoothly. Please reach out to us today for more information.

What is Bankruptcy?

Bankruptcy is a legal process that provides relief for those who:

  • owe at least $1,000
  • have debts greater than the sale value of their assets
  • are unable to pay their debts when they are due

In most cases, the individual who holds the debt (the debtor) must surrender certain assets in exchange for being discharged from their debts.

The assets are usually sold and used to pay creditors some portion of the original debt amount. Some assets are exempt, and the debtor will retain them in and after bankruptcy.

Assets exempt from bankruptcy in British Columbia:

  • RRSPs/RRIFs
  • Portion of home (in BC)
  • Medical aids
  • Household items/clothing
  • Vehicle ($5000)
  • Work tools ($10,000)
  • Farm equipment

Though the process does eliminate your debts, it is not to be used as a free pass to get out of your responsibilities. Bankruptcy should only be considered as a last resort as it has lasting effects on your credit and lifestyle. The bankruptcy process in British Columbia is regulated by the Bankruptcy and Insolvency Act.

What is a Licensed Insolvency Trustee?

In British Columbia, a licensed insolvency trustee (LIT) is an individual who is licensed by the Office of the Superintendent of Bankruptcy to file bankruptcies, manage any assets held in trust in a bankruptcy, and administer consumer proposals. A Bankruptcy Trustee works on behalf of the debtor, and they act as a mediator between the debtor and their creditors. The trustee must balance the interests of all parties and ensure they are satisfied with the bankruptcy terms before they are finalized. In addition, a trustee manages the sale, if any, of the debtor’s assets and ensures all proceeds are divided among the creditors according to the legislation.

Who Needs to File for Bankruptcy?

When you’re facing a significant financial burden, it can be difficult to know when it’s time to seek professional assistance. You may attempt to carry on, making what payments you can as others fall by the wayside. The first thing you need to do in order to find a way out of debt is to recognize your financial problems are beyond your control, meaning you’re at a point where it’s simply not possible to pay off your debts. While every person’s situation is different, there are some telltale signs that it’s time to consider other options, like bankruptcy. Being honest with yourself and realizing your debt is not a problem you can overcome on your own is the best thing you can do. You may want to consider filing for bankruptcy if you meet any of the following criteria:

  • You are regularly unable to make payments when they are due
  • You can barely afford your minimum payments each month
  • You have credit cards that are maxed out
  • You are making bill payments by taking credit card cash advances
  • Your creditors have passed your account over to collection agencies, and you’re being harassed by creditor calls
  • You have been sent a notice of legal action that your creditors are attempting to collect the money you owe
  • You are living pay cheque to pay cheque
  • Your creditors are garnishing your wages
  • You are borrowing money from friends and family

How Bankruptcy Can Help Individuals with Debt

If you have an unmanageable amount of debt, it’s important to weigh your options. Speaking with a licensed insolvency trustee will help you assess your debt and determine whether bankruptcy is the right option for you. An LIT will explain how bankruptcy can help you overcome your debt and move onto a better financial future. By eliminating your debt, bankruptcy gives you a fresh start and a chance to rebuild your credit. Filing for bankruptcy can help debtors in the following ways.

  • Provides legal protection from creditors: As soon as you file for bankruptcy, you will be granted protection from your creditors. This means no more constant phone calls, legal judgments, wage garnishments, or other collection actions.
  • Eliminates unsecured debt: Once finalized, your bankruptcy will eliminate most of your unsecured debts. This includes credit cards, Canada Revenue Agency debts, student loans, and other debts.
  • Is relatively inexpensive: When compared to the actual cost of all your debt, filing for bankruptcy is a relatively inexpensive alternative. The cost of filing for bankruptcy is determined by each person’s individual situation and is regulated by the OSB. An LIT will walk you through the cost of a bankruptcy for you in your free, initial consultation.
  • Solves problems quickly: While the bankruptcy process does not occur overnight, it is a relatively quick way to eliminate debt. Many people who are filing for their first bankruptcy are debt free within nine months.

The Process of Filing for Bankruptcy

At first, filing for bankruptcy can feel overwhelming and stressful. With the right insolvency trustee firm, you’ll have an entire team of experienced professionals to guide you through the process. Bankruptcy is not something you have to face alone, and the team at Smythe Insolvency will be with you from beginning to end. Knowing how the process works beforehand will help to relieve some of your anxiety about bankruptcy. Below are the basic steps of filing for and completing bankruptcy, however, we’ll go into more detail about each step later in this article. The basic steps of the process include:

  • Meeting with an insolvency trustee to assess your debt
  • Gathering all the pertinent documents and information needed
  • Signing the paperwork to declare bankruptcy
  • The trustee filing the paperwork and notifying creditors
  • Completing your bankruptcy duties
  • Obtaining your certificate of discharge

Assess Your Debt

Before you decide to file for bankruptcy, it’s a good idea to first sit down with a professional, like a licensed insolvency trustee from our team, and determine if bankruptcy is the right solution for you. You may come to realize that there is a better debt relief solution for your unique situation. Our team will assess your current financial situation and let you know more about the options available to you. If you decide you want to continue with bankruptcy, our team will explain the remainder of the process and begin preparing forms for you to sign. To start the process, your trustee will need the following items from you:

  • Personal information (name, address, birthday)
  • A list of your creditors and how much you’re owing
  • A complete list of your assets
  • Up-to-date tax information
  • Information on your income and monthly budget

Sign Paperwork

Your trustee will help you fill out the necessary paperwork for filing bankruptcy. Even though the trustee will be the one preparing the documents based on the information you provided, it is still your responsibility to make sure all the information is accurate before you sign anything.

File Paperwork

Your trustee will file the completed and signed paperwork with the Office of the Superintendent of Bankruptcy, at which time you will be considered legally bankrupt. Once this occurs, you cannot reverse the bankruptcy without a court order. Immediately following the filing of the paperwork, a “stay of proceedings” will begin. This means your creditors and collection agencies must stop all actions against you, including constant calls and legal proceedings. Your trustee can also notify your employer to stop wage garnishments on your paycheque. After filing, you can stop making payments to unsecured creditors and begin simply making your bankruptcy payments instead.

Complete All Bankruptcy Duties

When you file for bankruptcy, you agree to perform all bankruptcy duties. While these duties will vary from case to case, they usually include making your bankruptcy payments, providing information about your monthly budget and assets, attending two credit counselling sessions, and notifying the trustee of any material changes to your situation.

End the Process with Your Certificate of Discharge

Your bankruptcy process will end with a certificate of discharge. For first-time bankruptcies, this usually occurs automatically nine months after you file.

Contact Our Trustees for Bankruptcy Filing

If you have reached a place where you are no longer able to make payments on your debt, it is time to consider filing for bankruptcy. Let the team at Smythe Insolvency determine if this is the best option for you and if so, guide you through the process. Our goal is to help you move forward from your debts and help you find financial freedom. Please reach out to us today for additional information about filing for bankruptcy in British Columbia.

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