Bankruptcy Info
Learn more about bankruptcy
Bankruptcy is an option that one may be faced with when in financial upheaval. There are many reasons and many outcomes of filing bankruptcy which is why, the more you know, the better off you are.
The Bankruptcy and Insolvency Act
The Bankruptcy and Insolvency Act is administered by the Office of the Superintendent of Bankruptcy. If a person or company is insolvent, they are considered as legally unable able to meet their financial obligations.
Before any legal action can take place, a trustee must be contacted to ensure that you are eligible to file bankruptcy.
If an individual or company makes the decision to file bankruptcy, their assets are liquidated and the money will go to those who are owed money. There are certain assets that can be excluded from the liquidation depending on the province and other circumstances.
Proposal
An individual also had the option of submitting a “Proposal”. This is where a “reorganization” of debt is created and submitted for approval. After approval, there are settlements made with each creditor for all or partial payment of the debt.
Companies have the option of Receivership (this is not typically an option for an individual). In a receivership, the creditors take control of the assets and do with them what they please.
Bankruptcy should always be your last option. There are many options that a consumer should look to before beginning the bankruptcy process. Do not listen to advertisements on television or even friends who recommend that you file bankruptcy before you have explored options like credit counselling. Also keep in mind that your bankruptcy filing has to be approved in a court of law.
How Long Will a Bankruptcy Stay on My Credit File?
When you file bankruptcy, it stays on your credit report for at least 7 years. After those 7 years, the bankruptcy no longer shows on your credit report but credit prior to your bankruptcy may be erased as well. So you are not only starting from scratch but you will also need to explain to any potential creditor why there is nothing on your credit report after you have been eligible for credit for so long. Although you are not required to tell any creditor about your financial past, it is typically very easy to identify a person who has filed bankruptcy by just looking at a credit report. So, chances are, the creditor it not going to give you the benefit of the doubt. If you pursued another option like credit counselling, that same creditor will know that you made every effort to make good on your debts even though you were going through a hard time. You will have less difficulty re-establishing credit and you will more than likely save money in interest that you will be charged on new cards.
For more information on filing bankruptcy or a consumer proposal, go to www.strategis.gc.ca. This is a government provided website that contains information on the bankruptcy process, laws and regulations, and additional resources based on your province.
