Personal Bankruptcy in Canada

Personal bankruptcy is the legal process of clearing any overwhelming unsecured debts that cannot be paid. It is designed to help individuals who have found themselves in challenging financial situations to begin a fresh financial future. You assign any non-exempt assets you may have to your Licensed Insolvency Trustee for sale, with the proceeds going to your creditors in exchange for debt relief. When you complete your bankruptcy, you are legally discharged of your unsecured debts and officially gain debt relief. Many Canadians realize they need to file bankruptcy when they are triggered by an activity like a threat of a wage garnishment, or persistent collection calls from creditors.  Filing bankruptcy prevents creditors from making collection calls or pursuing legal action, like a wage garnishment or bank account freezes.

While many Canadians think that bankruptcy means you lose all your assets, this is far from the reality. In fact, you can keep some essential items like your home and car, depending on your province of residence.  Although bankruptcy may seem like an intimidating process, our experienced Licensed Insolvency Trustees at Spergel will approach your situation with compassion and understanding, and help you to find the right debt relief solution for you Unlike other bankruptcy firms, you will receive your own dedicated trustee at Spergel to walk you through each step of the bankruptcy process, instead of being passed from person to person.

You may be wondering if filing bankruptcy is the right form of debt relief for you, and our Licensed Insolvency Trustees can help you to make this decision. There are a number of key advantages of filing bankruptcy over other forms of debt relief:

• All unsecured debts are eliminated
• A fresh financial future
• Most first time bankruptcies are discharged within nine months, allowing you to enjoy life after bankruptcy
• Peace of mind, and often relief from mental health problems caused by financial circumstances
• The cheapest form of debt relief (especially so for those with no non-exempt assets or surplus income) as the cost of bankruptcy is not associated with the amount of debt owed
• Keep essential assets – contrary to popular belief, you do not lose everything when filing bankruptcy. You can keep your home, car, and clothing up to a value threshold – see Ontario bankruptcy exemptions, for example.
• A stay of proceedings – a legal end to collection calls from your creditors and any legal action including wage garnishments, placement of liens, and bank account freezes
• You can begin to save money once you no longer have high-interest debts to repay

There is no getting around the fact that bankruptcy will have a negative impact on your credit score. That said, it is temporary and it is likely that you already have a damaged credit score due to your debts and potentially missed or late payments. A bankruptcy remains on your credit report for six to seven years, although some lenders will offer credit before this time period – a secured credit card, for example. Getting new credit can help you to build a credit history, and at Spergel we can help you to rebuild your credit score.

In line with the Bankruptcy and Insolvency Act, you are eligible to file bankruptcy in Canada if you are insolvent, which means:

1. You owe at least $1,000; and
2. You are unable to pay your debts as they come due; or
3. You owe more in debts than the value of the assets you owe; and
4. You either reside, do business, or have property in Canada

If you meet the eligibility criteria for bankruptcy, one of Spergel’s Licensed Insolvency Trustees can walk you through the process of filing bankruptcy.

There are a number of reasons why Canadians struggling with unmanageable debts choose to file bankruptcy over other forms of debt relief like a consumer proposal. For many, it is the best pathway to a fresh financial future. Here are the key reasons many Canadians choose to file bankruptcy over a consumer proposal to clear their debts:

• Unsecured debts are completely eliminated. Consumer proposals can only reduce debts by up to 80% – provided creditors agree to the proposal.
• Most first time bankruptcies are discharged within as little as nine months, while consumer proposals can take up to five years to be completed.
• Creditors have to comply with a bankruptcy, while they can choose to decline a consumer proposal.

Ultimately, if you do not have a significant income or many valuable assets that could be seized, bankruptcy may be the best option. If in doubt, you should speak to an impartial Licensed Insolvency Trustee about your available options and what they recommend for you.

At Spergel, we understand that bankruptcy is likely not your first option, and your Licensed Insolvency Trustee will first work with you to assess the best debt relief option for you and your financial circumstances. Not everyone will need to file bankruptcy – we will first run through bankruptcy alternatives including debt management plans, debt consolidation loans, and a consumer proposal. As one of Canada’s most trusted bankruptcy firms, at Spergel we are here to support you and help you choose between filing bankruptcy or a consumer proposal. We have been helping Canadians gain debt relief for over thirty years, and we will use our expertise and experience to help you too. Use our debt repayment calculator to see your options.

In order to gain debt relief, you will first need to find a suitable Licensed Insolvency Trustee to help you. At Spergel, we offer a free consultation to review your finances and assess the most suitable debt relief options for you. One of our Licensed Insolvency Trustees will explain the process to you, and answer any questions you might have.