Life After Bankruptcy in Canada
Although not a decision to be taken lightly, filing bankruptcy is a way of gaining a fresh financial start, free from the stresses of overwhelming debts.
While it relieves you of unmanageable debts, it has a number of different impacts on your life, from the cost of your assets to showing on your credit report. All of these consequences should be considered with an experienced Licensed Insolvency Trustee before undertaking the decision to file bankruptcy. Below, we have listed the key impacts of filing bankruptcy in Canada.
How will bankruptcy affect me in the future?
The primary positive of filing bankruptcy is that your overwhelming debts are now cleared. You are free from the burden of unsecured debts, and creditors are no longer able to contact you or pursue a wage garnishment or any lawsuits against you – two important advantages of filing bankruptcy. That said, in Canada, filing bankruptcy has some impacts on your future:
- Bankruptcy obligations
- The cost of assets
- Your credit report
What are my bankruptcy obligations?
When filing bankruptcy in Canada, there are a number of obligations you will need to stand by in order to be discharged and cleared of your debts. These duties include:
- Making your agreed monthly payments on time
- Attending two sessions on credit counselling
- Reporting your monthly income to a Licensed Insolvency Trustee
- Attending a creditor meeting if required
Another factor to consider is surplus income. If your income exceeds the government threshold, your monthly payments will subsequently need to increase. This is where a bankruptcy alternative like a consumer proposal may more beneficial. Learn more about filing bankruptcy, and the consequences of not meeting your obligations.
How will my assets be affected by bankruptcy?
The true cost of bankruptcy is in assigning any non-exempt assets over to a Licensed Insolvency Trustee. These will typically be sold and used to pay towards your debts for each of your creditors. While many people believe that filing bankruptcy means you lose everything, this is not the case. In fact, most Canadians are able to keep their home, a car valued below the provincial limit, and some personal belongings and property related to work. It is important to discuss the impact of bankruptcy and your assets with your trustee to see if bankruptcy is your best option.
What is the impact of bankruptcy on my credit report?
It is important to note that while your credit report will be affected by filing bankruptcy, this is only temporary. Disclosure about your bankruptcy will be visible on your report to creditors for six to seven years if this is your first time filing bankruptcy. Despite this, it is still possible to gain credit when bankrupt. Some creditors will offer a credit card when bankrupt, depending on the reasons for filing bankruptcy and prior payment history. Being able to get a secured credit card is nearly always possible, and your Licensed Insolvency Trustee will be able to help you to gain credit following bankruptcy. This is a new chance for you to build up a new credit report.
How long does bankruptcy last?
In Canada, the length of bankruptcy is fairly dependent on whether or not this is your first time filing bankruptcy, and whether or not you will have surplus income. If it is your first time filing bankruptcy and you have no surplus income, you could become debt free within nine months. This is, of course, provided you have fulfilled your bankruptcy obligations and given that no creditors oppose your bankruptcy. If it is a subsequent bankruptcy, or you have surplus income, there is likely to be a longer bankruptcy period. Once your bankruptcy is complete, you will receive a certificate of discharge. From hereon out, you are granted debt relief from what you owe.
What happens after bankruptcy discharge?
At this point, you are able to live your life debt free. This is a huge relief for most debtors. It means you are able to enjoy life again, without being contacted by creditors. You no longer need to manage large, high-interest monthly debt payments, and instead you can begin to save your money. From here, you can begin to take the steps of rebuilding your credit, without being weighed down by heavy debt. At Spergel, we can help advise you on the next steps to take.