The short answer is… yes.
You can now file for bankruptcy online.
Due to the economic and social impacts of the ongoing COVID-19 pandemic, the Office of the Superintendent of Bankruptcy (OSB) has updated their guidelines. The new regulations now allow bankruptcies to be filed remotely, online and by phone, through video-conferencing and electronic signatures.
This means that Licensed Insolvency Trustees (LITs) can continue serving the public while also adhering to physical distancing recommendations by the Canadian government. This is significant, as (in the past) such formal meetings were always required to be held in person. Naturally, that presented problems for social distancing, making it difficult (or impossible) to safely seek the debt help so many citizens desperately need during these challenging times.
These changes may be particularly helpful to young Canadians (under 34 years of age) and those from diverse communities – especially Black, Indigenous, and People of Colour (BIPOC). According to a COVID-19 Impact Poll commissioned by TD Bank, these groups have been most likely to experience significant financial impacts during this pandemic.
How to File for Bankruptcy Online
Online bankruptcy filing is essentially the same as filing for bankruptcy in-person, except now the whole process can be done online.
In both cases, you must meet with a trustee (this is because LITs are the only professionals that are authorized to administer a bankruptcy in Canada). Though the internet makes it easy to do a lot of things independently, you can’t file for bankruptcy online on your own – you still need a team. What has changed is how you access and interact with that team. Digital tools now allow us to advise you and share documents more quickly and easily, while practicing safety with physical distancing.
The first step is a consultation with an LIT in your geographical region. This is because different provinces have slightly different rules and requirements for the bankruptcy process. Meaning, even if you aren’t meeting in person, you still need to talk to a trustee near you. When you call or use our online booking calendar, we’ll make sure you are connected to the correct office for your region.
Consultations are both free and confidential. During your meeting, the trustee will review your credit card debt, tax debt, and any other debts you have with all your creditors. Once they have a complete understanding of your financial situation, they can then show you the debt solutions you qualify for and advise you on which one(s) may best protect your assets (such as your home, car, employment income, etc.).
This initial consultation is intended to give you as much information as possible about your options, including whether or not a bankruptcy is right for you. In fact, it’s entirely possible that you may not need to file for bankruptcy at all! If you are like most Canadians, you probably just don’t know what programs are available to you or how to get the collections agencies to stop calling you and garnishing your wages. In most cases, a meeting with an LIT should leave you feeling pleasantly surprised and hopeful.
“It’s entirely possible that you may not need to file for bankruptcy at all!”
If you and your LIT decide that bankruptcy is the best path for you, you will receive an electronic copy of the required paperwork to your email. After you fill it in and send it back, the trustee will go over each document and confirm that all of the information is completed correctly.
Once you’ve read through all of the documents, asked all your questions, and resolved any lingering concerns or fears, all that’s left to do is provide an electronic signature. This finalizes the bankruptcy application, giving your trustee the power to contact your creditors and make their collection agencies stop harassing you and siphoning money from your pay cheques – immediately.
Then, just like an in-person bankruptcy, you will be required to complete two mandatory credit counselling sessions. These can also be done via video conference or phone call.
How long the bankruptcy period lasts will depend on your individual situation. In most circumstances, your trustee will be able to estimate this by the end of your first meeting.
Types of Bankruptcies
There are three different types of bankruptcies in Canada (all of which are governed by the Bankruptcy & Insolvency Act):
- Small Business
Each type has its own nuances and an LIT can help you choose the right bankruptcy type for your situation. For example, personal and small business bankruptcies are basically the same thing if your small business is set up as a partnership or sole proprietorship. If your business is set up as an incorporation, however, the process is quite different.
This is the most common type of bankruptcy in Canada. People who file for personal bankruptcy have typically experienced a personal loss of income (such as unemployment), have been hit hard with unexpected costs (such as divorce or medical bills), are having difficulty decreasing the amount of their debt (even though they are making payments), and/or have maxed out the credit they depend on to cover everyday living expenses such as groceries, gas, and utility bills.
Small Business Bankruptcy
Legally, if a business is not incorporated it is treated as an individual running the business (or individuals, if there are partners). Because of this, the debts and assets from a small business registered in this way are also considered to be the owner’s own personal debts and assets. And, since the business is considered to be ‘personal’, you also get the same protection from creditors with a small business bankruptcy that you would with a personal bankruptcy.
In most cases, incorporated businesses have the benefit of liability protection for the business owner (meaning, the owner’s personal assets are usually protected from the corporation’s debts and creditors). These kinds of bankruptcies are much more complicated than a personal or small business bankruptcy and require a Licensed Insolvency Trustee who specializes in corporate filings. Because of the complex nature of these solutions, we have an entire team dedicated to corporate bankruptcy services for our clients.
What Happens When You File For Bankruptcy In Canada
While bankruptcy can greatly improve the quality of your life by quickly alleviating the stress and strain that comes with carrying a heavy debt load, it is also important to understand and prepare for the disadvantages that come when you file any type of bankruptcy in Canada.
- Your debt is instantly and completely eliminated
- Collections agencies stop calling – immediately
- Wage garnishments stop coming off your pay cheque – immediately
- Peace of mind and better sleep without the weight of debt hanging over you
- Your credit score will be lowered
- Challenges obtaining new credit for at least six years
- Potentially having to forfeit some of your assets (depending on your situation)
- Your tax and other financial information being shared with third parties
An Alternative to Bankruptcy
A common alternative to bankruptcy is what is known as a Consumer Proposal.
The biggest difference between these debt solutions is that a bankruptcy eliminates all debts, whereas a consumer proposal allows you to consolidate them, reduce the total amount of debt owing, stop interest from piling up, and pay back your creditors with a single monthly installment that you can actually afford. In most cases, you also get to keep your assets (house, car, etc.) and, because you are making regular payments and your creditors have legally agreed to the arrangement, your credit rating will not be impacted as much as it would with a bankruptcy – making it easier and quicker to rebuild your credit.
Get Started with A Licensed Insolvency Trustee
It can be easy to make hasty financial decisions during hard times, especially when it feels like there is no way out of debt. Taxes, bills, credit card interest, and mortgage payments pile up quickly… and weathering the storm can be difficult when there is so much uncertainty about employment and the economy.
If this is the case for you or your loved ones, a Spergel Licensed Insolvency Trustee can explain what debt relief options are out there for you and your family. If you choose to work with us, your LIT will act as a mediator, ensuring that your rights and dignity are protected while also ensuring your creditors (and anyone else affected by the process) are also treated fairly. They will help you get a fresh start on your path to financial freedom with personalized care, compassion, and life-changing results.
For more information or to schedule a call with an LIT from the comfort and safety of your home, you can reach us in the following ways:
- Calling toll-free at 1-877-501-4321
- Email (firstname.lastname@example.org)
- 24/7 live chat on our website
- Facebook messenger
- Booking a free consultation online
- Visiting our learning centre, a place where you can find FAQs, tips & tricks, and real-life stories of regular Canadians who have successfully managed their debt
Our experienced trustees have been helping hundreds of thousands of Canadians with money management and debt relief solutions for over 30 years.
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- Declaring Bankruptcy in British Columbia: Your Go-To Guide
- Declaring Bankruptcy in Saskatchewan: Your Go-To Guide
- Ontario Bankruptcy Exemptions – Will I Lose My House or Car?
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