One of the first things I am asked by just about everyone I see professionally is: “Is filing bankruptcy the right thing for me to do?”
Since every person’s situation is unique, this is not a question that can be easily answered, but what I can do is provide you with a list of six key advantages of filing bankruptcy. You can then decide if the benefits will help you resolve your own financial difficulties and whether you should contact a trustee to talk about your situation further.
Benefits of Filing Canadian bankruptcy
- Bankruptcy in Canada is a legal procedure that immediately provides you with protection from your creditors. When you file for bankruptcy or a consumer proposal an automatic “stay of proceedings” is created. The stay stops your creditors for commencing, continuing, or enforcing any Court action without the express permission of the Bankruptcy Court. In layman’s terms it means if your wages are being garnisheed by a creditor the garnishee will stop. If your bank account has been frozen by a creditor it will be released. Any lawsuits that have already started will be stopped. Any that haven’t started yet won’t be.
- Your creditors don’t have the right to “opt out”. By law, all of your unsecured creditors will be dealt with by filing bankruptcy. A creditor cannot simply decide to ignore the process and try to collect their debt. This is an advantage when bankruptcy is compared to debt settlement programs or debt management plans. A creditor can refuse to participate in an informal debt settlement or debt management plan. If that happens often the entire plan will fall apart. In a bankruptcy (or consumer proposal) all unsecured creditors are included.
- The rules have been set out by the government and the Courts – bankruptcy is bankruptcy is bankruptcy. The process should be the same if you file in downtown Toronto, or in Labrador. If you run into some sort of problem you have recourse to the Office of the Superintendent of Bankruptcy (the government body that licences and monitors all trustee in Canada) and the Courts to set things right.
- If you follow the rules, you will be discharged from a first bankruptcy in either 9 or 21 months. 9 month bankruptcies are for people at or below the government’s income standards for bankruptcy. 21 month bankruptcies are for people above the government standards. Unless something changes in your situation, you should know before you file how long your bankruptcy is going to last.
- The cost of filing bankruptcy has nothing to do with how much you owe. The cost to file is based on the number of people living in your household and your share of the total household income. For most low income Canadians, bankruptcy costs about $1800 no matter how they owe.
- You’ll feel better. No one is “happy” about filing for bankruptcy, but the anxiety you have been feeling about you financial problems will go away. Once you have filed for bankruptcy, it is as if a weight has been lifted. The decision to file for bankruptcy, while not easy, is empowering – instead of your creditors and debts running your life, you put a plan in place to deal with the problem.
Those are just some of the benefits of filing for bankruptcy. To determine whether or not bankruptcy is something you should seriously consider, you should book an appointment to sit down and discuss your situation in detail with a licensed trustee.
At the start of this article I said it was difficult to tell someone whether or not they should file for bankruptcy without going into a great deal about their personal situation. At the end of the article that still holds true – the only way you will really learn whether or not bankruptcy is the right solution for you is to compare it to all of the other strategies that you may be able to follow. Once you know all of your options you may make an informed decision of which solution makes the most sense for you.