What Should I Do During Bankruptcy?
If you’re facing a serious financial crisis, you must decide on the most suitable debt relief solutions. In Canada, you can choose from the several legal insolvency alternatives that will free you from indebtedness. Besides considering each debt relief solution to cope up with managing your debts, you must consider the prerequisites under the law that you need to comply with. Moreover, you might prefer credit counseling and debt settlement if you seek for an effortless solution on your end.
When you should seek debt relief
Debt relief is not a magical fix that can solve your insolvency in a snap. You must change your attitude in spending to at least repay some of your debts. However, if you feel that you can’t pay your obligations with major tweaks in your spending, you might check debt relief alternatives as your way out. The following are the few factors that you need to consider when seeking for debt settlement, debt management, or bankruptcy:
- If you’re incapable of making payments of your unsecured debt such as credit cards, medical expenses, personal loans- within five years. This is regardless if you’ve exhausted efforts to manage your money habits.
- If the overall amount your unsecured debt reaches 50% or more of your gross earnings
Duties Required During Bankruptcy
Surrendering Your Assets
- Personal Property — some of the assets that you need to present may include your household furniture or appliances, vehicles, valuable pieces of jewelry, and other valuable items. Moreover, you might need to give up your home equity if its value can cover more than what you owe. However, exemptions may vary by province or territory. Besides, you will not lose your entire assets; you can keep some of your property during bankruptcy discharge.
- Credit Cards — unwise usage of credit cards can be one of the causes of bankruptcy. In the case of credit card debt, you’ll be obliged to surrender all of it unless issued by your employer or company. This way, you can minimize your debt and avoid worsen your situation.
Your Income and Tax Information
- Tax Return Documentation —you will be required to present documents and paper works to determine your debt in tax. Your T-4 slips are included, and other essential documents for your tax return until bankruptcy discharge.
- Monthly Income and Expenses — when you file for bankruptcy, you may be urged to pay for the surplus income cost. So, if you’re earning more than the law stipulates, you are obliged to surrender the excess to your trustee. Your trustee will use these funds to pay part of your debt to creditors. Besides, you’ll have to supply certain documents to your trustee every month; your documents such as pay stubs and forms will be used to calculate your surplus income. Furthermore, you can take home a set amount of net income each month in compliance with Canadian law.
Legal Demands and Prerequisites
- Meeting of Your Creditors — during a consumer proposal, you’re creditors will call a meeting to either deny or accept your proposal. You will have to present and explain your current financial standing to your creditors to explain the filing of bankruptcy.
- Credit Counseling — you are required to undergo two sessions of credit counseling; through this, you will know how to stay away from debt again. You can decide to undergo the first session within 60 days and 210 days for the second. By doing so, you will be qualified for bankruptcy discharge after nine months.
Miscellaneous and Other Requirements
Aside from the duties listed above, you will comply the following:
- You will have to pay your trustee to oversee your bankruptcy trust every month.
- Make sure to proactively inform possible creditor who’s offering a $500 loan or more that you’re bankrupt.
- You must desist your positions as a company director if you are one.
- Always maintain constant communication with your trustee and comply with your duties
Consider Other Debt Relief Options
You must know that bankruptcy is not the end of the world. You can seek refuge by exploring the other debt relief solutions. All you need is the willingness to overcome your indebtedness. You can consider a consumer proposal or debt settlement as a starting point or the other debt relief solutions.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.