Bankruptcy – Commonly Asked Questions
Although it is something people don’t wish to think about, there are times when bankruptcy is the only financial option available. The following are some commonly asked questions about personal bankruptcy. If this is an option you must contemplate, get the advice of experts. The answers below are only general guidelines.
What is bankruptcy?
An insolvent person (who owes at least $1,000.00 and is unable to pay their debts as they become due) can declare bankruptcy which will discharge most of their debts (student loans are one notable exception to this) and give them a fresh start.
Will everyone know about it?
A Bankruptcy Trustee must notify your creditors. If you have a lot of assets (and presumably larger debts) a notice of a Creditor’s meeting may be placed in the newspaper. If you have few debts, it is more likely that the notice will be mailed to your creditors. In any event, your bankruptcy papers are legal documents which can be accessed.
What happens to my assets?
A Bankruptcy Trustee will take charge of your assets and sell them to raise funds to pay your creditors. This would include any debts owed to you by family, friends or the government (such as an income tax refund). You will be allowed to keep personal assets such as clothing, a vehicle, household goods and tools of the trade up to certain limits.
How do I declare bankruptcy?
You can either voluntarily make an assignment into bankruptcy or you can be forced into bankruptcy by your creditors.
Are there any other options?
Assuming you can’t pay your debts in full, it is still open to you to make a proposal to your creditors. This can be a formal or informal process. If accepted and fulfilled by you, you can avoid bankruptcy. The specifics of the formal process route should be discussed with a bankruptcy trustee.
When can I be discharged from bankruptcy?
On a first bankruptcy, you can be granted an automatic discharge within 9 months if you have received counselling and your bankruptcy has not been opposed by your creditors or the Superintendent of Bankruptcy (a government official). If it is not your first bankruptcy, then the conditions for granting a discharge are much more onerous.
Will my bankruptcy prevent me from getting credit in the future?
Although your bankruptcy is on record, once you are discharged from bankruptcy, you have been discharged from your debts (except certain specific ones). In fact in some ways you are a better credit risk than you were before your bankruptcy because you no longer have a mountain of debt. It is up to the financial institution in question to make the call.
Please note that this article is not a recommendation to go through the difficulties and stress of bankruptcy, but in some cases it is a necessity.