Bankruptcy has a very negative connotation attached to it. But if we look at it from a different perspective, it plays a vital role in dealing with economic crisis. The same holds true when we talk about personal bankruptcy. Apart from being a reliable way to manage debts, it surely helps getting personal finances back on track.
However, most Canadians have certain apprehensions regarding this debt management solution. And due to this lack of awareness, people usually dodge the idea of declaring bankruptcy.
Let’s unveil the 5 most frequently asked questions regarding bankruptcy to help clear the air around it:
Question#1 – What Will Happen To My House When Filing For Bankruptcy?
If there is a huge amount of equity in your house, you cannot keep it when filing for bankruptcy. However, if it has very little or no equity at all, making arrangements with a mortgage company to continue paying the mortgage is also feasible. Doing so will let you keep the house post filing for bankruptcy.
On the other hand, if the house has considerable equity, it is your trustee who will decide whether the house should be seized and sold, or other arrangements need to be made (for repaying the equity). Other arrangements include borrowing from relatives, friends, or colleagues. You can even opt for second mortgage.
Question#2 – In Canada, How Long Does Bankruptcy Last?
There are a few variations to this. If your income is more than the minimum limit set out by the Canadian government, there are chances of your bankruptcy being extended longer than nine months. Moreover, if this isn’t the first time you’re filing for bankruptcy, the duration will be prescribed by the Judge or Registrar of the Bankruptcy Court. Lastly, if you failed to fulfill one or more of your obligations under bankruptcy, expect delays in your discharge.
Question#3 – Does Filing For Bankruptcy Affect My Spouse?
In Canada, filing for bankruptcy has no impact on the spouse. The debts solely belong to the person filing for bankruptcy and hence, only he/she holds complete responsibility. Similarly, if you file for bankruptcy, only your debts will be discharged. The spouse or common-law partner is not responsible for the debts. However, there are exceptions if your spouse has co-guaranteed your debt.
Also referred to as bankruptcy exemptions, the Canadian government exempts certain assets to facilitate a fresh financial start for individuals. Some of the most crucial exemptions include limited amounts of:
- Health aids,
- Car (under certain cases),
- House (under certain cases),
- Tools of trade,
- Farm land, animals etc.
Question#5 – When Filing Bankruptcy, What Happens To My Debts?
Typically, bankruptcy discharges unsecured debts. However, there some exceptions under the law where the following debts remain:
- Student loans (that are less than 10-year old),
- Child and spouse support,
- Fines and payments ordered by the court,
- Debt as a result of theft or fraud,
- Certain government-related overpayments.
The discharged debts include:
- Credit card balances,
- Unsecured personal loans,
- Unpaid utility bills,
- Medical bills,
- Accrued taxes (income and municipal house) etc.
Bankruptcy is a complex topic for someone already going through financial and mental trauma. Get in touch with our experienced credit counsellors and consultants serving Toronto, Whitby, Mississauga, Scarborough, and nearby areas who will guide you throughout the process of filing bankruptcy. Call (416)900-2324 to hire our credit counselling services.