What is bankruptcy?

We meet with a lot of people in our Windsor, Ontario and Leamington, Ontario offices wanting to know what bankruptcy is.

Bankruptcy is a legal process where the debtor surrenders his or his assets to the creditors and in exchange he or she is released from the debt. The purpose of bankruptcy is to allow an honest debtor to be discharged (released) from his or her debt.

There are certain assets the debtor is allowed to keep (providing there is not a lien on them). For example: furniture valued at less than $11,300, clothing and personal effect valued at less than $5,650 and an automobile valued at less than $5,650. There are more items on list and it is best to talk to a trustee to see what you will be entitled to keep.

The discharge process occurs a minimum 9 months after the bankruptcy is filed. It lasts longer for people who do not perform their duties, if there income is above the surplus income limits, or if the person has been bankrupt before.

During the bankruptcy process, there are duties you have to complete. These include:
– making the required payment
– submitting income and expense report each month
– attend 2 credit counselling sessions

In order to file for bankruptcy you must meet with a licensed trustee. The trustee will review your personal situation and review the bankruptcy process with you. The trustee will also discuss other options that may be available to you such as a consumer proposal. We may also suggest credit counseling or debt consolidation.

Keep in mind that not all debt is discharged upon filing for bankruptcy. Under the Bankruptcy and Insolvency Act (the legislation that governs bankruptcy), the following debts are not discharged:

  • fines, penalties, restitution orders
  • damages for wrongful death or sexual assault
  • alimony
  • support
  • fraud, embezzlement, misappropriation
  • debt obtained by false pretences
  • a dividend a creditor would have been entitled to if the creditor had been informed of the bankruptcy
  • student loans less than 7 years old from when the debtor ceased to be a student
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