Is bankruptcy the best way to shed the debt?
Bankruptcy is a legal proceeding that resolves all of your unsecured debts. It covers credit card balances, taxes owed to the Canada Revenue Agency, 407 ETR bills, loans with private lenders, car loans, payday loans, overdue utilities, cellphone bills, and any other unsecured debts.
Secured borrowing, such as your mortgage, a home equity line of credit, or any loans secured by your home equity, is not retired through a bankruptcy.
Determining whether bankruptcy is the best way for you to shed the debt is not something you can decide alone. It’s best to work with a licensed insolvency professional like Goldhar to review your entire financial situation.
Only a licensed trustee in bankruptcy (LIT) can file your assignment in bankruptcy.
Heavy debt loads don’t always mean you are bankrupt.
You are eligible to file for bankruptcy only if you are truly insolvent to the point that the total of all your unsecured debts exceeds the combined value of all your assets. Your cash flow may not be enough on a month to month basis to keep up with the cost of servicing your debts. However, if the equity built up in your home, or the value of the tools and equipment you use to run your unincorporated business, or other personal effects such as artwork, jewellery, or valuable collections, add up to more than the sum of your unsecured debts, technically you are not bankrupt. In this situation, a consumer proposal may permit you to settle your debts for cents on the dollar, with payment made to your creditors over a period of up to 60 months. Read more about a consumer proposal here.
How do you know if bankruptcy is the right choice for you?
If you are truly unable to pay your bills and make debt payments when they are due, and you cannot afford to make an offer to your creditors through a consumer proposal or Division 1 proposal, or your proposal has been rejected by your creditors, bankruptcy may be the only viable option to discharge your debts.
Bankruptcy is a significant financial decision, with consequences that will affect your credit rating, and may limit your ability to qualify for credit cards, loans and mortgages. However, when your debt load consumes all your cash flow, and it is apparent that you are unlikely to ever pay off your debts, bankruptcy is a responsible way to clear away your debt and make a fresh financial start.
There is no shame in filing for bankruptcy. No one needs to know. Your family and friends, your employer and your co-workers will only see your smile – a smile that comes from knowing your finances are in balance and you’re back on track to build a solid financial future.
To make an assignment in bankruptcy, you work with Goldhar to determine what assets you have that can be liquidated as payment to your creditors, and how much of your income you will be required for monthly payments to your creditors during the months until you are discharged. Many people who file for bankruptcy have no assets to be liquidated, and make little or no monthly payments to creditors.
Once you make your assignment in bankruptcy, all garnishments, executions, and legal actions by creditors are stopped.
In a first time bankruptcy, you will most likely be discharged in 9 months or 21 months, depending on the total of your debts. In second or third bankruptcies, the time before discharge will be longer.
Will you lose your home in a bankruptcy?
In most cases your family home is not required to be sold to pay your creditors. Your equity in your home, however, is considered an asset and you may be required to seek financing equal to the equity, which will be paid to the trustee for distribution among your creditors. Alternatively, Goldhar may be able to accept payout of the equity amount over time. In the event that only one spouse(or homeowner) goes bankrupt, Goldhar will, in most cases, permit the other spouse or homeowner(s) to buy out the bankrupt’s equity share.
- the amount of your settlement is determined by the Goldhar based upon the value of your assets and your income
- you are required to fulfill certain obligations to Goldhar, including a monthly reporting of your income and expenditures
- if you have income in excess of the thresholds set by the Superintendent of Bankruptcy, up to 50% of your deemed “surplus” is payable to Goldhar (for distrubiton to your creditors) until you are discharged from bankruptcy
- items such as household furniture, clothing and your personal effects are exempt in most cases
- typically you may keep a car/vehicle, the savings in an RRSP (less any contributions made in the last 12 months), your personal computer, cellphones, etc.
- the debts of your sole proprietorship business would be included in your personal bankruptcy
- the debts of your incorporated business will be addressed if/when the corporation files a Division 1 proposal or bankruptcy.
- Directors of a corporation may be assessed personally for the corporation’s tax arrears related to HST and to the employee portions for CPP/EI and income tax deductions at source
- you may not hold the position of Director of a corporation while you are personally an undischarged bankrupt
Call Goldhar now at 1-855-541-5114, or fast dial #DEBT (#3328) on your mobile phone, to arrange a free, no obligation personal financial review, and to discuss if bankruptcy is an appropriate way for you to settle your debts.
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