Bankruptcy is a legal procedure available to all Canadians through the Bankruptcy and Insolvency Act (BIA). It offers the right to an individual or business unable to pay their debts the opportunity to be relieved of most of them. The process is intended to give debtors a fresh financial start while providing an orderly means for creditors to receive partial repayment of the amounts owed.
Benefits of Bankruptcy
Bankruptcy offers several advantages for those overwhelmed by debt. Here are some of the possible benefits:
- Immediate Relief: Once bankruptcy is declared, most creditor recovery actions are stayed. This means that phone calls, seizures, and other recovery measures stop, providing instant relief to the debtor.
- Debt Discharge: At the end of the bankruptcy process, most debts are erased, allowing the debtor to rebuild themselves financially.
- Protection of Essential Assets: The Bankruptcy and Insolvency Act (BIA) and the Civil Code of Quebec provide exemptions for certain assets, meaning you can keep certain possessions, like household goods, work tools, your RRSPs, and in some cases, your home and car.
- Structured Procedure: The bankruptcy process is governed by law, ensuring that both creditors and the debtor are treated fairly. The process is supervised by a Licensed Insolvency Trustee who ensures that the rights and obligations of all stakeholders are respected.
- Financial Education: The BIA requires those declaring bankruptcy to attend 2 counseling sessions. The objective is to help debtors better manage their finances in the future.
- Stress Reduction: With the end of the creditors’ recovery activities and the prospect of a fresh financial start, many people feel a significant reduction in debt-related stress.
- Alternative to Other Options: For some, bankruptcy may be more beneficial than other debt solutions, like a consumer proposal, depending on individual financial circumstances.
When to Consider Bankruptcy?
It’s generally recommended to consider bankruptcy as a last resort, after exploring all other options to settle your debts. Before making a decision, meeting with a licensed insolvency trustee can offer the best advice after analyzing your financial situation.