Personal bankruptcy is a state of financial insolvency that allows an individual to be discharged from most of their debts. The procedure is governed by the Bankruptcy and Insolvency Act, aimed at helping those overburdened in debt to start afresh.
When filing for personal bankruptcy, the debtor must first contact a licensed insolvency trustee (LIT) who will evaluate their financial situation and advise on the best course of action. Once decided, the individual will file their case with the trustee, who will then submit documents to the Superintendent’s Office and send copies to the creditors to inform them that a person has filed for bankruptcy.
During this procedure, creditors cannot continue their recovery activities against the debtor. In addition to ending creditor harassment, filing for personal bankruptcy also allows those burdened by debts to be immediately released from most obligations such as unsecured credit lines, credit cards, and unpaid rents (if applicable). However, it’s worth noting that bankruptcy does not erase all debts; it exempts certain debts like student loans (if they are more than 7 years old), alimony, and taxes owed due to court-ordered restitution or fines.
Filing for personal bankruptcy typically lasts from 9 to 21 months, depending on the individual’s financial situation and whether it’s their 1st bankruptcy. During this time, any income or property acquired may be subject to seizure. At the end of this period, if all conditions are met (including attending counseling sessions), all remaining dischargeable debts are eliminated, and the debtor can begin rebuilding their finances.
Such a procedure can only be implemented through a licensed insolvency trustee tasked with protecting the rights of all parties involved in the process, including the person filing for bankruptcy.