Bankruptcy is a legal process by which debtors are able to erase the debt that they owe. In order to file for bankruptcy, you must be insolvent.
In Canada, being insolvent means:
- Owing at least $1,000
- Not having the means to make the regularly scheduled payments
How to File for Bankruptcy
The first step in declaring personal bankruptcy is to consult a bankruptcy trustee. A bankruptcy trustee is a government appointed representative who will not only handle all of the document filing, but work out payment options with your creditors. In extreme cases, a bankruptcy trustee will refer you to an insolvency lawyer (AKA a bankruptcy lawyer).
A bankruptcy trustee will refer you to an insolvency lawyer if:
- There are complicated issues/contracts involving you and your creditors
- If large sums of money are involved
What to Do if You’ve Gone Bankrupt
The period of bankruptcy lasts for nine months. During this time, you will have to be available to work closely with your trustee, who will monitor your earnings and spending habits. You will also have to attend counselling. After nine months, the trustee can discharge you from bankruptcy, meaning that you have been given a “clean slate.”
What to Do if the Bank Forecloses on Your House
Having a bank foreclose on a mortgage seriously affects your credit rating and will make it difficult to secure another mortgage. In this situation, you should consult a lawyer with a background in foreclosure law.
Why Would You Need a Foreclosure Lawyer?
- Your lawyer will attempt to reach a solution with your creditors that doesn’t involve foreclosure, such as: Selling other assets
- Working out a temporary payment program
Tip: Scam artists will offer you “too good to be true” solutions to avoid foreclosure. Always consult a lawyer before accepting any kind of foreclosure prevention deal.