5 Bankruptcy Facts You Need to Know Before You File

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If your debts are weighing you down, bankruptcy may be a solution that’s crossed your mind. The truth is that bankruptcy can eliminate burdensome debts and give you a fresh start to rebuild your financial house. However, it’s not a form of debt relief that you should take lightly, at least not without careful consideration. Filing bankruptcy is a choice that can drastically impact your finances for many years, so you should get to know what the process entails. Here are five bankruptcy facts you need to know before you file.

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1. You need a Licensed Insolvency Trustee to administer your bankruptcy in Ontario

Have you decided that bankruptcy is the best way to resolve your debts? If so, you first need to know that you cannot go through the process independently. Instead, you’ll need assistance from a Licensed Insolvency Trustee (LIT). 

An LIT has the knowledge, training, and experience to administer a bankruptcy proceeding in Ontario and elsewhere in Canada. They’re also the only professional authorized by the Government of Canada to carry out a bankruptcy (or a consumer proposal) on your behalf. That’s exactly what we do at David Sklar & Associates.

2. You need to disclose and surrender your assets

When you file for bankruptcy, you must disclose your assets and assign them to your trustee. In turn, the trustee will arrange for the sale of your assets and distribute the proceeds to your creditors to cover your debts. 

Luckily, you won’t be deprived of every last item you own – specific property is exempt from seizure under bankruptcy laws. These include your personal belongings and various financial assets, like your vehicle, clothing, furniture, life insurance, and a portion of your home equity.

Still, some assets you’re entitled to keep come with restrictions based on their market value. For example, in Ontario, you get to keep one vehicle worth up to $7,117. If your vehicle’s value exceeds this limit, you must pay out the excess amount in cash to your LIT.

3. You may have to pay surplus income

Once you file for bankruptcy, there are obligations you must adhere to if you wish to eliminate your debts successfully. One of these requires you to report your income and household expenses each month to your trustee. 

Depending on your monthly earnings may need to pay out a portion to your trustee as surplus income, which will go toward settling your debts. Each year, the federal government sets an income threshold, which, if you exceed it, will necessitate payment of surplus income. This threshold further varies based on the size of your household. 

You can check out 2022 surplus income limits by visiting the Office of the Superintendent of Bankruptcy website.

Calculating surplus income payments can be quite involved and tricky. At David Sklar & Associates, we can help you determine whether filing for bankruptcy will result in surplus income payments for your household and how much you can expect to pay. 

4. Your bankruptcy discharge date will vary based  on certain factors

Bankruptcy doesn’t occur overnight. For a first-time bankruptcy, you can expect to receive your discharge after nine months. 

Of course, this assumes you’re not required to pay surplus income payments. If that’s the case, your bankruptcy may last up to 21 months before you become eligible for a discharge. 

Let’s say it’s your second time filing for bankruptcy. In that case, you can anticipate a time frame of 24 months, provided you don’t need to contribute surplus income payments. With surplus income payments, you’ll need to wait 36 months before receiving your discharge.

5. Bankruptcy is the option of last resort

If you’re drowning in debt and experiencing severe financial stress, there’s no shame in considering bankruptcy. Your unsecured debts will vanish in as little as nine months. And you’ll have the opportunity to rebuild your finances from scratch. 

However, it’s essential to understand that bankruptcy is the option of last resort when resolving your debt problems. Pursuing bankruptcy means:

  • You’ll need to give up your assets (minus those exempt under provincial and federal bankruptcy laws).
  • Your credit score will drop considerably – bankruptcy will remain on your credit report for six to seven years after discharge.
  • You may need to pay surplus income payments. 
  • Your employment prospects may suffer. For example, suppose your role involves managing money. In that case, employers may reject your application once they spot the bankruptcy remark on your credit report.

Take Your First Step Towards A Debt-Free Life

There may be better debt solutions you can choose over bankruptcy, including a consumer proposal. 

Consumer proposals are the most popular alternative among Canadians struggling with debt who wish to avoid filing for bankruptcy. Under this insolvency program, you negotiate a new payment plan with your creditors that involves wiping out a significant portion of your current debts. Then, you repay your remaining principal in fixed monthly payments over five years. 

While a consumer proposal won’t eliminate 100% of your unsecured debts, you won’t need to surrender any assets. This feature makes a consumer proposal an attractive debt relief option, as losing a sizable chunk of your investments, home equity, and other assets can devastate you financially.

So, while bankruptcy is always available to help you get rid of troublesome debts, it’s wise to pursue it only if all other options aren’t feasible. 

Let’s Talk

Take Your First Step Towards A Debt Free Life

If you are overwhelmed by debt, call us at 1-844-962-9200 to book a FREE, confidential appointment. We will review your financial situation in detail and discuss all of your options with you. Alternatively, you can fill out the form below and our team will reach out to you. 

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I was a little nervous going into my consumer proposal with David Sklar & Associates as I had a horrible experience attempting to file with a different group.Following the first correspondence, I immediately felt much more relaxed and confident in my decision.Beatriz was incredible! I feel so lucky to have had her working with me.She was friendly and kind, professional, patient, considerate, and caring. I felt no judgment in anyway. Honestly, speaking with her regarding my debt felt like I was speaking with a family member – just very easy to discuss how I ended up in my financial situation and being met with understanding, no judgment.Mark was also very kind and made sure that I understood what was discussed and was open to going over it again if needed prior to signing.David Sklar & Associates is the team you want handling and assisting you with your debt. I have only positive things to say about them and will 100% recommend them to anyone if the situation ever arises.
Helped me with filing for bankruptcy and getting a fresh start and made the whole process seamless and easy.
Sameer Kamal
I would like to say "Thank you very much" for David Sklar team that handled my case smoothly and without any issues! I am glad that I ve got consultation by Jerry Janiec. He explained me all process in details and told me right away what options I do have to resolve financial difficulties. I ve proceed with consumer Proposal option and entire process was very smooth. Jerry took care of my case and gave me personal recommendations for future! Thank you very much Jerry and Hernee for your help and really take care of your clients!
Alexander Arepyev
Very knowledgeable, helpful and fast service
Anthony Mcfeat
I am so delighted to have found this company. They are the best. Everyone in the office is very nice never to busy to assist you. Thank you David Sklar and Shirley and associates for being you. 😊🌺😊
Trina was amazing and quick. No judgement was made and they all made me feel I made the right decision. Would highly recommend them
Crystal Minaker
Trina was very easy to work with. Any questions I had were answered promptly. What seemed like a complicated process was explained in a clear manner that wasn't at all intimidating. It made for a more comfortable experience during a turbulent time.
Eldon Aubie
Jackie is very professional...I would recommend David Sklar to anybody especially knowing how understanding they are.
Kimberley Lyder-Niles
I had Shirley and Kim take care of my finances. From the very first moment I spoke with Shirley I could sense how caring, professional and patient she was. She was also very understanding with my lack of financial knowledge and never made me feel dumb as some other companies have.Her and Kim were always very quick to respond to emails, always available if I called and answered my abundance of questions in such detail that I now believe I have a thorough understanding of how finances work. I am hopeful about my fresh financial start and very grateful I had the privilege of meeting and working with these two beautiful women.I also spoke briefly with Richard over zoom and he to was extremely friendly, patient and made sure I was well taken care of.I could not recommend David Sklar and Associates more. Thank you again.
Shayleen Muzi
Good professional team! Jennifer is the best, helped me through everything and answered all my questions. Made the process easy! Would recommend Jennifer and the team at David Skylar.
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