Personal Bankruptcy

Bankruptcy is a legal process that gives you immediate relief from your unsecured creditors. It allows you to rid yourself of your debt and get a fresh financial start.

Going bankrupt is generally a last resort for solving financial problems. Before making a decision about whether it is the best solution for you, the licensed insolvency trustee at R. West & Associates will meet with you to go over all of your options. We’ll explain how bankruptcy works, and review your duties and responsibilities if you go bankrupt. See Timeline for a First-Time Bankruptcy.

Advantages of going bankrupt

It stops the actions (harassing phone calls, garnishments, and lawsuits) of your unsecured creditors.
It allows you to end long-term contracts such as car loans, cell phone contracts, leases, and mortgages.
Your discharge from bankruptcy rids you of unsecured financial obligations such as credit card debt, lines of credit, income tax debt and GST debt, and payday loans. See What debts survive bankruptcy?
The costs are usually handled through a payment plan. Your monthly payments are generally affordable, based on your ability to pay (not the amount of your debt), and usually a fraction of what you have been previously paying your creditors.
For a first-time bankrupt, the time in bankruptcy is usually less than half the time it takes to do a proposal to creditors.
In most cases, the cost of bankruptcy is significantly less than the cost to file and complete an acceptable proposal.
While in bankruptcy, you are required to file monthly income and expense reports. This exercise usually helps you learn to budget and live within your means. It also allows you to start on the road to financial recovery.
It gives you a fresh start in a reasonable time period.

Disadvantages of going bankrupt

The cost and length of bankruptcy may change as they depend on your monthly adjusted average net income.
Your discharge from bankruptcy may be opposed by a creditor, and you may need to attend court to obtain your discharge. (This rarely occurs, but if it is likely given your circumstances, we will discuss what action you may wish to consider prior to filing for bankruptcy.)
When you go bankrupt, a deemed year end results for income tax purposes. You are required to supply the trustee with income tax information. Any tax refunds relating to the period prior to your bankruptcy and the year of your bankruptcy will be paid into your bankruptcy estate. Also, any income tax loss carry forward or unused education tax credits will be lost.
If this is your first bankruptcy, your credit rating will indicate a bankruptcy for 6 years after your discharge.
If you have a prior bankruptcy, your subsequent bankruptcy will be indicated for 14 years after your discharge.
You are not allowed a credit card and must surrender all of your credit cards to the trustee, including those with no balance.
Any inheritance or lottery winnings (“after acquired property”) received during your bankruptcy must be paid to the trustee.
If you are unemployed, your bankruptcy may decrease your employment opportunities.
If you are self-employed, during your bankruptcy it is an offence to conduct business with someone without disclosing your bankruptcy.
While you are in bankruptcy, you cannot sponsor someone for immigration purposes.