An assignment into bankruptcy is a legal process that was enacted to provide relief to an honest but unfortunate debtor.  Most people incur debt with the intention to repay.  Unfortunately, “life” sometimes interrupts the ability to repay with a job loss, separation of marriage, or insufficient funds to meet family needs.  A bankruptcy allows you to eliminate the debt burden and be a future contributing member to society.

The process of declaring bankruptcy is as follows:

  • Free initial meeting with an insolvency trustee to review your financial situation in detail and explore solutions
  • Sign statutory documents assigning yourself into bankruptcy
  • Realizable assets (i.e. investments, equity in house) vest in the trustee, which means the trustee must either sell the asset or you must settle with the trustee to keep the asset
  • Monthly income and expense reports are submitted, and the trustee will determine if you are required to make surplus income payments based on your income, non-discretionary expenses and family size
  • The insolvency trustee will review to make sure there are no assets that were recently transferred out of your name or preferential payments to creditors
  • Two counselling sessions must be attended regarding budgeting, money management and rebuilding credit. You can rebuild your credit after a bankruptcy
  • The trustee will file your personal income tax returns for the year of bankruptcy, and those refunds will go directly to the trustee as will your GST payments for the term of your bankruptcy
  • A first-time bankrupt is eligible to be discharged in as early as 9 months
  • A bankruptcy will remain on your credit report for 6-7 years from discharge

The above is a very simplified summary of the bankruptcy process in Canada.  Seek the advice of a Licensed Insolvency Trustee to see if a bankruptcy is the right debt solution for you.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)