Bankruptcy is a legal process to eliminate and discharge certain debts owed subject to reasonable conditions. It is a trade-off between the assets you own and the debts you owe. The assets (except those subject to provincial exemptions like furniture, personal effects, certain vehicles and tools required to earn your living) are given to a trustee who in turn liquidates them and distributes the funds to creditors.

Advantages/Disadvantages:

Bankruptcy offers an immediate stop to garnishments, wage assignments and court judgements. It also effectively eliminates the debt in a relatively short period of time (usually 9 months) at a minimum cost to the debtor.

The main disadvantage to filing for bankruptcy is the loss of certain assets and the negative effect on a credit rating. It often represents a moral dilemma that needs to be addressed by weighing the financial burden and family responsibility. Certain debts cannot be released by bankruptcy such as fines, fraud, alimony and child support and student loans if the person has not been out of school for at least 10 years.

Credit Rating:

Your credit rating is made up of several factors including job and residence stability, marital status and income. For first time bankrupts, credit reporting agencies such as Equifax (Credit Bureau) will keep a record of your bankruptcy and your discharge for a 7 year period (approximately). That does not mean that you will not be able to borrow during that 7 year period but bankruptcy will have an impact for a period of time.

Co Signers or Guarantors:

If any of your debts have been guaranteed by friends or family, they likely will continue to be liable for the debt they guaranteed. However, our professionals may be able to negotiate with the creditors in question to help you and your guarantor through these difficult times.

Costs:

Bankruptcy costs are set by legislation and by the Bankruptcy Court . Arrangements may be made to pay those costs. To discuss arrangements suitable to you, please contact the professionals at Fontaine & Associates.

Effect of bankruptcy on assets such as houses, furniture and vehicles:

Bankruptcy does not mean that you will automatically lose your house, furniture or vehicle. If any assets are given as collateral, an arrangement may usually be made with that creditor to keep the asset in question. The trustee is only interested in the equity or excess value of an asset. If you have significant equity in an asset, you may be able to settle the value with the trustee. Provincial exemptions allow you to keep furniture / vehicles in certain circumstances. For more specific information, contact our professionals.

back