Being in debt can feel overwhelming. Among the many ways of recovering from debt, declaring bankruptcy should be the last option. Before you decide to declare bankruptcy, ask yourself whether it is the best solution to manage your debt. To help you in making this decision, below are a number of things you should know about how bankruptcy works.
1. Debt Assessment
It is important to book an appointment with a bankruptcy trustee to assess your debt. Understanding how indebted you are and what other options are available to you, besides bankruptcy, is key. At this stage, the trustee will review your debts, assets, and your personal budget to establish the cost of bankruptcy compared to other options such as a consumer proposal or a debt management plan.
Feel free to ask whatever questions you may have during this meeting. You may be able to learn more at the Bankruptcy website.
2. Filing for Bankruptcy
If after the debt assessment you still want to file for bankruptcy, collect as much information about your debt as the trustee may need to file your bankruptcy forms. This a simple process involving gathering your bills for the last month, getting RRSP, investment statements and RESP, and information about any other asset you may have.
You will also need to supply the trustee with a copy of your current pay stub and a comprehensive list of your expenses. You may also be required to complete unfiled tax returns or get an estimate and appraisal of the current value of your home. Once he or she has received all these relevant documents from you, the trustee will proceed to prepare your paperwork.
3. Signing the Paperwork
Once the bankruptcy trustee has received and reviewed your documents, they will ask you to sign the paperwork. After this, your application for bankruptcy is filed with the government. You are now officially bankrupt. Upon declaring bankruptcy, the creditors are notified. At this point, the harassment and suits against you cease.
4. What Happens During the Bankruptcy Period?
Almost nothing happens during this time. However, you may have to adapt to a life without credit cards. You also no longer have to undergo the stress of juggling payments or making large debt payments. Somehow, life becomes simpler without your creditors’ incessant calls.
5. Your Responsibilities during Bankruptcy
If this is your first bankruptcy, you have a minimum of nine months to enjoy the bankruptcy status. This period could be longer if it’s your second bankruptcy. During this period, you will have the following obligations: make monthly payments as stipulated in the bankruptcy agreement, send a monthly budget to your trustee, send evidence of filing your income taxes, attend credit counselling sessions, and assist your trustee with whatever information they need. If you stick to the rules and keep your trustee updated on the various developments in your life, the bankruptcy period is largely uneventful.
6. Post Bankruptcy
You are officially discharged from bankruptcy upon meeting all your bankruptcy obligations. With this discharge, your debts are officially gone. You can now turn a new page in your life. It’s a new day … and a fresh start. From here on, stay out of bad debt and adopt fiscal discipline to avoid a second bankruptcy.
When all else fails, declaring bankruptcy can help you recover from debt without creditors harassing you for payments every now and then.