There are consequences of bankruptcy and also benefits. Below we provide an overview of common questions regarding declaring bankruptcy in Toronto
The most significant consequence when signing your bankruptcy “Assignment” papers is that you have immediate relief from creditors who are contacting you regarding your debts. This includes the Canada Customs and Revenue Agency. All inquiries are referred to our office. The bankruptcy proceedings prevents anyone from suing you or garnishing your wages.
You Will Not Lose All Your Assets
During the bankruptcy you may have to make some payments to the trustee, however, you do not lose all your assets. There may be some things you have to give up, but you probably will keep your furniture and personal effects, your car and your business tools.
You May Be Able to Keep Your Car and House
During a bankruptcy it is possible to keep a secured asset such as a car or a house, as long as you arrange to continue your payment to the secured creditor, however, a bankruptcy will not stop a secured creditor from repossessing its’ security.
Your Spouse Should Not Be Affected
Your spouse and his or her property should not be affected by your bankruptcy, however there are sometimes side effects. Ask the trustee if they may apply to you.
Co-signers and Guarantors Are Still Responsible for Their Obligations
If someone has co-signed or guaranteed any of your debts they will not be released from their obligations by your bankruptcy. the creditor may require them to pay and may want the balance in full. It is usually a good idea to talk to your co-signor before you go bankrupt.
Employers Do Not Need to Be Notified
Your employer will not be notified of your bankruptcy unless you are being garnisheed (which will at that point stop) or if you owe him money. With some rare exceptions, a persons job is not affected at all by their bankruptcy.
You Can Still Operate or Start a Business
You are allowed to operate or start a business when you are bankrupt. Be sure to keep proper book and records. If it happens to be a corporation, you cannot be a director.
How Wages, Commissions and Other Earnings are Affected
The Superintendent of Bankruptcy sets a “Standard” to determine if any of your net monthly income must be paid to your creditors. If your net income is more than the Standard, you have “Surplus Income” and must pay half of the Surplus to the trustee for the first 9 months of the bankruptcy. This amount can change during the bankruptcy if your income or expenses change.
How your Credit Rating and Future Borrowing is Affected
Restoring your credit rating after a bankruptcy is not as hard as it use to be. However, you must first solve your financial problems, then you can begin working on your future credit rating. Bankruptcy is the beginning of that solution. The time that it takes to restore your credit rating depends on many varying factors, but most people can borrow again within 2 or 3 years. The credit bureau reports things, including your bankruptcy for 7 years. This does not mean that you cannot get credit for 7 years. Though it may be difficult to do, it is possible and legal to borrow during a bankruptcy. If you do try to borrow, you must tell the lender you’re bankrupt.
As you can see there are both consequences of bankruptcy as well as benefits not to mention the debt relief and reduction of stress.