By Al Rosati
Bankruptcy Administrator, Deloitte and Touche Inc.
Personal bankruptcy is a process which permits an honest but unfortunate person to be discharged from their debts and to obtain a fresh financial start in life. If your financial circumstances are such that you are unable to meet your payments as they come due, you may qualify for bankruptcy. Personal bankruptcy is initiated by filing an assignment with a bankruptcy trustee.
To declare bankruptcy in Canada, a person must go through a trustee, whose rates vary depending on the size of the person's estate. The basic cost of most bankruptcies is fixed at $1,300 by the Canadian government.
The fee can be paid in several ways, including through monthly payments of $145, by income tax or GST refunds or through the sale of assets.
If you are having financial difficulties, there are several options which may relieve your financial and personal stress including bankruptcy or a proposal to your creditors.
Upon declaring bankruptcy or filing a consumer proposal, most garnishments are stopped. If you've been served with a garnishee order and file for bankruptcy, your employer can be provided with papers that will stop the garnishments.
If you were running an unincorporated business, you are responsible for all of the business debts. If your business is a limited company, you are a separate entity and as a director, you are only responsible for the amount of debt you personally guaranteed and for certain other debts, including payroll deductions and GST. In either case, bankruptcy will relieve you of these debts.
Income tax and student loans are also discharged by the bankruptcy process.
Alberta law allows to you to keep certain assets, which may include your home, household effects, a vehicle, tools of the trade and some or all of your household income.
A record of your credit rating is kept and up-dated by various credit bureaus who provide this information to financial institutions and other businesses. If your level of debt has become unmanageable, your credit rating has already likely worsened.
Your bankruptcy will be noted by the credit bureau for up to seven years. You can ask for credit once you are discharged, which usually occurs about nine months after declaring bankruptcy. Whether or not you get credit depends on your personal financial situation.
(Rosati is a Bankruptcy Administrator with Deloitte and Touche Inc. He can be reached by calling 267-1750 or by e-mail at [email protected])