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What Happens Before, During and After Bankruptcy?
What Happens Once You File for Bankruptcy?
Once your bankruptcy is filed, there is an immediate stay of proceedings. This means that unsecured creditors cannot begin or continue lawsuits, wage garnishees, or even contact you to request payment.
Within five days of the bankruptcy starting the trustee will send a copy of the bankruptcy paperwork to creditors, so they can file a claim.
The trustee will file outstanding tax returns up to the date of bankruptcy. Any outstanding taxes or penalties owed CRA will be included.
You will have certain duties and obligations that you will have to fulfill including a monthly income statement and attending 2 credit counseling sessions.
The following are some guidelines for discharge eligibility:
1st time bankrupt with no surplus income – 9 months
1st time bankrupt with surplus income – 21 months
2nd time bankrupt with no surplus income – 24 months
2nd time bankrupt with surplus income – 36 months
3rd time bankrupt – no automatic discharge date (discharge only given through the court after 36 months)
- Surplus income is any income over the monthly amount allowed by the Superintendent of Bankruptcy less any discretionary expenses. If you have surplus income over the allowed guidelines you are required to submit half to your trustee for your creditors on a monthly basis The Superintendent’s guideline amounts are dependent on your family size and situation and are derived from the Low Income Cut offs (LICO) released by Statistics Canada.
What Happens After Bankruptcy?
Once your bankruptcy is discharged your debts will be cancelled (with minor exceptions). A note about your bankruptcy will remain on your credit report for a minimum of six years after the date of discharge. In most circumstances, your bankruptcy will be discharged in 9 months.
This means that for most people their debts are cancelled 9 months after filing for bankruptcy and they can start going through the process of rebuilding their credit. Your trustee can help you here as well by providing effective strategies for getting your credit back on track and helping manage your money.
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