What Can You Not Do After Filing for Bankruptcy
Important Things to Avoid After Bankruptcy in British Columbia
After a bankruptcy filing, you might feel immense relief. This is to be expected—you’ve just had massive debt lifted off your shoulders, and you can work to rebuild your credit without creditors looming over you. However, you’ll need to be aware of the restrictions that could affect your daily life and financial decisions. Understanding these limitations before you file can help you prepare for the road ahead and avoid complications during your bankruptcy period. Here’s what you can’t do after filing bankruptcies.
Open New Credit Accounts
You won’t be able to obtain credit exceeding $1,000 without disclosing your bankruptcy status to the potential lender. This applies to credit cards, personal loans, lines of credit, and other financing arrangements. Sometimes, you may get lucky and find a lender willing to extend credit, even after you’ve disclosed your bankruptcy. Be aware that the terms will likely be unfavourable, and you may need to deal with high interest rates and strict conditions.
Act as a Director of a Corporation
Bankruptcy laws prohibit you from serving as a director of a corporation while bankrupt. This is because directors have fiduciary duties to shareholders and creditors that could conflict with your bankrupt status. If you currently hold such a position, you will unfortunately have to resign immediately after filing.
Managing Trust Funds or Others’ Money
Folks who have declared bankruptcy cannot be a trustee or executor of an estate. They may not hold any position requiring them to manage other people’s funds—this includes being appointed as power of attorney or serving as a trustee for investments.
Practice Certain Licensed Professions
Many professional licensing bodies have specific rules regarding bankruptcy. While you may not automatically lose your professional licence, you will likely need to notify your regulatory body right away. If you hold any of the following positions, reach out to your licensing body immediately:
- Real estate agent or broker
- Insurance broker
- Securities dealer
- Chartered Professional Accountants (CPA)
- Lawyer
Start a New Business
Filing for bankruptcy in Canada makes starting a new business very challenging. While it isn’t illegal, you won’t be able to easily obtain business credit, and any business assets will be subject to seizure by your trustee. As previously mentioned, you can’t serve as a director, so incorporating the company may prove difficult.
Sell, Transfer, or Purchase Major Assets
You cannot sell, transfer, or dispose of any assets without your trustee’s permission. Beyond that, you are barred from making large purchases like vehicles or real estate without approval from your trustee.
Travel Internationally
If you’d like to travel outside of Canada, you must request written permission from your trustee. They will ask you about the purpose of travel, how long you’ll be gone, and your ability to meet bankruptcy obligations while away. Business travel and family emergencies are typically approved, but don’t get your hopes up about going on vacation.
Change Your Name
You cannot legally change your name while bankrupt without court approval and trustee consent. While this restriction might seem unnecessary, it prevents debtors from avoiding their bankruptcy obligations by assuming a new identity.
What Happens If You Claim Bankruptcy in Canada?
We’ve talked a lot about what you can’t do after bankruptcy, but what are you required to do after filing? In general, you must:
- Submit monthly income and expense statements to your trustee
- Attend mandatory credit counselling sessions
- Provide access to all financial records upon your trustee’s request
What Happens If You Violate These Restrictions?
Violating bankruptcy restrictions can have serious consequences, so it’s always in your best interest to avoid these activities in the first place. If you try to do a restricted activity, you may be subject to these consequences:
- An extended bankruptcy period
- Criminal charges
- Additional conditions before granting a discharge
Work With the Team at J Bottom & Associates
If you have questions about what happens if you file bankruptcy, J. Bottom & Associates is here to help. Based in British Columbia, our Licensed Insolvency Trustees can work with you to better understand the restrictions that come with bankruptcy and how to rebuild your credit. Contact us today to consult with one of our professionals.