What Bankruptcy Can and Cannot Do
Pros & Cons of Bankruptcy in British Columbia
If you’re considering the pros and cons of bankruptcy, you’re not alone. Hundreds of thousands of Canadians file for bankruptcy or file a consumer proposal each year. J. Bottom & Associates is here to help you learn more about bankruptcy, consumer proposals, and debt consolidation in British Columbia. While bankruptcy can be a powerful tool if you’re in too much debt, certain types of debt cannot be discharged. The three main types of bankruptcies in Canada are personal bankruptcy, small business bankruptcy, and corporate bankruptcy. Consumer proposals are also a popular way to deal with debt. While bankruptcy eliminates most debts, a consumer proposal allows the filer to pay back a determined portion of the debt over a long period of time.
Which Type of Bankruptcy is Best?
In order to file for bankruptcy, you must be a Canadian resident, have more than $1,000 in debt to creditors, and those debts must be greater than the value of your assets and/or you must not be able to pay your bills when they are due. Learn more about the different types of bankruptcies available:
- Personal Bankruptcy – The most common type of bankruptcy in Canada, personal bankruptcy might make sense for you if you have experienced a loss of income, are not able to reduce your debt despite making your payments, can’t get any more credit, and have maxed out your borrowing potential, or rely on credit to pay your everyday expenses. Your licensed insolvency will help you determine whether you should file for summary administration bankruptcy or ordinary administration bankruptcy. Summary administration is more common for individuals whose assets will not exceed $15,000. Ordinary administration bankruptcy is more common for businesses whose assets will exceed $15,000. After your bankruptcy is completed, you will get one of four types of discharge.
- Small Business Bankruptcy – These types of bankruptcies are treated the same as personal bankruptcies. The process becomes different and more complicated if your business is incorporated. You will receive one of four discharge types and many of the same benefits of protection against your creditors.
- Corporate Bankruptcy – A trustee who specializes in corporate bankruptcies should be utilized. In a corporate bankruptcy, the business’s assets will be forfeited, but the owner’s personal assets are protected. While there may be some exceptions to the personal assets rule, it’s best to hire a professional team like J. Bottom & Associates to assist you through this process.
What Bankruptcy Can Do for You
Bankruptcy is a powerful financial tool, but you should carefully weigh your options before deciding to file. Bankruptcy allows you to wipe out certain financial obligations to get a fresh start. In addition to helping you get out from behind a mountain of debt, bankruptcy also offers other benefits. Learn more about what filing for bankruptcy can do for you:
- Stopping Harassment & Collections – If you’re tired of those annoying calls and letters from creditors, bankruptcy may be your best option. After your file bankruptcy, the court will put an automatic stay in place. That stay will stop most creditor calls, lawsuits, and wage garnishments. There are some exceptions, but filing for bankruptcy may help you rest easier.
- Pausing Foreclosures, Repossessions, & Evictions – The automatic stay previously mentioned will also stop a foreclosure, repossession, or eviction, at least temporarily. Bankruptcy won’t help if any of those are already complete. Evictions in the litigation process will stop after you file. Some bankruptcies will help you keep your property, but others won’t.
- Getting Rid of Credit Card Debt – Bankruptcy is commonly used to eliminate unsecured credit card debt, overdue utility payments, medical bills, personal loans, and other obligations such as gym contracts. Bankruptcy can wipe out most of your nonpriority unsecured debts, but it typically does not get rid of student loans.
- Getting Rid of Secured Debt – Filing for bankruptcy can release you from secured debt, but you’ll likely have to give up the purchased property. If you can’t afford a payment that you used collateral to secure, you can wipe out that debt with bankruptcy. However, you won’t be allowed to keep your home, car, computer, or any other item you used to secure the payment of the loan.
What Bankruptcy May Do for You
We know that the bankruptcy process can be confusing, but it doesn’t have to be. The bankruptcy experts at J. Bottom & Associates are here to guide you through every step of the process and make the best decision for you based on your unique situation. While bankruptcies can get rid of certain debts and will not get rid of others, there are some things that they may or may not do based on your personal situation. Certain types of bankruptcy may be able to stop a mortgage foreclosure, allow you to keep property not protected by a bankruptcy exemption, cram down secured debts when the property is worth less than you owe on it, and more. A bankruptcy consultation with our experts will include taking an in-depth look at your debts and determining which of them can be eliminated through each possible solution.
What Bankruptcy Cannot Do
Bankruptcy can be a powerful financial tool, but it can’t do everything. Filing for bankruptcy might not cure all your financial problems. Learn what a bankruptcy can’t do for you:
- Prevent All Foreclosures or Repossessions – While bankruptcies eliminate debts, they do not remove liens. A lien allows your lender to take your property and sell it at auction and then use the proceeds toward your loan balance. The lien will stay on your property until the debt gets paid back. Bankruptcy may eliminate your obligation t pay the debt if you have a secured debt, but it will not take the lien off the property.
- Eliminate Child Support or Alimony Obligations – If you owe child support or have alimony obligations, a bankruptcy will not relieve you of these duties.
- Eradicate Student Loans – In most cases, student loans are not discharged through bankruptcy. You may be able to prove undue hardship. Our team of experts will help you understand whether your student loans may be forgiven through filing for bankruptcy.
- Get Rid of Tax Debts – Most of the time, a bankruptcy will not eliminate tax debt. It may be possible for older, unpaid tax debts. J. Bottom & Associates will take a thorough look at your situation and help you determine your best course of action.
Consumer Proposals for Debt Relief
Because a bankruptcy will not eliminate all types of debt, a consumer proposal is sometimes a better way to go. Bankruptcies involve surrendering your assets to your creditors to eliminate your debts, but consumer proposals are legal settlement agreements that allow you to retain your assets. Consumer proposals can also result in lower monthly payments compared to bankruptcy. Our team will help you determine whether bankruptcy of a consumer proposal is the best route for you to take. Consider the following reasons why many of our clients choose a consumer proposal over filing for bankruptcy:
- Bankruptcies are often expensive for high-income earners
- Filing for bankruptcy can result in losing your tax refund or other assets
- Consumer proposals are easier to file than bankruptcies
- The terms of the consumer proposal are determined upfront
- Consumer proposals are proactive, giving you the chance to decide what you can afford to pay
Personal & Corporate Debt Solutions
- Bottom & Associates offers multiple debt solutions for individuals, couples, families, and corporations looking for answers to overwhelming debt. Our team is here to help you find a debt consolidation solution that works for you. Before considering bankruptcy, we can help you try a consumer proposal. We also offer debt consolidation for Canadians. Our team is here to walk you through the process step-by-step. Recognizing that you need help may not be easy, or you may not want to admit it. The good news is that help can be around the corner. Our licensed insolvency trustees are on your side, and we’ll help you understand what happens after filing for bankruptcy or a consumer proposal in British Columbia. We also offer corporate solutions for bankruptcy issues to get you back on track. We will be your partners in the corporate credit proposal process or help you with filing bankruptcy.
Contact Your Bankruptcy Team in British Columbia
If you’re overwhelmed by your personal or business finances, you’re in the right place. The team at J. Bottom & Associates is here to help you understand what bankruptcy can and cannot do for you. We offer professional services for individuals and businesses looking for debt relief. Contact us today to schedule your first no-obligation appointment.