Things to Know Before You File For Bankruptcy

bankruptcy Every month thousands of Canadians that are faced with high-debt and consider bankruptcy as a way to crawl out, get some breathing room and avoid being crushed by debt. While most jump into bankruptcy with both feet prior to doing some research and learning, bankruptcy serves a purpose but is for everyone.

Filing a personal bankruptcy or consumer proposal in Canada is something that is administered by a Bankruptcy Trustee. However this differs from the system in the United States where bankruptcy is administered by a bankruptcy lawyer – such as this well known San Diego bankruptcy attorney. Keep in mind that no matter how bad your situation might be, no one else has the ability to file a bankruptcy for you except you for yourself.

In United States bankruptcy lawyers represent the debtor while in Canada the bankruptcy trustee is required by law to act in the best interests of both the debtor and the creditors. But even in Canada, lawyers can administer bankruptcies. However bankruptcy lawyers in Canada are lawyers that have specialized in insolvency law who are used almost entirely on business files.

But how do you know a bankruptcy is right for you?

Your best bet is to consult a professional that specializes in bankruptcy. But for the purpose of this post, I’ll share with you 5 things that you should know if you’re leaning towards a bankruptcy.

1. Impact on Your Credit – Filing a bankruptcy will certainly not have a positive impact on your credit rating. For a period of 6 years for the first time filers not required to make surplus payments into the estate to 14 years for repeat filers who must make payments. When you meet with your bankruptcy professional, they’ll give you a pretty solid idea of how long the bankruptcy will remain with your credit rating.

2. Full Protection – If you’re getting harassed by debt collectors or creditors through harassing phone calls or even being threatened with wage garnishment – a bankruptcy will stop all of this once you file for it. Legally you are protected from all forms of collection activity, including lawsuits.

3. There is a Cost – Many are surprised that there’s a cost associated with filing a bankruptcy. Aside from the trustee’s or lawyer’s fee and court filing costs, high income filers and those with quite a few assets are expected to contribute some of what they earn or possibly own into a bankruptcy estate. These funds in the estate are then distributed to creditors with valid claims during the bankruptcy.

4. You’ll Get Hammered Second Time Around – If you have previously filed for bankruptcy the “second time around” it is going to be more painful than the first.  If your income is high enough to require making payments into the bankruptcy estate you could remain in bankruptcy for 3 years before discharge.

5. Other Options – A bankruptcy is generally the last resort for most. Filing a consumer proposal may be more suitable for you. A consumer proposal is a way to make a deal with your creditors to repay your debts. In most proposals you repay less than the full amount owing, and your creditors agree to write off the rest of your debt. It’s a “win-win” for both parties.

Final Thoughts

The freedom from escaping your debts may be worth the pain. Once the bankruptcy is over,likely there will be a huge relief that you could finally start fresh. However, filing a vista bankruptcy is more than just getting rid of debt, it’s also an emotional journey too. Financial problems happen to the best of us and even if some people enjoyed a little living beyond their means when the real estate market was booming its no reason to suffer for eternity.

In fact, for every single person filing bankruptcy today there is most likely someone much more famous, richer and higher in another courthouse doing the same thing. No one is immune to financial problems but the only way to a good night’s sleep is to embrace your situation and take steps to fix it – not steps to avoid it.

Readers, do you know anyone who filed for a bankruptcy? How did the handle it? Where are they today?
Thanks for stopping by and your valued support!


  1. W is a car salesmen and he sees people who have filed bankruptcy all the time at his work. Yes, you might still be able to get a car, but it will significantly affect the interest rate you get. People are shocked and yell at him when he says that their interest rate is 22%, but they are seen as a big risk!
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  2. We had a family member file for bankruptcy about five years ago and it was not fun at all. They handled it on their own after consulting several lawyers. The crazy thing is that they received new credit card offers within a month of it being finalized. They’re doing better now, not 100%, but better than they were doing.
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  3. sean reever says:

    Wow, thanks for this post! I came across your blog when searching for info about bankruptcies in Canada and I am glad that I had the chance to read it. Thanks for the insight! I will be back to read more in the future. These are some good things to know before filing. Great ideas.