What You Need To Know Before You File Bankruptcy

Are you considering filing for bankruptcy and are wondering how long the process will take or how an attorney can help? Click for more.

What You Need To Know Before You File Bankruptcy

19 February 2016
 Categories: , Blog

Filing bankruptcy is a big decision. Not only do you need to determine whether or not you qualify to file bankruptcy, you need to determine if filing bankruptcy will be beneficial to you in the long run. To do this, you need to understand how bankruptcy works, how it will affect you in the future, and consider all of your options. So, before you start looking for a bankruptcy attorney, you need to learn more about bankruptcy and debt relief options so that you can make an informed decision.

Is Bankruptcy an Option?

In order to file bankruptcy, you need to talk to a bankruptcy trustee to compare your financial information to the requirements on the solvency test. If you meet all three of the requirements, you are considered insolvent and are eligible to file bankruptcy. In order to file bankruptcy, you need to:

  • Be at least $1,000 in debt.
  • Have a total debt amount that exceeds the value of your assets.
  • Be unable to pay your debts when they are due.

Will You Lose Everything?

Many people assume that they will lose everything that they own if they file bankruptcy. That's simply not true. When you file bankruptcy, your assets will be evaluated to determine what you're allowed to keep and what needs to be sold to pay down some of your debt. In most provinces you're allowed to keep your:

  • Clothing and household furniture, as long as it doesn't exceed the the province's value limits.
  • Home, unless you have a lot of equity in the house.
  • Any medical or health related equipment.
  • Tools that you use to earn a living, as long as the value doesn't exceed the province's value limits.
  • Your vehicle, as long as it's modestly priced.

Other Ways That Bankruptcy Affects You

Some people assume that filing bankruptcy is an easy way to get out of debt. However, filing bankruptcy is a big decision that affects your life in several ways. Because of this, bankruptcy should be used for debt relief as a last resort. Not only does your first bankruptcy show on your credit report for six years after your discharge date, but there are specific things that you have to do from the time you file until your bankruptcy is discharged, which can take between 9 and 21 months.

  • Hand over complete control of your finances to a bankruptcy trustee.
  • Submit a monthly report to your bankruptcy trustee each month that includes details about your living expenses and income, as well as copies of your pay stubs.
  • Surrender all of your credit cards.
  • Tell potential creditors that you have an undischarged bankruptcy any time you apply to borrow amounts exceeding $1,000.
  • Complete two credit counseling sessions.

Do You Have Other Options?

Bankruptcy is designed to give people who are in severe financial trouble relief over their debts. However, when you have financial difficulties, bankruptcy isn't the only option. Before you decide to file for bankruptcy, you need to consider whether the alternative options available would be more beneficial to you. There are several things that you can do to regain control of your finances, including:

  • Attend debt management programs.
  • Refinance your home.
  • Consolidate your debt.
  • Submit an informal or formal consumer settlement proposal.

If you live in Alberta or Nova Scotia, you might also qualify to enter the Orderly Payment of Debt program. The program allows you to consolidate your unsecured debt at a five percent interest rate, and pay it off over a three-year period.

It's difficult to deal with financial problems, but you can get back on track. All you need to to is talk to a bankruptcy attorney or trustee to determine what debt relief option is right for you.

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answers to your bankruptcy questions

Are you considering filing for bankruptcy? If so, you have a ton of questions that you need the answers to. Will you lose your home? Will you lose your cars? Will you have to repay the debt? How long will it take to get through the entire process? Will you ever be able to get financing in the future? These and many more questions about bankruptcy are answered right here on my blog. You will find out what your attorney will do for you and find advice for managing your finances a little better in the future to avoid finding yourself in this situation again.