Filing for Bankruptcy in Cambridge, Ontario: Top Three Questions

by J. Douglas Hoyes

Filing for bankruptcy is a difficult decision.  Over the past 15 years I’ve met with thousands of people in my Cambridge bankruptcy office, and most people ask me the same three questions about filing for bankruptcy:

1 What is the cost of filing bankruptcy? The answer will vary with each person’s situation, but at a minimum you can expect to pay about $200 per month for each month that you are bankrupt, plus you lose your tax refund for the year of bankruptcy (and any prior years that haven’t been filed).  You also lose any contributions you’ve made to your RRSP in the last year, and certain other assets (like investments, or equity in a house or valuable car).

2 How long does bankruptcy in Cambridge last?  This is a two part question.  You are actually bankrupt for a minimum of nine months, but the length of bankruptcy in Canada will be extended if:

  • you were bankrupt before (in which case you are bankrupt for a minimum of two years);
  • you have surplus income (if you earn more than the surplus income limits set by the government, your bankruptcy is extended for an additional year, and you are required to make additional payments);
  • you don’t complete your duties (such as providing your trustee with information to file your tax returns, or attending your credit counselling sessions); or
  • any creditor objects to your bankruptcy discharge (which is very rare).

The second part of the question is: how long will bankruptcy stay on my credit report?  Most credit reporting agencies in Canada leave a note about your bankruptcy on your credit report for six years after you are discharged, so for a first time bankrupt with no surplus income, that’s just under seven years.  That doesn’t mean you can’t borrow for seven years, but it will be more difficult, and you will need to take steps to repair your credit and rebuild after bankruptcy.

3 How can I avoid claiming bankruptcy? You can avoid filing bankruptcy by making a budget and attempting to pay off your debts on your own, or getting a debt consolidation loan to lower your interest payments.  If your debt is too high for that to work, a debt management plan is a possible option.  If you can’t afford that, a consumer proposal may be the perfect way to lower your monthly payments each month and eliminate your debt.

About

Douglas Hoyes is the co-founder of Hoyes, Michalos & Associates Inc., Ontario's largest independent personal insolvency firm, and the trustee responsible for the Hoyes Michalos Cambridge office.

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