Personal Bankruptcy in Kitchener

What does filing bankruptcy mean?

Personal bankruptcy is a legal process, governed by federal law, that allows you to discharge most of your debts. This means that at the end of your bankruptcy, your debts are eliminated and you gain a fresh financial start.

If you file for personal bankruptcy in Kitchener you are allowed to keep certain assets. These rules are governed by Ontario law.

If you file personal bankruptcy in Kitchener you are allowed to keep one motor vehicle with no liens or loans against it worth up to the current exemption limit. If the vehicle is worth more than that amount, you would be required to pay the trustee the amount over that limit.

You are also allowed to keep all personal clothing, and exemptions usually cover most peoples household furniture and appliances.

At the end of your personal bankruptcy your debts are discharged, meaning they are eliminated. Certain debts, such as child support payments and court fines and certain student loans are not discharged in a personal bankruptcy in Kitchener.

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How much does bankruptcy cost?

If you file for personal bankruptcy in Kitchener you will be required to make a payment each month into your bankruptcy. The payment is based on your monthly income, the size of your family, and whether or not you pay child support or have unusual medical expenses. Your trustee in Kitchener will explain this calculation in more detail before you file.

The minimum personal bankruptcy period in Kitchener is nine months. In addition to making a payment each month as discussed above, you will also be required to submit a monthly budget each month to your trustee, with copies of your paystubs, and you will be required to attend two credit counselling sessions.

If you have income significantly higher than the government determined average, it is possible that your bankruptcy will last for more than nine months. Again, your trustee will explain this in more detail and will help you review alternatives like a consumer proposal.

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Should I file bankruptcy in Kitchener?

The next step is to take stock of your situation. Make a list of everyone you owe money to (your creditors). If you are behind on your payments to a creditor, put a checkmark beside their name. If you have more than one checkmark on your list, personal bankruptcy may be an option.

Third, make a list of what it costs you to live each month. Compare this to your income each month. If keeping up with debt payments means that you don’t have enough to live on each month, personal bankruptcy may be an option.

The next step is to ask yourself if you can solve your financial problems on your own. Can you get a debt consolidation loan to repay your debts and lower the interest rate you pay? Can you borrow from friends or family? Can you work overtime to generate more income to repay your debts? If you can deal with your debts on your own, you will not need to file bankruptcy in Kitchener, Ontario.

However, if you cannot repay your debts on your own then bankruptcy may be an option.

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Who is eligible to declare bankruptcy?

To declare bankruptcy you must be insolvent according to the Bankruptcy and Insolvency Act. This is a simple three part test:

  • you owe more than $1,000
  • what you own is worth less than what you owe, and
  • you are unable to pay your debts.

Declaring bankruptcy in Kitchener means you are declaring that you are insolvent, and are unable to pay your debts.

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Gaining protection from your creditors.

It is essential that the bankruptcy paperwork is filed with the government, because the filing of the bankruptcy is what officially starts the bankruptcy process.

As soon as the government accepts the filing, the bankruptcy starts, and more importantly your creditors (the people you owe money to) are prevented from taking you to court, garnisheeing your wages, or even calling you at home or at work.

The legal term for this is “stay”, meaning the creditors must “stay away” from taking legal action against you. This stay comes into effect upon the filing of the bankruptcy paperwork.

Since the stay does not begin until the filing, it is critical that the process happens as efficiently as possible.

If you are filing bankruptcy in Kitchener, only deal with a trustee that files bankruptcies electronically. By filing the bankruptcy electronically, it is accepted immediately, and the protection you get from creditors starts immediately.

(It is a little known fact that the first bankruptcy filed electronically in Canada was filed in Kitchener, Ontario by Hoyes, Michalos & Associates Inc. who are now very familiar with the process of filing bankruptcy electronically in Kitchener).

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What is the role of a Kitchener licensed insolvency trustee?

To file bankruptcy you must see a Licensed Insolvency Trustee (previously called bankruptcy trustee). The trustee does not work for you, but they also don’t work for the people you owe money to, or for the government.

Your Kitchener licensed insolvency trustee is like a referee in a hockey game: they don’t work for either side, but they are there to make sure that everyone involved follows all of the rules.

Of course your trustee is not working against you, either. Their job is to help you through the process, so they will provide advice before, during, and after the bankruptcy process.

An LIT is licensed by the federal government, and must have many years experience before they receive a trustee license, so you can be confident that they have the knowledge and experience to provide you with the bankruptcy help you require.

Here are some of the areas where a trustee can provide help:

  • Your trustee in Kitchener can provide help with your bankruptcy options. Your trustee will explain debt consolidation, credit counselling, consumer proposals and other bankruptcy alternatives. This advice may help you avoid bankruptcy.
  • Your trustee will give you advice to help you deal with your secured creditors. Even if you owe money on your car or house it is possible in Kitchener to declare bankruptcy and keep your car and your house; your trustee can give you the help you need to decide how best to handle your car and house in a bankruptcy.
  • Your trustee will explain the bankruptcy process to you in detail. If you have a question, ask. Filing bankruptcy is a difficult decision, and most people need help understanding the process.
  • Once your bankruptcy starts your trustee will help you through the process. If you have problems completing your duties, your trustee can provide help and advice to help you finish the process.
  • Once your Kitchener bankruptcy is completed, your trustee can give you advice to help you re-build your credit.

The calculation of the cost of a bankruptcy is somewhat complicated, so before you declare bankruptcy you should meet with a licensed insolvency trustee in Kitchener and ask them to explain, in detail, how the cost will be calculated in your bankruptcy.

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How do I file bankruptcy?

To file bankruptcy, you require the assistance of a licensed insolvency trustee. The first step is to book a free consultation with one of our two Kitchener trustees, Scott Schaefer or Ian Martin. This does not mean you will have to file bankruptcy. It’s an initial assessment of your situation. At that first meeting Scott or Ian will review your options with you, and answer all of your questions about how the bankruptcy process works. They will help you decide if bankruptcy truly is the best solution in your situation.

If you decide to file bankruptcy, you will be required to complete an information form to give the trustee the information necessary to complete all of the required paperwork. Once the bankruptcy paperwork is prepared, your trustee will meet with you in our Kitchener office to sign the required forms so that you can officially declare bankruptcy. Before you sign any papers, we will explain again the bankruptcy process and make sure that you have received answers to all of your questions. We will go over each page of the bankruptcy application with you, explain it to you, and then ask you to sign it. Once signed, your trustee will submit the forms electronically with the government and you will become bankrupt.

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What is your trustee paid?

There is no extra fee to pay the trustee. Trustees are paid a portion of the payments you make into your bankruptcy and the amount they can be paid is set by the federal government. From your perspective it’s important to understand the cost of your bankruptcy based on your potential income payments and any assets you may lose before you start the process as this is the real cost to you.

Your Kitchener bankruptcy trustee will work with you to estimate your projected income during the bankruptcy period, and put you on a payment plan so that the cost of the bankruptcy is paid in full so that your bankruptcy can end on time. In Kitchener, we arrange payments by pre-authorized payments so that you don’t need to worry about writing cheques or paying cash each month.

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Can I borrow after a bankruptcy?

In the Kitchener-Waterloo area many people use a car to get to and from work, so unlike a city like Toronto with a subway system, a car is important for many people. For many, borrowing to purchase a good used car is an important financial goal.

For many people home ownership is also an after-bankruptcy goal, and people worry that with a bankruptcy on their credit report they may never be able to own their own home.

In fact there are thousands of people who have filed bankruptcy in Kitchener over the years who go on to finance a car or a house. Even with a bankruptcy on your credit report, it is possible to borrow again.

To borrow after bankruptcy, you will need a good job (so that you have the income to repay the loan), and a security deposit or down payment.

For example, if you had never filed bankruptcy and you had perfect credit, you might be able to finance a brand new car with no money down, at a low interest rate. After a bankruptcy, with a good job, you will probably need a down payment (say $1,000 on a good used car) and you will probably be charged an interest rate higher than someone who had not been bankrupt.

Generally as each year passes after you have been discharged from bankruptcy the interest rates you are charged decrease, and eventually you will not need a significant security deposit. After seven years the bankruptcy disappears from your credit report.

The key to being able to borrow after a Kitchener bankruptcy is to save money (for your security deposit or down payment), keep your monthly bills like hydro and rent current, and have a good job.

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How do I get started?

Our Kitchener bankruptcy office is located at 607 King Street West, Suite 204, Kitchener, Ontario. We are conveniently located for residents from Kitchener, Waterloo, and surrounding areas. Our phone number is 519-747-0660 (toll free 1-866-747-0660).

If you or someone you know is having financial difficulties, contact our team in Kitchener Waterloo for a free consultation.

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