What Does Bankruptcy Mean

by Cyndi Michalos Baker on September 18, 2012

People have heard the word before, but what does it mean? Legally, it is a method of absolving yourself from debt that gives you some formal protection against your creditors and their collection activity. Great, so what does that mean? This blog has been created to help explain the mystery of bankruptcy and what it means to real people trying to make sense of it.

When you file for bankruptcy you are essentially asking the Bankruptcy Court of Canada to discharge you from your debts, that you can no longer afford to pay them and that you would like a fresh start.  In exchange for this there are some duties you must complete.  First, you must submit monthly income and expense statements with proof of your monthly income. Second, you must attend two Credit Counseling Sessions to learn how to create a budget you can live within so your fresh start is just that. And third, you must make monthly contributions to your bankruptcy estate to cover the costs associated with filing. Most people are surprised by the third duty but it’s true, there is a cost associated with going bankrupt.

The cost of your bankruptcy is determined by looking at your income, your family size and your assets. The government provides a guideline of income thresholds which they have determined will meet the basic cost of living for families of different sizes.  If your income is at the threshold level or below then bankruptcy typically costs $200.00 a month and if it is your first time, it will last 9 months.  If your income is more than $199.00 a month above the threshold then you must pay half of the overage to your estate for 21 months. This is called surplus income. If your income places you in this situation the government believes that half of the overage should better your quality of life and half of the overage should be available to pay your debts. The extended time is to allow this money to build up in your estate so that it may be distributed to your creditors’ when the entire 21 month process has been completed.

So now that you know a little more then you did before, the next step is to give us a call. We would be happy to go over this process in detail with you and your specific situation.  Bankruptcy in Guelph does not have to be a scary or lonely experience. You may reach us at 519-823-0330 or toll free at 310-PLAN (7526).

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