Peter Decaprio- A Guide to Understanding Personal Bankruptcy

What is bankruptcy?

Bankruptcy is the legal process of resolving debt problems. Bankruptcy does not mean that you have no assets, but you have more liabilities than assets says Peter Decaprio. The majority of people who file for personal bankruptcy are honest and want to repay their debts, but are unable to pay them back because they earn only a low income or have unexpected expenses.

The purpose of bankruptcy laws is to give honest people a “fresh start” by wiping out their debt and allowing them to begin again financially. By law, once you are declared bankrupt you must take steps to repay your debt over time, usually five years. After that time has passed, any remaining debt will be waived or written off.  

What types of bankruptcy are there?  

There are two main types of personal bankruptcy: bankruptcy (or composition) and proposals (also known as consumer proposals). You can see the definitions for each below or download our Personal Bankruptcy Glossary. The only difference between the two is how debts are repaid; in a proposal, you make regular payments until your debts are paid off, while in bankruptcy your debts are repaid through the sale of your assets.

There is also a third type called an assignment in bankruptcy, which is when you hand over all of your financial information to a licensed trustee, who then handles everything for you. You can read more about it on our “Who Can File?” page here.

What does filing mean? Who files for bankruptcy?  

Filing means taking legal action against debt problems. It doesn’t make you bankrupt right away; instead, it puts things like credit card payments and repossessions (when your bank takes back an item they lent money to buy) on hold until the court makes its decision. Because of this, you don’t need to rush into filing for bankruptcy. In fact, it’s a good idea to talk with a trustee before you file at all.

In most cases, the only people who file for bankruptcy are over-indebted Canadians who earn a low income and have no other means of resolving their financial troubles. If you have something called “disposable income,” however, you may not qualify to file at all unless you can show hardship. What this means is that your household has little left over each month after paying basic expenses like shelter costs, food and child care. For more information on what constitutes disposable income based on your family size click here says Peter Decaprio.

You don’t need to be working full time to qualify for our services; in fact, if you’re unemployed or on social assistance it could be easier to file. If you are retired, on disability or receiving EI benefits (or any other income not listed above), however, you will likely need to show hardship before we can help you.

What do I need to bring with me when I apply?

– A completed application;

– Proof of your income;

– Details about your assets;    and    – The names and addresses of all your creditors (people you owe money to).

You may also want to ask the trustee who files your paperwork what other documentation is needed. You can find more information on our “Who Can File?” page here.

How long does the process take?               

The length of time varies, depending on how complicated your financial situation is. We try to have all the paperwork filed within a week of meeting with the trustee who will be making your filing says Peter Decaprio. We may need more time to gather necessary documentation from you, though, so please make sure you give yourself enough time before your first payment is due. For a full understanding on how quickly things move along once you file click here.

If I can’t afford my monthly payments after bankruptcy, what happens?

Since you were declared bankrupt after May 2005 it’s very unlikely that we’ll require this as part of our process; however if it comes up we won’t turn down an offer of voluntary payments toward your creditors. In some cases people are able to negotiate their own repayment plans outside of the courts, so feel free to ask.

Conclusion:

When you come into our office the trustee who files your paperwork will meet with you. And talk about your financial situation. If we believe that bankruptcy is the best option for you. They’ll help you complete all of the necessary paperwork to file. On average, people are able to get their finances back under control within six months after filing for bankruptcy.

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