Effects of Filing for Bankruptcy

What happens to my assets?

When you go bankrupt in Canada, you will lose all your money and possessions, except those assets that are exempted in your particular province. Consult with your bankruptcy trustee to find out which assets of your are exempted. These usually include food and heating fuel, health aids, clothing, furniture, and the tools of your trade. In some cases they can also include your car and house. There are limits, though, to these exemptions, and again, they vary according to province. You will also need to surrender part of your earnings considered surplus income, specifically all income above a limit set by law. There is a complex formula that computes this limit, and it includes your income level and your family size.

You will also not be entitled to any “windfalls” that may come your way during the bankruptcy period, such as lottery winnings and inheritance.

What happens to my long-term financial standing?

Once you are discharged from bankruptcy, all your debt is eliminated. However, your bankruptcy will appear on your credit report for a minimum of six years. Thi, though does not automatically mean you will not be eligible for new loans or other credit. Of course, there will be lenders who will shy away from you, but you can take steps to gradually improve your credit standing. Make sure your payments are always on time, and show lenders that you have improved your financial situation by eliminating your credit card debt.