The 12 Steps of Bankruptcy

Once you have reached the conclusion that your financial problems are beyond your capacity to solve on your own, and you are ready to consider personal bankruptcy as a way out, you will go through the following steps:

1. Find a licensed bankruptcy trustee to look over your financial situation. Bankruptcy trustees are experienced financial counsellors with resources and contacts that you probably do not have access to, so they often discover alternatives to declaring bankruptcy. They can also tell you if bankruptcy is the only option that makes sense for your individual situation.
2. Once you and your trustee have decided that personal bankruptcy is the best choice, the formal process begins with the completion of a form that must contain both personal (name, date of birth, address) and financial information that includes all your debts, both to individuals and companies, and any assets you may posses such as property, car, RRSPs, household goods, jewellery, etc.
3. As soon as the application form is done, your trustee starts to prepare the paperwork that must be submitted to begin the court case.
4. Once the paperwork is finished, you will review the form to make sure that all information is accurate and then sign it. This is the official start date of your bankruptcy process which means that any repayment demands from unsecured creditors must now go through your trustee—you no longer have the stress of dealing with phone calls and letters from your creditors.
5. Your trustee will send copies of your paperwork to all of your creditors, who then file a claim with your trustee.
6. Even if it is not the end of the tax year, your taxes must be filed. Your trustee does this for you. If you owe the Canada Revenue Agency any money, it will become one of your creditors. If you have a GST rebate or tax refund it will be given to your trustee to be distributed amongst your creditors.
7. From the time you have signed your bankruptcy papers you must send your trustee a monthly proof of your income, up until the time that your bankruptcy is declared discharged (it usually takes between 9 and 21 months).
8. At some point during the first 60 days of your bankruptcy, you will be required to attend a credit counselling session. You will be taught general budgeting and money management techniques so that you won’t run into the same problems in the future.
9. A second counselling session must take place before 210 days have passed. This session will look at the unique circumstances that led you to bankruptcy and offer ways of avoiding similar problems once the bankruptcy is discharged.
10. Sometimes, your creditors will request a face-to-face meeting with you. This doesn’t happen very often, but you are legally required to attend if they do decide to call a meeting.
11. At the end of the 9 or 21  months, assuming that this is the first time you have declared bankruptcy and as long as you met the terms of agreement, you will be released from the state of bankruptcy and your debts will be discharged. It can take longer than nine months if you did not carry out your responsibilities during the bankruptcy period or if you have previously been bankrupt.
12. Your credit report will show that you declared bankruptcy for at least six years after your date of discharge.

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