Are you in financial hot water? Are you having trouble making minimum payments? Are collectors calling on a regular basis? Are you feeling like you’ll never be able to get on top of your debt? Maybe bankruptcy is the solution for you.
Click here to find out how you can stop collection harassment in Canada.
If your debts outweigh your assets and you owe at least $1,000 in unsecured debt, you have become legally insolvent and have the right to declare bankruptcy.
If you are considering this option, you’ve probably already done some research, but here are some commonly asked questions that might help you make your decision.
What is the Bankruptcy and Insolvency Act? Find out here.
Why Should I Consider Bankruptcy?
While bankruptcy isn’t for everyone, it can provide a fresh start for people who feel they have no other option. Once you start the process, it can provide protection against creditors who might be harassing you. It can stop wage garnishment and legal action against you.
When you choose to declare bankruptcy, your unsecured debts will be eliminated and you will have the chance to begin again, with a clean slate.
Check out our new video for more information about personal bankruptcy.
Unfortunately, there are drawbacks. You will see a negative, lasting impact on your credit score, so it will be difficult to obtain credit in the following years and you may lose assets that you have acquired.
Since there are serious benefits and drawbacks, you’ll want to consider all your options before going ahead with bankruptcy.
Are There Alternatives to Bankruptcy in NS?
There are several alternatives to bankruptcy if you seek help early enough.
- Do It Yourself – You might be able to negotiate with credit providers on your own, to reduce your interest rate or the size of your payments.
- Consolidation Loan – You could apply for a single, lower-interest loan to pay back your debt in one manageable payment. If your debt consolidation loan application gets denied, check this out.
- Debt Management Program – You can hire a credit counsellor to help you negotiate lower interest rates or payment rates.
- Debt Settlement Plan – You can hire a credit counsellor to negotiate a lump sum payment to your creditors, with the possibility of debt forgiveness.
- Consumer Proposal – You can hire a Licensed Insolvency Trustee to help you negotiate with your creditors, through the courts. Like bankruptcies, consumer proposals are legal proceedings that will affect your credit rating, but you will be able to keep your assets.
- Orderly Payment of Debt Program – To help you avoid bankruptcy, Nova Scotia and a few other provinces also offer OPD, a consolidation order allowing you to repay unsecured debts at a set interest rate of 5% over 3 years while keeping all your assets.
If you choose to submit a consumer proposal or declare bankruptcy, you will need to work with a Licensed Insolvency Trustee.
For some information about credit counselling in Nova Scotia, click here.
What is a Licensed Insolvency Trustee?
As in other provinces, Nova Scotia Bankruptcies are legal processes that go through the courts. If you are considering filing, you will need to enlist the help of an Insolvency Trustee. Also called a Bankruptcy Trustees, Licensed Insolvency Trustees (LITs) are highly trained professionals, who must follow strict rules and a code of ethics. Their licenses and fees are regulated by the federal government.
LITs can provide you with credit counselling, help you sort through bankruptcy and its alternatives, and help you choose the solution that best fits your situation. They can also provide you with the best information about how to move forward after a bankruptcy, rebuild your credit score and use credit wisely. As an officer of the court, their job is to make the process as fair as possible for everyone involved.
Which Debt Will Be Eliminated With Bankruptcy?
When you go through bankruptcy in Nova Scotia, most unsecured debts will be eliminated. These may include:
- Past due income taxes
- Credit cards
- Lines of credit
- Payday loans
- Unsecured personal loans
In most cases, you will remain responsible for your secured debts such as mortgages and car loans, any outstanding child support or alimony payments, court fines, and government overpayments.
What else can and can’t be included when you file for bankruptcy? Click here to find out.
What Will Happen to My Student Loan Debt?
You will be responsible for student loan debt unless it has been seven years since you finished your studies. This includes part-time classes. You may be eligible for a hardship provision after five years have passed so it is worth discussing with your bankruptcy trustee.
What Costs are Involved in Bankruptcy?
There will be some administration fees for your bankruptcy to provide compensation to your creditors and to your Licensed Insolvency Trustee. These are set by the federal government.
Each month, you will need to provide your LIT with information about your financial situation, including income and expenses. If you make more money than expected, you may be required to pay more toward your bankruptcy.
Don’t get your hopes up if you are expecting an income tax refund. Unfortunately, in most cases, you will need to surrender it as part of your insolvency proceedings.
Look here to find out more about the costs of declaring bankruptcy.
What Assets Can I Keep When I Declare Bankruptcy in NS?
Personal insolvency is governed by a Federal Act, called the Bankruptcy and Insolvency Act, but specific information about what assets you can keep varies by province. In Nova Scotia, bankruptcy exemptions include, but are not limited to the following:
- Vehicles with equity up to a value of $6500, when used for work, or $3000 when used personally
- Tools up to a value of $1000, when required for work
- Household furniture and clothing
- Necessary food, fuel, and health aids
- All registered retirement savings plans, except contributions you made during the 12 months before your bankruptcy. Those will go to your creditors.
Your LIT will clearly explain which assets you will need to surrender and which ones you will keep, depending on your individual circumstances.
Will My Bankruptcy Affect My Spouse?
Usually, your bankruptcy won’t affect your spouse, just because you are married. There are some cases though, where your spouse may be responsible for a debt:
- If he or she has a supplementary credit card on your account
- If he or she has co-signed for a loan
- In divorce situations, where the debt was to be divided evenly between spouses
What About Co-Signing?
We all like to help people we are close to, but this is an area where we need to be cautious. If you have asked a friend or family member to co-sign a loan for you, that person will become responsible for the loan payments after you file for bankruptcy. Likewise, if you have co-signed for someone who has declared insolvency, making the payments will now be up to you. Either way, the co-signer should request a meeting with the Licensed Insolvency Trustee handling the case.
What happens when your co-signer declares bankruptcy? Read this to find out.
How Long Does Bankruptcy Last?
Under normal circumstances in NS, bankruptcy discharge will happen in about 9 months. If you have surplus income or if you have filed for bankruptcy more than once, it could take longer. You’ll want to discuss your individual situation with your LIT to find out your personal date of discharge.
Although it can be a tough route to take, bankruptcy isn’t the end of the world. If you are willing to work hard, spend wisely and save diligently, you can get back on track after your bankruptcy is discharged.
Looking For Bankruptcy Help?
If you’re currently thinking about filing for bankruptcy and are interested in seeking the help of a professional, you’ve come to the right place.