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What to know About Bankruptcy – When to file for Bankruptcy?

Bankruptcy often considers scary experiences – except it’s not . Especially when you feel that you are financially ruined, this is the ideal solution to choose.  To keep the process hassle-free, different changes have been made regarding the rules and laws. Consult with bankruptcy Toronto to know if bankruptcy is you’re only option or not.

When, Howand Why Bankruptcy is Needed?

Bankruptcy is helpful when you are not financially capable of returning the loans from creditors. It can help in getting relief from paying back the debt. However, it has long term and serious effects on the credit for the last 7 to 10 years. It also affects the ability to open another credit card account at favourable rates

Filling bankruptcy is a complex work, for an average person, it’s not advisable to face it alone. For filling it successfully, there are some requirements to meet. The person has to demonstrate that he or she is unable to repay the amount with the approval of credit counselling and government-approved credit counselling.  The counsellors will access the finances and other alternatives to understand if bankruptcy is needed or not. Also, they help in creating a personal budget plan.

Types in  Bankruptcy

There are two main options you get from filing for bankruptcy in Toronto or any other option, i.e. Chapter 7 and Chapter 13 bankruptcy.  There are more options like chapter 11, which is for repayment similar to chapter 13. And another one is chapter 12 but it’s only for farmers and fishermen.

Chapter 7 is also known as Liquidation bankruptcy. Under this, most of the unsecured debt like credit cards and personal loans are discharged. The process takes three to four months, and you require to pass a means test. Also, you must have some amount of income, and under this, you might be forced to sell non-exempt assets.  With this, you can save most of the assets.

Chapter 13 is known as a reorganization bankruptcy. Under this,  the certain repayment plan is set up and you are forced to pay back the debts to the creditors. There is no requirement of property liquidated is needed. This process takes around three to five years to finalize. For this, you require regular income and the ability to pay monthly.

The type of bankruptcy you choose depends on your asset and income. If you are earning more, then you will not eligible for chapter 7. But if you want to protect your non-exempt asset, you need to choose chapter 13 for that.