Filing for bankruptcy does not immediately eliminate your debts when you sign the initial paperwork. Instead, filing just means that you are entering the bankruptcy process. During bankruptcy, your creditors cannot demand payment from you directly, but you will still pay them indirectly through your bankruptcy trustee. Your debts are cancelled only at the discharge of your bankruptcy, which happens some months after you file for bankruptcy and then only if you meet all the bankruptcy duties laid out in your bankruptcy agreement.
The length of time you are in bankruptcy is determined by several factors such as whether you have filed bankruptcy before, your faithfulness in following your bankruptcy duties, and many others. Most of the time, you will be out of debt faster with a bankruptcy than with a low-interest debt consolidation loan or a consumer credit counselling program. However, other debt solutions such as debt settlement or a consumer proposal may get you out of debt sooner than a bankruptcy, and certainly with less damage to your credit history.
The Normal Automatic Discharge
The vast majority of bankruptcies in Canada are automatically discharged after a period of nine months. Thus, most people can get on with their lives rather quickly after filing for bankruptcy. If you do not qualify for an automatic bankruptcy discharge either because you are required to pay surplus income or because you have been in bankruptcy before, your time in bankruptcy will be longer. Based on certain criteria, the automatic discharge of your bankruptcy may also be extended even though you are in bankruptcy for the first time or do not have to pay surplus income.
The Extended Automatic Discharge
Individuals who have never filed for bankruptcy before will spend a total of twenty-one months in bankruptcy if they are required to pay surplus income to their bankruptcy trustee. If this is your second bankruptcy, your time in bankruptcy protection is automatically twenty-four months, and it will be extended to thirty-six months if you are required to pay surplus income.
The Non-Automatic Discharge
Whether you meet the above standards for a normal automatic discharge or an extended automatic discharge of your bankruptcy, other factors can prevent the discharge from going through as anticipated. Keep these things in mind when deciding whether or not you should file for bankruptcy:
• Filers with more than two past bankruptcies are required in every case to go to court in order to have their bankruptcy discharged.
• When a creditor questions your bankruptcy, you will not enjoy an automatic discharge. Creditors have the right to question your bankruptcy, although this is quite unlikely to happen. This will delay your discharge but not automatically derail it. This differs from a consumer proposal in which a simple majority of creditors can refuse your proposal and derail it entirely.
• Failing to meet your bankruptcy duties will keep you from getting an automatic bankruptcy discharge. Your trustee exercises a great deal of sway in the process, so failing to stay in touch with the trustee is sure to delay your discharge.
Why Wait for a Discharge?
Other debt relief options do not force you to wait for a discharge, and you will never have to guess as to when you will be debt free. Complete the form on the debt relief page and learn about bankruptcy alternatives that won’t be as painful a process to go through.
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