How to file for bankruptcy in Nova Scotia (and Survive It)

Do you feel overwhelmed by your financial situation? Are you burdened by debts that seem insurmountable? Based on these bankruptcy statistics, you are not alone. In January 2023, 305 Nova Scotians found themselves turning to bankruptcy to regain control of their finances. 

In this article, we will guide you through the process of filing for bankruptcy in Nova Scotia. We’ll provide you with essential information to help you not only survive bankruptcy but also rebuild your financial health. Together, we’ll explore the ins and outs of bankruptcy in Nova Scotia.

Understanding Bankruptcy in Nova Scotia

Before we delve into the details, let’s start by understanding what bankruptcy really means. This legal process allows individuals who are unable to repay their debts to obtain relief and a fresh financial start. You should never take this decision lightly, as it has significant consequences for your financial future. However, in certain situations, it may become the best option available to regain control of your financial life.

Bankruptcy is a complex topic that requires a thorough understanding of its process and implications. By looking at the various aspects of bankruptcy in Nova Scotia, this comprehensive overview will help you make informed decisions.

What is Bankruptcy?

Bankruptcy legally declares an individual or business unable to repay their debts. It is a formal process overseen by the courts to provide relief to individuals drowning in debt. When you file for bankruptcy, you essentially surrender control of your assets and debts to a Licensed Insolvency Trustee. This person becomes responsible for distributing your assets fairly among your creditors to fulfill your obligations during the bankruptcy period.

Bankruptcy is not a one-size-fits-all solution. Different types of bankruptcy may apply to your specific situation in Nova Scotia. By exploring the nuances of each, you can gain a better understanding of the potential benefits and drawbacks.

Why People File for Bankruptcy

People have various reasons why they choose to file for bankruptcy. They could face overwhelming credit card debt, medical bills, failed businesses or unemployment. Regardless of the reasons, bankruptcy can help individuals eliminate or reduce their debts and start over. It provides a viable solution for those who have exhausted all other options for resolving their debt crisis.

However, bankruptcy should not be seen as a quick fix or an easy way out. It requires careful consideration and a commitment to rebuilding your financial life. By understanding the motivations behind bankruptcy filings, you can gain insight into the challenges individuals face and the potential benefits they hope to achieve.

Understanding the bankruptcy process in Nova Scotia enlightens anyone considering this option. By familiarizing yourself with the steps involved, you can better navigate the process and make informed decisions about your financial future.

Preparing to File for Bankruptcy

Now that you are familiar with the overall bankruptcy process, let’s focus on the steps you need to take to prepare for filing.

Evaluating Your Financial Situation

Take the time to review your financial situation holistically before committing to bankruptcy. Understand the extent of your debts and the assets you possess. Determine whether there are any alternative options available to address your financial difficulties. 

At this point, consider creating a detailed budget to track your income and expenses. This will give you a clearer picture of your financial health. Ideally, it will help you identify areas where you can cut back on spending or increase your income. Additionally, consider reaching out to a credit counseling agency for assistance. They can provide guidance on managing your debts and developing a plan to regain financial stability.

Furthermore, assess the impact of bankruptcy on your long-term financial goals. Bankruptcy can have significant consequences, such as a negative impact on your credit score and limited access to credit in the future. Understanding these implications will help you make an informed decision about whether bankruptcy serves as the right choice for you.

Instead, you can opt for a consumer proposal between you and your creditors. It allows you to repay a portion of your debt over time, based on what you can afford. This stays on your credit report for three years, compared with six with a first bankruptcy.

You pay an administrator $750 when filing a copy of the consumer proposal, $750 upon court approval and 20 percent of the money distributed to creditors. Canadian law also mandates a $100 filing fee, plus charges for counseling, registration and taxes.

Seeking Legal Advice

A licensed insolvency trustee or a bankruptcy lawyer will help you understand the potential outcomes, consequences and alternatives to bankruptcy. They will guide you through the decision-making process and ensure that you have a clear understanding of the implications. In Canada, trustees’ fees are set at no more than $1,800.

Before this consultation, walk in prepared to discuss your financial situation in detail. Provide with all the relevant information, including your debts, assets and income. This will enable them to assess your eligibility for bankruptcy and provide tailored advice based on your specific circumstances.

Additionally, a legal professional can help you navigate the complex legal requirements associated with filing for bankruptcy. They will assist you in completing the necessary paperwork, filing the appropriate documents with the bankruptcy court. Finally, they will represent you in any legal proceedings that may arise during the bankruptcy process.

The Bankruptcy Court sits regularly in Halifax where all court documents must be filed. However, the Registrar does hear matters in communities throughout the province for better accessibility for debtors. Plan to appear at your hearing to give evidence where the trustee speaks on your behalf. 

Gathering Necessary Documentation

Accurate and comprehensive financial documentation makes a big difference when filing for bankruptcy. Gather all the necessary paperwork, including income statements, bank statements, tax returns and outstanding debts. This documentation will be used to assess your financial situation during the bankruptcy proceedings.

When compiling your financial documentation, ensure that you have records for all your debts, including credit card statements, loan agreements, and medical bills. Having a complete, organized record of your finances will provide an accurate representation of your situation to the court.

In addition, you may also need to provide documentation related to your assets, such as property deeds, vehicle titles and investment statements. These documents will help determine the value of your assets and their eligibility for exemption during the bankruptcy process.

Keep copies of all the documents you submit for bankruptcy, as well as any correspondence with creditors or legal professionals. These records will be important for reference and future financial planning.

The Step-by-Step Guide to Filing for Bankruptcy

Now that you have prepared for bankruptcy, it’s time to walk through the step-by-step process of filing.

Filing the Initial Paperwork

First, your trustee or lawyer will file your application with the Office of the Superintendent of Bankruptcy (OSB). At this stage, the OSB will assign a bankruptcy estate number to your file and notify your creditors that legal proceedings have started.

This begins an automatic stay of proceedings so your creditors cannot take any legal action to collect their debts. This gives you breathing space to regroup and plan for your financial future.

Meeting with Creditors and Credit Counselors

After filing for bankruptcy, in rare cases, creditors may ask for a meeting. This meeting gives your creditors an opportunity to ask questions and gain a better understanding of your financial situation. Your licensed insolvency trustee will represent your interests during this meeting.

Further, debtors must attend two mandatory credit counseling sessions to learn financial management skills and the causes of your bankruptcy. Typically, you pick up invaluable advice on budgeting and managing credit in future.

Asset Distribution and Debt Repayment

Once your bankruptcy gets approved, the trustee will take control of your assets and distribute them among your creditors. They will also develop a debt repayment plan, which may involve monthly payments based on your income and expenses.

During a bankruptcy, some of your assets could get seized to repay your debts. These may include a second home or cottage, jewelry, recent RRSP contributions, pensions funds or vehicles. 

First, your trustee will evaluate all assets and their values to decide which items might face seizure. Next, they will liquidate them with the help of third-party appraisers or auctioneers. This procedure unfolds with professional discretion while respecting your privacy to minimize any potential discomfort or embarrassment.

After you report your income and expenses to your Licensed Insolvency Trustee, they will determine if you owe any surplus income. This means a monthly amount beyond what the federal government decides a family needs to maintain a reasonable standard of living. This could result in additional payments and a longer bankruptcy period.

Bankruptcy Discharge

The final stage of the bankruptcy process is the discharge. This occurs when you have fulfilled your obligations and have been released from your debts. The length of a first-time bankruptcy period varies from nine to 21 months, depending on your specific circumstances. A second time, the window expands to 24 to 36 months. Subsequently, a court will set a timeline.

Finally, your trust submits a certificate of discharge to the Office of the Superintendent of Bankruptcy for review. If approved, you’ll receive your certificate proving that you have successfully completed the bankruptcy process. Remember, keep this certificate in a safe place, as you may need it as evidence of your clean slate.

Life After Filing for Bankruptcy

Life begins anew after a bankruptcy; celebrate this a new beginning. Let’s explore what happens once you have successfully filed for bankruptcy.

Understanding the Impact on Your Credit Score

Filing for bankruptcy will have a significant impact on your credit score. It is important to understand that a first bankruptcy will remain on your credit report for 6 years in Nova Scotia. If you file for bankruptcy again, it will remain visible for no less than 14 years.

Keep a Close Eye on Your Credit Score 

It’s crucial to be proactive when working to rebuild your credit score. Keeping a regular check on your credit report ensures you’re aware of your progress and any fluctuations in your score. In Canada, credit reporting agencies like Equifax and TransUnion offer a free annual credit report. Additionally, there are various apps available that allow Canadians to keep tabs on their credit scores without incurring any cost. By ensuring the information on your credit report is accurate and addressing any inconsistencies immediately, you stand to greatly accelerate your path to credit recovery.

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Rebuild Your Credit With a Secured Card

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After going through bankruptcy, you may find it challenging to qualify for a conventional credit card. This is where secured credit cards can be a game-changer for you. These cards necessitate a deposit that subsequently acts as your credit limit. Because you’ve made this deposit, the risk for the card issuer decreases, which is the reason why there is no minimum credit score to secure (no pun intended) such a card. If managed wisely, a secured credit card can serve as a shining example of your newfound financial responsibility. Over time, this can contribute to improving your credit score.

Avoiding Future Bankruptcy

Once you have successfully navigated the bankruptcy process, take proactive steps to avoid falling into the same situation again. Practice responsible financial habits, such as budgeting, saving and managing your debt effectively. Building an emergency fund and creating a solid financial plan will help mitigate the likelihood of future financial crises.

Bankruptcy can be a challenging and emotionally draining process. Yet, with the right knowledge and guidance, you can navigate it successfully. Remember, bankruptcy does not mean failure; it gives you an opportunity to start fresh and build a better financial future. Seek professional advice, take control of your finances and begin your journey towards a brighter tomorrow.