Bankruptcy is a legal process that allows individuals or businesses to eliminate part or all of their debts. When you file for bankruptcy in Canada, the court will review your financial situation and determine which debts are eligible for discharge. This means that you won't have to pay back these debts.
Types of Bankruptcy Filing
- Individual Chapter 7: A person can file individual bankruptcy by providing detailed information about their income, expenses, assets, and liabilities. The court will review this information to determine which debts are eligible for discharge.
- Business Chapter 7: Businesses can also file bankruptcy, but they must meet specific requirements. The court will review the business's financial situation and determine whether it is insolvent or bankrupt.
How Bankruptcy Affects Debts
Filing for bankruptcy means that most debts, including credit card debt, car loans, and personal loans, will be discharged. However, some debts may still remain on your credit report for a certain period of time.
Here's what you can expect to happen to your debts after filing for bankruptcy in Canada:
Credit Report
The court will issue an automatic stay, which temporarily halts creditor activity. This means that creditors cannot contact you or try to collect on your debts during the bankruptcy process.
Once the bankruptcy is finalized, credit reporting agencies will have access to your credit report. However, if you filed for Chapter 7 individual bankruptcy, most debts may be discharged, including credit card debt and personal loans.