Mistakes you should avoid when filing for bankruptcy

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The Bankruptcy and Insolvency Act is designed to help people be discharged from excessive debt and give themselves a fresh start financially. If you think that bankruptcy might be the answer to your problems, consult with our Waterloo bankruptcy advisor. Before you make the appointment, be sure you have everything together.

Here are some tips on how to avoid the most common mistakes people make when filing for bankruptcy:

Be complete and accurate.

Otherwise, you will be guilty of perjury, a felony. You may be subject to prosecution if you knowingly fail to include an asset or misrepresent any other information.

Include all creditors.

Whether the debt is in your name alone or in combination with someone else, you should include all creditors. If you have any concerns, the Trustee can help sort out relevance.

File your income tax returns before filing for bankruptcy.

These documents will determine your current and past earnings. They will also verify your assets and be sure you are not delinquent in paying your taxes.

Avoid additional debt.

If you begin to accumulate other debt in the two or three months before filing for bankruptcy, the creditors are likely to look less favourably on your efforts. They will think that you took out their loan with no intention of repayment. That creditor will be less likely to negotiate a lower rate or agree to discharge the amount you owe. This includes cash advances and credit cards.

Keep your RRSP, pension, and other retirement plans.

Cashing them in now will mean you lose the exemption they provide.

Don’t take out an equity line of credit on your house.

You will then have to explain why you took that loan and what you did with the proceeds, in other words, why you didn’t repay the debt instead of using the line of credit for something else.

Keep all assets in your name.

It is okay if you have sold assets in an attempt to pay off your debt, but simply transferring them to another person will seem as though you are hiding something. It could also result in penalties or prosecution. One of the questions the Trustee will ask is whether you sold, transferred, or gave away any assets. If you dispose of any assets, you will be required to explain what you did with the money, including paying off a creditor.

Do not repay loans selectively.

It may be tempting to pay back loans made to you by friends or relatives. This could be considered a preferential transfer, forcing the Trustee to reclaim the money you paid and then distribute the money among all the creditors equally.

Explain that you are in the middle of filing for bankruptcy.

If the collection actions are fulfilled and judgment has been obtained from the Courts, your wages can be garnished, or property seized.

Reconsider bankruptcy proceedings.

Especially if you think you might be receiving some windfall within a year. You could use that inheritance or court settlement to pay your debts and avoid bankruptcy. Discuss your options with our professionals.

Knowing how it works and what you should avoid doing is essential if you consider filing for bankruptcy in Waterloo. A consultation with a reliable trustee is a crucial step to take because it will allow you to speak with a professional who can answer your questions and determine if this is the best option for you.

Dana MacRae Licensed Insolvency Trustee has been helping people manage their debt since 2000. With 10 offices across Southwestern Ontario, it’s easy to schedule an appointment. Just go to www.danatrustee.ca and book your appointment online. We offer video conferencing, or book a home consultation and have the trustee come to you (when allowed by COVID-19 protocols). Contact us today at 1.800.665.9965 or info@danatrustee.ca to learn more about our services and find the financial solution that’s right for you.