Bankruptcy Nova Scotia

If you’re struggling with overwhelming debt in Nova Scotia, bankruptcy may be the right path to a fresh financial start. Filing for bankruptcy is a legal process that can eliminate many unsecured debts while allowing you to keep certain assets protected under provincial exemptions.

In this guide, we’ll walk you through how bankruptcy works in Nova Scotia, who qualifies, what debts can be included, and what alternatives might be available if bankruptcy isn’t the best fit for your situation. Understanding your options can help you make the best decision for your financial future.

What is bankruptcy?

When dealing with unmanageable debt, sometimes filing for bankruptcy is the most effective way to get a financial reset. In Nova Scotia, declaring bankruptcy is a legal process that allows you to eliminate most unsecured debts when you are unable to meet your obligations. It’s designed to give people a second chance and protect them from aggressive collection actions by creditors.

Bankruptcy can help you eliminate debts like credit card balances, payday loans, tax debts, and personal loans. However, it does involve certain responsibilities, such as disclosing your income and assets, attending counselling sessions, and making surplus income payments if applicable.

If you are overwhelmed by debt and unable to manage even minimum payments, it might be time to consider whether bankruptcy is the right solution. In this article, we’ll guide you through everything you need to know about filing for personal bankruptcy in Nova Scotia.

Bankruptcy and insolvency act

The Bankruptcy and Insolvency Act is the federal government’s effective regulatory framework that governs personal bankruptcy and related insolvency processes across Canada, including in Nova Scotia. This legal process ensures fairness for both people who owe money and their creditors.

Under the Act, when you file for bankruptcy, you are legally protected from further collection efforts. Creditors must stop contacting you, and wage garnishments or lawsuits are halted. In exchange, you must assign your non-exempt assets to a Licensed Insolvency Trustee (LIT), who manages the process on your behalf.

The Act also requires you to attend two financial counselling sessions, which aim to help you better manage your finances after bankruptcy. Overall, the Bankruptcy and Insolvency Act offers Canadians a structured way to move past serious financial problems and work towards a fresh financial start.

Who can file for bankruptcy in Nova Scotia?

If you are struggling to pay your bills and dealing with overwhelming unsecured debt, bankruptcy might be the best solution to get a fresh start. Filing for personal bankruptcy in Nova Scotia is available to people who owe at least $1,000 and are unable to meet their debt obligations as they come due.

To qualify, you must either reside, do business, or own property in Canada. It’s also important to assess your available assets when considering bankruptcy. Certain assets are protected under Nova Scotia bankruptcy exemptions, but non-exempt assets may need to be surrendered to your Licensed Insolvency Trustee.

Bankruptcy is not the right choice for everyone, but it can be extremely helpful if you have significant unsecured debt and no realistic way to repay it. Before making a decision, it’s important to meet with a trustee who can review your full financial situation and determine if bankruptcy truly is your best solution for debt relief.

How does the bankruptcy process work?

Filing for bankruptcy in Nova Scotia is a structured and carefully regulated insolvency process designed to help you get a fresh start. Here’s a step-by-step guide to what happens:

Consultation with a Licensed Insolvency Trustee

The first step is scheduling a free initial consultation with a Licensed Insolvency Trustee. During this meeting, the trustee will assess your financial situation and explain the insolvency process. 

You will be asked to submit monthly income details, along with your income tax information and most recent income tax return, so the trustee can determine whether bankruptcy is the best solution for you.

Filing bankruptcy

If you decide to proceed, the trustee will complete the necessary paperwork to file for bankruptcy. Once filed, you will be protected from creditor actions such as collection calls, wage garnishments, or lawsuits.

Monthly payments

While you are bankrupt, you may be required to make monthly payments. If your income is above a certain threshold, you will make surplus income payments according to federal guidelines.

These payments are designed to ensure fairness between you and your creditors during the bankruptcy process. You’ll also need to complete certain duties like providing proof of income each month.

Surrendering assets

During the bankruptcy process, you may need to surrender non-exempt assets. For example, if you own a vehicle worth more than the allowed exemption limit, you may have to surrender it. However, essential household furnishings and household appliances are usually protected.

If you own a motor vehicle, it may be exempt up to a certain value under Nova Scotia bankruptcy laws. Any non-exempt property surrendered will be used to help pay debts you owe. Your trustee will explain which of your assets are protected and which ones could be affected.

Credit counselling sessions

As part of the bankruptcy process, you must complete two mandatory credit counselling sessions. These sessions are designed to provide education on money management, budgeting, and ways to avoid future debt problems.

Discharge from bankruptcy

In most cases, you are eligible for an automatic discharge after nine months. This discharge legally releases you from the responsibility of repaying most unsecured debts and marks the completion of your bankruptcy. 

Some debts, like child support or student loans under certain conditions, may not be discharged.

Can bankruptcy be extended?

While most bankruptcies in Nova Scotia result in an automatic discharge after nine months, there are circumstances where a bankruptcy can be extended. 

Bankruptcy court

The Bankruptcy Court may become involved if certain conditions are not met or if objections are raised by creditors, the trustee, or the Office of the Superintendent of Bankruptcy.

Extensions typically occur if the individual has not completed all required duties, such as making surplus income payments, attending credit counselling sessions, or submitting necessary financial information. In these cases, the Bankruptcy Court will review your file and may require you to attend a hearing.

At the hearing, you or your trustee will need to submit court documents explaining why an extension is necessary or why conditions were not met. The court may then impose additional requirements, extend the bankruptcy period, or refuse a discharge until all obligations are fulfilled.

It’s important to work closely with your Licensed Insolvency Trustee to avoid any delays and ensure you achieve a timely discharge.

Which debts can bankruptcy help me with?

Filing for bankruptcy in Nova Scotia can help eliminate most debts and give you a fresh financial start. However, not every type of debt can be cleared through bankruptcy. It’s important to know which debts are included so you can make the best decision for your financial future.

Bankruptcy can help you with:

• Credit card debt
• Personal loans (unsecured)
• Lines of credit
• Payday loans
• Income tax debt owed to the Canada Revenue Agency
• Medical bills
• Utility bills
• Old cell phone bills
• Outstanding rent from previous addresses
• Unsecured overdrafts on bank accounts

However, some debts are not cleared by bankruptcy, such as:

• Secured loans like car loans (unless you surrender the asset)
• Student loans (if less than 7 years old)
• Child support and spousal support payments
• Court fines and penalties
• Debts arising from fraud

If you’re unsure which of your debts can be eliminated through bankruptcy, a Licensed Insolvency Trustee can help review your specific situation during a free consultation.

How does declaring bankruptcy impact your credit rating?

Declaring bankruptcy in Nova Scotia will have a significant impact on your credit report. When you file, the bankruptcy will be noted in the public records section of your credit file. This notation alerts future lenders that you have used a legal process to eliminate debt.

For a first bankruptcy, the record will typically stay on your credit report for six years after your discharge date. If you declare bankruptcy a second time, the information can remain for up to 14 years.

During this time, it may be harder to qualify for new loans, mortgages, or credit cards. However, rebuilding your credit is possible. Many people start re-establishing their credit history by using secured credit cards and making all payments on time. Over time, as your positive credit activity grows, your credit score will begin to recover.

Alternative debt relief options in Nova Scotia

While bankruptcy can provide a fresh start, it’s often considered a last resort. There are several other debt solutions available in Nova Scotia that might suit your financial situation better, depending on the amount of money owed and your long-term goals.

Consumer proposal

A consumer proposal is a formal agreement negotiated between you and your unsecured creditors, with the help of a Licensed Insolvency Trustee. Instead of paying the full amount you owe, you propose to repay a portion through affordable monthly payments over a period of up to five years.

An insolvency professional, who is licensed by the federal government to administer bankruptcies and proposals, manages the process. A consumer proposal immediately stops collection calls, wage garnishments, and legal actions, and provides an opportunity to avoid filing for bankruptcy. 

Debt management plan

A debt management plan (DMP) is a program typically organized through a non-profit credit counselling agency. In a DMP, your bill payments are combined into one affordable monthly payment. The agency negotiates with your creditors to reduce or eliminate interest rates, helping you pay off your full debt amount faster and more efficiently.

Although a DMP won’t reduce the total principal owed like a consumer proposal might, it makes debt repayment more predictable and less stressful. It’s important to stay committed to the plan, as missing payments could cancel the negotiated agreements with creditors.

Credit counselling

Credit counselling offers one-on-one support to help you deal with debt issues, budgeting, and rebuilding financial stability. Certified counsellors review your financial situation in detail and recommend the most suitable path forward.

Services might include budgeting advice, education on responsible spending, and assistance in developing a repayment plan. By working closely with a credit counsellor, you can get a clearer understanding of how to make bill payments on time and how to manage your overall money more effectively without immediately resorting to legal proceedings like bankruptcy.

Debt consolidation

Debt consolidation involves taking out a new loan or line of credit to pay off multiple existing debts, simplifying everything into one payment. The goal is to combine your money owed into a single loan with a lower interest rate, making repayment more manageable.

Options for debt consolidation include personal loans, home equity loans, or balance transfer credit cards. A successful consolidation can help lower your monthly costs and reduce the total amount of interest paid over time. However, it’s crucial to have good enough credit to qualify for favourable terms.

If you cannot secure a lower interest rate, or if your credit is too poor to qualify for a new loan, other solutions like a consumer proposal or bankruptcy might be more appropriate.

Get professional advice to regain control of your financial situation

If you’re feeling overwhelmed by debt and unsure which option is best, speaking with a professional can make all the difference. A Licensed Insolvency Trustee (LIT) can review your finances and help you find the right solution based on your unique needs.

At Farber, our experienced team offers a free consultation to residents of Nova Scotia who are looking for practical, trustworthy debt advice. Whether you are considering bankruptcy, a consumer proposal, debt consolidation, or another form of debt relief, a Farber LIT will guide you through your options clearly and compassionately.

Don’t face financial challenges alone. Talk to a Farber LIT today to get the advice you need to regain control of your financial situation and start building a stronger, debt-free future.