Bankruptcy Saskatchewan

If you find yourself overwhelmed by debt, bankruptcy may be a way for you to regain financial stability and a fresh start. This legal process, governed by the Bankruptcy and Insolvency Act, offers a structured method for people or businesses to eliminate most unsecured debts. 

While bankruptcy can provide relief, it comes with long-term consequences, such as damage to your credit rating. In this article, you will learn about the bankruptcy process in Saskatchewan, including the steps involved, eligibility criteria, and how it may affect your financial future. 

What is bankruptcy?

Bankruptcy and Insolvency Act

Bankruptcy is a legal process governed by the Bankruptcy and Insolvency Act in Canada, designed to help individuals and businesses who find themselves unable to pay debts. When financial obligations become overwhelming, bankruptcy offers a structured way to address unaffordable debts, allowing you to deal with your debts while ensuring your creditors are treated fairly.

Filing for personal bankruptcy can eliminate most unsecured debts, like credit card balances and personal loans. However, it’s important to note that certain financial obligations, like court-mandated payments, remain unaffected by bankruptcy. For instance, child support payments must continue as they are prioritized over other debts.

Bankruptcy can be a useful option for people who have built up a level of debt they can’t afford to repay, providing protection from unsecured creditors as long as they follow the criteria. That said, declaring bankruptcy will seriously damage your credit rating, so you should always seek professional advice before making a decision. 

What is the bankruptcy process in Saskatchewan?

Filing for bankruptcy is a structured process with several key steps that must be followed to ensure a successful outcome. Here’s a breakdown of the bankruptcy process in Saskatchewan.

1. Seek the advice of a Licensed Insolvency Trustee

The first step in filing for bankruptcy is to consult a Licensed Insolvency Trustee (LIT). These professionals are regulated by the federal government and are the only ones legally authorized to file a bankruptcy or consumer proposal on your behalf.

• Many LITs offer free initial consultations, allowing you to discuss your financial situation and explore all available debt relief options before committing to bankruptcy.
  
• The trustee will review your income, assets, liabilities, and expenses to determine whether bankruptcy is the best option for you.
  
• They will also explain trustee’s fees, which cover the cost of administering the bankruptcy.

2. OSB appoints a bankruptcy trustee

If you decide to proceed with bankruptcy, the Office of the Superintendent of Bankruptcy (OSB) will appoint a Licensed Insolvency Trustee – commonly known as a bankruptcy trustee – to administer your case. The trustee will be responsible for:

• Performing duties related to bankruptcy, such as filing the required legal documents and notifying your creditors.
  
• Ensuring that you fulfill all obligations during the bankruptcy process.
  
• Managing your non-exempt assets, which may be sold to help repay your creditors.
  

Once the trustee has been appointed, you will be legally protected from creditor actions, including collection calls, wage garnishments, and lawsuits.

3. Gather the documents to file for bankruptcy

To officially file for bankruptcy, you’ll need to provide your trustee with detailed financial information, including:

• A list of all your debts, including credit card debt, payday loans, and personal loans
  
• A breakdown of your monthly income and expenses
  
• Information about your assets, such as your home, vehicle, and savings accounts
  
• Tax returns and employment records
  

Once these documents are gathered, your trustee will file the bankruptcy paperwork with the OSB, and the bankruptcy process will begin.

4. Meet your bankruptcy commitments

After filing for bankruptcy, you will have several legal obligations to fulfill, including:

• Surrendering non-exempt assets – Some of your assets may need to be sold to repay creditors. However, Saskatchewan law protects certain assets, such as necessary household items.
  
• Making surplus income payments – If your income exceeds the government-set threshold, you may have to make additional payments for a specific period.
  
• Attending financial counselling – You must complete two mandatory financial education sessions during bankruptcy to learn about budgeting and responsible credit use.

5. Discharge from bankruptcy

Once you have met all bankruptcy obligations, you will be eligible for a discharge from bankruptcy, which releases you from most of your debts.

• Bankruptcy can take as little as 9 months if you have no surplus income, or as much as 21 months if surplus payments are required.
  
• After discharge, all included debts will be legally eliminated, and you can start rebuilding your credit.

Can a bankruptcy be extended?

In most cases, bankruptcy in Saskatchewan lasts for either 9 months or 21 months, depending on whether you need to make additional payments due to surplus income. 

However, it is possible for the bankruptcy process to be extended beyond the typical duration, especially if you don’t meet certain commitments. 

Surplus income payments

If your income exceeds a certain threshold set by the Bankruptcy and Insolvency Act, you may be required to make surplus income payments to your creditors. These payments are typically made on a monthly basis and are intended to ensure that those who can afford to contribute to the repayment of their debts do so. 

If you fail to meet your surplus income payment obligations, your bankruptcy may be extended beyond 21 months.

Bankruptcy court

In rare cases, if you do not comply with your bankruptcy obligations, the LIT may be required to set up a court hearing to deal with these conduct issues. This may result in a decision to extend your bankruptcy.

Will my credit rating be impacted if I declare bankruptcy?

Yes, filing for bankruptcy in Saskatchewan will significantly impact your credit rating. A first-time bankruptcy typically stays on your credit report for six years after discharge, while a second bankruptcy can stay on your credit file for as long as fourteen years.  

During this time, lenders may see you as a higher risk, making it more expensive to borrow money.

On the positive side, bankruptcy allows you to eliminate unmanageable debt and rebuild your finances. By making timely payments and improving your money management skills, you can gradually restore your credit and reputation with lenders. 

What happens after the legal process ends?

Once you receive a discharge from bankruptcy, you are officially released from responsibility for the debts included in the arrangement. The bankruptcy will stay on your credit report for six years if it’s your first time declaring bankruptcy, which may impact your ability to borrow money.

To rebuild your financial stability after bankruptcy, you should focus on improving your credit score gradually by budgeting wisely and avoiding unnecessary debt. Completing the mandatory financial education sessions during bankruptcy can also help you manage money more effectively moving forward.

Alternative debt relief solutions to bankruptcy

While bankruptcy can provide a fresh financial start, it is not the only option. If you’re struggling with debt but want to avoid bankruptcy, other debt relief solutions are available. 

Consumer proposal

A consumer proposal is a legally binding agreement between you and your creditors, arranged by a Licensed Insolvency Trustee. It allows you to consolidate your debts into one affordable monthly payment, often reducing the total amount you owe. Unlike bankruptcy, you can keep your assets, though the arrangement will be listed on your credit report.

Credit counselling

If you need help managing your debt, credit counselling provides professional guidance and budgeting support. A certified credit counsellor can negotiate with creditors to reduce interest rates and help you create an affordable repayment plan. This option can also help improve your money management and prevent future financial struggles.

Debt consolidation

Debt consolidation allows you to combine multiple debts into a single loan with a lower interest rate, making it easier to manage payments. This can help you save money on interest and repay debts more quickly and efficiently.

Is bankruptcy right for me?

Deciding whether to file for bankruptcy in Saskatchewan depends on your financial situation and available alternatives. If you have overwhelming debt, can’t keep up with payments, and don’t qualify for other debt relief solutions, bankruptcy may be the best option for you.

Before making a decision, consider seeking advice from a Licensed Insolvency Trustee or exploring the OSB’s Bankruptcy Assistance Program if you’re on low income.

If you can manage your debts through a consumer proposal, debt consolidation, or credit counselling, those options may have less severe consequences than bankruptcy.