Understanding Bankruptcy in Nova Scotia: A Simple Guide

Understanding Bankruptcy in Nova Scotia: A Simple Guide

Bankruptcy is a legal process designed to provide relief to individuals or businesses that cannot meet their debt obligations. In Nova Scotia, as in the rest of Canada, bankruptcy is governed by federal law, specifically the Bankruptcy and Insolvency Act (BIA). This guide aims to demystify the concept of bankruptcy in Nova Scotia, offering a basic understanding of the process, implications, and alternatives.

What is Bankruptcy?

At its core, bankruptcy is a formal procedure that allows individuals or companies facing insurmountable debt to have a fresh start, by relinquishing their non-exempt assets in exchange for the discharge of their debts. It’s important to note that not all assets are forfeit; certain exemptions allow debtors to retain basic assets deemed necessary for living and working.

How Does Bankruptcy Work in Nova Scotia?

The process begins by consulting a Licensed Insolvency Trustee (LIT), the only professionals authorized to administer bankruptcies in Canada. The trustee evaluates the debtor’s financial situation, explains the alternatives to bankruptcy, and if bankruptcy is the chosen or unavoidable option, assists in filing the necessary documents.

Once the bankruptcy is filed, an automatic stay of proceedings is initiated. This immediate effect stops most creditors from pursuing legal action to collect their debts, including stopping wage garnishments and other collection efforts. The debtor then surrenders their non-exempt assets to the trustee, who sells these assets to pay off as much debt as possible.

Throughout the bankruptcy, the debtor may be required to perform certain duties, such as attending credit counselling sessions, and providing monthly information about their income and expenses. Depending on various factors, including the debtor’s income, the bankruptcy can last from 9 to 36 months.

Consequences of Bankruptcy

Declaring bankruptcy helps relieve the pressure of unmanageable debts, but it’s not without consequences. Your credit score will be significantly impacted for a period of time after your bankruptcy is discharged. For a first-time bankruptcy, the information remains on your credit report for six to seven years in Nova Scotia. Additionally, certain debts are not discharged by bankruptcy, including alimony and child support payments, certain student loans (if it’s been less than seven years since you ceased being a student), and fines or penalties imposed by the court.

Alternatives to Bankruptcy

Before deciding on bankruptcy, it’s crucial to consider the alternatives. These might include debt consolidation, where multiple debts are combined into a single loan with a lower interest rate, or a consumer proposal. A consumer proposal is an arrangement facilitated by a Licensed Insolvency Trustee where you agree to pay a portion of your debts over a specified period, or to extend the time you have to pay off the debts, or both. Unlike bankruptcy, a consumer proposal allows you to keep all your assets.

Conclusion

Facing overwhelming debt can be a stressful and challenging experience. However, understanding your options, including bankruptcy and its alternatives, can help you make informed decisions towards achieving financial stability. Remember, each financial situation is unique, so it’s always best to consult with a Licensed Insolvency Trustee to explore the most appropriate solution for your circumstances.