What is Bankruptcy?

Bankruptcy is a solution to a problem.

The problem that it solves is that your creditors are not being paid.

When you don't pay your creditors it forces them to take action to make you pay.

This force could be calling you repeatedly until you pay them. They might encourage you to borrow money from another creditor to pay them. Or to sell some of your things and give them the money. Or they might tell you to cash in investments. Or they might tell you to speak with your parents and ask them for help.

If this doesn't work, they will sue you.

The Court will grant them a judgment outlining how much you have to pay, including legal fees and interest. They may then send that judgment to your employer and your bank. This can result in your wages being garnished or funds being frozen and sent to the creditor.

Not a good situation.

If you have lots of assets, creditors might apply to the Court for an order putting you into bankruptcy. This way they can stop you from selling assets and using the proceeds as you see fit.

Don't worry though. This hardly ever happens with consumer debtors.

For consumers, bankruptcy is often a very good thing.

Bankruptcy does not pay your creditors.

Bankruptcy stops your creditors from being able to collect on their debts.

It's hugely advantageous for Canadians who are overwhelmed by debt.

Over the decades that I helped people file bankruptcy, almost everyone was surprised by how beneficial the law was to them. They, probably like you, thought that bankruptcy was a really bad thing that happened to someone.

With a little education, they came to understand that bankruptcy is actually a really good thing that someone does for themselves.

Bankruptcy is not a problem to avoid.

It is a solution to embrace.