Before you decide on filing for bankruptcy due to your unmanageable debts, it is important that you meet with a Licensed Insolvency Trustee (LIT). They will help to evaluate your current financial situation as well as provide you with multiple alternatives that you can take to get rid of your debts.
What to do if you cannot find a Licensed Insolvency Trustee (LIT)?
Under circumstances when you are unable to find a LIT, you can take the help of OSB’s Bankruptcy Assistance program provided-
- You have previously tried to get in touch with at least 2 LIT to hire them
- You are not involved in commercial activities
- You are not in prison
What will happen if you file for bankruptcy?
When you file for bankruptcy, with the help of the LIT, you will need to submit all required documents to the court to file for bankruptcy. Once you have files, you will no longer be dealing with your creditors directly, instead, the LIT will deal with the creditors on your behalf. Once you are declared bankrupt, you will-
- No longer make direct payments for an unsecured loan
- Get an automatic stay, preventing any kind of money collection
- Wage garnishment will stop
Let’s find in detail –
- All your assets, except the exempted ones, will be sold off by the LIT to help pay off the creditors
- Once you file for bankruptcy, the LIT will notify all your creditors for the same.
- You will need to attend the creditor’s meeting.
- An OSB will examine you under an oath. This will be done to confirm the cause of bankruptcy, your conduct, and how you plan to dispose of your property to pay off your dues.
- You will also need to attend the financial counseling course to understand how to manage your debts and financial affairs.
- You will also need to pay the LIT with surplus income so that they can pay off your secured dues or the creditors.
- You will get a bankruptcy discharge that will free you from all legal obligations that entitle you to pay a debt.
What is the impact of filing for bankruptcy?
Filing for bankruptcy has its pros as well as cons. Though bankruptcy helps relieve you from the burden of constant collection calls, you also have to face the negative impacts of filing the same. They are –
- Low Credit Rating – When you file for bankruptcy, your credit score automatically goes down. A low credit score will ultimately be problematic when you go for a new loan.
- Property – When you file for bankruptcy, under certain exceptions you can retain your property like a house or car provided you can pay regular monthly installments for the same. Otherwise, you have to surrender the property to your LIT, who will further sell it to pay off your creditors.
- Spouse – Only if you have a joint debt will your spouse be bothered with repayment.
- Wages – Though after filing for bankruptcy, you will not have to undergo wage garnishment, however, you will need to pay the surplus income to your LIT to pay off the creditors.