What Happens When You Go Bankrupt
Once you file for bankruptcy, all creditor action stops.
This means that your creditors cannot continue any further legal or collection activity against you, including wage garnishments, harassing letters or telephone calls.
The bankruptcy process is designed to help an honest but unfortunate debtor to get a fresh start plus you're are able to keep assets. The following are exempt from seizure pursuant to provincial (Ontario) legislation:
- Clothing, jewelry, personal belongings totaling up to $5,650
- A car, truck or motorcycle valued at up to $5,650
- Household furniture and appliances totaling up to $11,300
- Tools/equipment used to earn a living totaling up to $11,300
- Most life insurance policies
- Majority of RRSPs and pensions
Some other assets are not exempt (ie: a house) however, it is possible to keep them provided you are able and willing to buy them back from the trustee at fair-market-value. If you are making payments to secured creditors and you want to keep the assets they hold as collateral for their loan (ie: car loan, mortgage, etc.) you will have to continue making payments or be willing to surrender the encumbered asset. The rights of secured creditors are unaffected when you make an assignment in bankruptcy.