Consumer Bankruptcy in Canada - Consequences of Bankruptcy

Consequences of Bankruptcy

Positive consequences	Negative consequences
Bankrupt is discharged from all or a significant part of the existing debts and is able to make a "fresh start" Creditors are not allowed to start new legal actions or to continue existing ones against the debtor or the third parties in possession of bankrupt’s property Collection agencies are not allowed to enforce the debts, meaning the collection calls will stop Bankrupt is entitled to keep certain property exempted from distribution among the creditors Although the bankrupt gives up a part of his surplus income during the bankruptcy period, it is significantly less than the total payments required to his/her creditors prior to the bankruptcy	Bankrupt gives up the legal title and control of non-exempt property Bankruptcy will be shown on bankrupt’s credit rating for as long as seven years after discharge for a first bankruptcy and up to fourteen years on the second bankruptcy Bankrupt loses some professional and civil privileges, i.e. capacity to hold money in trust, capacity to be elected to certain civil positions Bankruptcy still carries negative stigma, i.e. negatively influence bankrupt’s credibility in the credit granting community Bankrupt loses part of any surplus income and all property received before his discharge, and is transferred to trustee for distribution among creditors Debtor is deprived of a part of the income and the property and as a consequence may have to lower his and his family standards of living Debtor’s contractors may suspend and cancel the services where there is a contractual ipso facto clause allowing contractors to cancel the contract on bankruptcy Bankrupt has limited contractual capacity, debtor’s contracts are subject to a review by a trustee in bankruptcy Debts that are not dischargeable debts still have to be repaid even after a discharge order is made (i.e. fraud, child support) Bankrupt has duties to perform before the discharge, and, if the discharge is conditional, some duties to perform afterwards depending on the findings of the Court

Positive consequences

Negative consequences

Bankrupt is discharged from all or a significant part of the existing debts and is able to make a "fresh start"
Creditors are not allowed to start new legal actions or to continue existing ones against the debtor or the third parties in possession of bankrupt’s property
Collection agencies are not allowed to enforce the debts, meaning the collection calls will stop
Bankrupt is entitled to keep certain property exempted from distribution among the creditors
Although the bankrupt gives up a part of his surplus income during the bankruptcy period, it is significantly less than the total payments required to his/her creditors prior to the bankruptcy

Bankrupt gives up the legal title and control of non-exempt property
Bankruptcy will be shown on bankrupt’s credit rating for as long as seven years after discharge for a first bankruptcy and up to fourteen years on the second bankruptcy
Bankrupt loses some professional and civil privileges, i.e. capacity to hold money in trust, capacity to be elected to certain civil positions
Bankruptcy still carries negative stigma, i.e. negatively influence bankrupt’s credibility in the credit granting community
Bankrupt loses part of any surplus income and all property received before his discharge, and is transferred to trustee for distribution among creditors
Debtor is deprived of a part of the income and the property and as a consequence may have to lower his and his family standards of living
Debtor’s contractors may suspend and cancel the services where there is a contractual ipso facto clause allowing contractors to cancel the contract on bankruptcy
Bankrupt has limited contractual capacity, debtor’s contracts are subject to a review by a trustee in bankruptcy
Debts that are not dischargeable debts still have to be repaid even after a discharge order is made (i.e. fraud, child support)
Bankrupt has duties to perform before the discharge, and, if the discharge is conditional, some duties to perform afterwards depending on the findings of the Court

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