Occasionally when I meet with someone considering bankruptcy, I refer to them as “creditor proof”. What does that mean? Does it really mean they are protected from creditors? Well, yes and no. More importantly how does that affect whether or not they need to file for bankruptcy.
Purpose of Bankruptcy is Creditor Protection
The main reason someone files for bankruptcy in Canada is to protect their wages or assets. If you don’t have any wages or assets, you have nothing to protect. Hence, the term creditor proof.
Does that mean I can’t be sued? No, you can still be sued. The difference is that even if you are sued there is little that can be done. You don’t have any wages that can be garnisheed and you don’t have any assets that can be seized.
However, these rules don’t apply to Canada Revenue Agency (formerly known as Revenue Canada). If you owe money to the government such as student loans or CMHC, they have the right to take your tax refunds and HST cheques until that debt is paid in full.
If you are in this situation, you really need to review the cost of filing for bankruptcy versus the benefits. For some the correct answer is to do nothing until you are back to work. For others, especially those with tax refunds that have been seized, it may be more beneficial to save up the money to file for bankruptcy to put an end to losing their tax refunds.
Contact us at 1-866-747-0660 if you have questions about bankruptcy or your debts.