Personal Debt FAQ
- How do I declare personal bankruptcy?
To declare bankruptcy, you must first meet with a Licensed Insolvency Trustee. Your trustee will evaluate your financial situation and determine whether or not bankruptcy is a viable option for you. If applicable, the trustee will file the bankruptcy paperwork.
- Can I declare bankruptcy online?
No. You cannot declare bankruptcy online. You must meet with a Licensed Insolvency Trustee in person.
- How much will I have to pay when I declare bankruptcy?
How much you must pay will depend on your monthly income, assets that you own which are not exempt and wish to keep.
- Will my spouse be affected when I go bankrupt?
Unless your spouse has co-signed any of your debts, your spouse should not be affected when you go bankrupt.
- Can I keep some of my assets if I go bankrupt?
Yes. Certain assets are exempt from seizure and therefore are not transferred to the Trustee.
- Can I keep my house if I go bankrupt?
When the market value of the house does not substantially exceed the mortgage and an agreement can be reached with the lender, the bankrupt can keep his/her house.
- Can I keep my car if I go bankrupt?
Yes, in certain cases (if required for your employment function) and if the car is of low value. If the vehicle is leased, an agreement can be made with the lessor to continue the payments under the contract.
- Will they take my furniture if I go bankrupt?
No, except for valuable items, such as art and antiques, which are not considered essential.
- Will I lose my RRSPs when I go bankrupt?
All RRSP's are unseizable except for the last twelve (12) months' contributions which are seizable.
- Are there alternatives for personal bankruptcy?
Depending on your situation these are other alternatives to personal bankruptcy:
- Negotiation with your creditors
- Consumer Proposal
- Debt Consolidation
- Voluntary Deposit
- What debts cannot be eliminated by filing for bankruptcy?
- Fines, penalties, restitution orders imposed by the court;
- Debts incurred by misrepresentation or fraud;
- Alimony or maintenance payments;
- Debt for damages imposed by Civil Court for intentional bodily harm, sexual assault or wrongful death;
- Student loans (if consumer proposal / bankruptcy occurs within seven (7) years of ceasing full or part-time studies);
- Will my creditors stop harassing me during and after bankruptcy?
They should. By law, all actions against you must stop. Neither secured creditors nor alimony payments are affected by bankruptcy.
- What are my duties and responsibilities when I declare bankruptcy?
- Reveal and turn over all assets and relevant books and records to the Trustee.
- Attend any examination called by the Official Receiver.
- Assist the Trustee with making an inventory of assets.
- Disclose to the Trustee the details of all property disposed of by sale, gift or settlement.
- Attend the first meeting of creditors and any other meetings that may be scheduled.
- Attend a minimum of two counselling sessions.
- Provide the Trustee with all information necessary to file pre-bankruptcy income tax returns.
- Keep the Trustee advised of place of residence, phone number and employer.
- Submit income and expense statements to the Trustee when requested to do so by the Trustee. Pay by monthly payments and/or surplus income payments.
- Resign any corporate directorships.
- Turn over all credit cards to the Trustee for cancellation.
For more information, please refer to the Bankruptcy Insolvency Act.
- What are my tax obligations after I declare bankruptcy?
You are required to complete two income tax returns for the year of the bankruptcy.
- The first for the period before the bankruptcy
- The second for the period after the bankruptcy
- What is a Licensed Insolvency Trustee?
An individual and/or a corporation licensed by the federal government to conduct the bankruptcy process while representing the mass of creditors.
- How does a Trustee get paid?
Trustees are paid out of the proceeds submitted by the debtor to the creditors as per the bankruptcy settlement.
- Should a lawyer represent me during bankruptcy?
Generally, it is not necessary for a lawyer to represent you. However, it is important to realize that the Trustee is not a lawyer nor does the Trustee represent the bankrupt.
- When is my bankruptcy over?
For a first time bankrupt, an automatic discharge will be issued after nine months from the date of your bankruptcy in the following circumstances:
- You have completed two counseling sessions.
- Your creditors, the Superintendent of Bankruptcy, and the Trustee are not opposing your discharge.
- You have not had surplus income based on the Superintendent's Standards during your bankruptcy.
- What is mediation during bankruptcy?
If the debtor disagrees with the Trustee as to the amount that should be paid to the estate in monthly installments when there is surplus income, the Trustee can seek mediation to resolve the matter.
- Will my employer be informed of my bankruptcy?
No, unless we must stop a garnishment of wages.
- Should I keep paying my creditors when I go bankrupt?
Once a debtor becomes bankrupt, they must not make any further payments to any unsecured creditors. Payments to secured creditors should only be continued after consultation with the Trustee.
- What is a consumer proposal?
The consumer proposal is a legal process administered by a Licensed Insolvency Trustee that allows a person to reduce the amount of their debts, extend the time to pay off the debts, or provides some combination of both.
- What's the difference between a consumer proposal and personal bankruptcy?
A consumer proposal allows a person the opportunity to repay a percentage of their debts, while personal bankruptcy involves surrendering a person's seizable assets and asking for their debts to be entirely forgiven.
- How do I know if a consumer proposal is for me?
- The debtor has steady employment which provides a level of income above that necessary for normal living requirements (surplus income).
- A third party is prepared to provide funding or guarantee for the consumer proposal settlement.
- Certain assets which may not be available to the creditors in a bankruptcy proceeding are voluntarily offered as part of the proposal.