What is bankruptcy?
Bankruptcy is a legal proceeding that is available to help a person cope with a financial crisis. You can go into bankruptcy if you owe more than $1000 and are not be able to meet your debts as they are due to be paid. One of the main purposes of bankruptcy legislation is to afford the opportunity to a person, who is hopelessly burdened with debt, to free himself of the debt and start fresh - "a new lease on life."
How do I go into bankruptcy?
There are two ways a person can go into bankruptcy. The first and more common way is to have the person make an assignment in bankruptcy (voluntarily go into bankruptcy). The second, and rarely used way, is for creditors to ask the Court to make an Order that a person is bankrupt. In both these cases a Trustee in Bankruptcy is required to administer the bankruptcy.
Will creditors stop harassing me?
Yes, they will. By law, all actions against a bankrupt must cease once the documents are filed. This does not apply to secured creditors such as banks holding, for example, a lien on a car.
What does it cost?
Trustee fees, filing fees and counselling fees are regulated by the government. The trustee normally is paid out of the funds arising from the liquidation of the bankrupt's assets. If the bankrupt has no assets available, then the trustee will require a retainer or require the bankrupt, over time, to pay the trustee's fees and disbursements. In the simplest cases this amounts to $1,347 plus taxes and counselling costs. Most firms have a payment plan that, ironically, allows you to pay the costs over time.
What about my wages during bankruptcy?
Earnings of a bankrupt after the start of a bankruptcy, such as wages and salaries or commissions, belong to the bankrupt person and are not interfered with by the trustee in the ordinary course of events. There are standards supplied to the trustee by the Superintendent of Bankruptcy which instructs the trustee to collect funds, for the benefit of creditors, from any earnings above what is reasonable for the number of people in the family and the bankrupt's personal situation.
When is my bankruptcy over?
For those people who have not been bankrupt before, an automatic discharge will take place after nine months if the creditors, Superintendent of Bankruptcy or trustee have not opposed your discharge and you have received counselling. Occasionally, creditors do object and the matter goes to mediation or is heard before a Registrar or a Judge. The discharge is usually granted where the bankrupt is only earning sufficient income to keep himself and his dependents reasonably provided for. It is the discharge of the bankrupt, with minor exceptions, that cancels the bankrupt's debts. In the event that you have been bankrupt before, your discharge will not be automatic and must be heard before a Judge or a Registrar.
What don't I keep?
In a bankruptcy, assets in excess of your allowed personal exemption, such as, real estate, automobiles and boats that are the property of the bankrupt as at the date of bankruptcy and anything that the bankrupt acquires during the bankruptcy vests in the trustee for the benefit of the creditors of the bankrupt. This would include inheritances received or to which the bankrupt might become entitled, by the death of someone during the time of the bankruptcy. It also includes such things as lottery winnings and anything that the bankrupt might accumulate, such as assets bought with any surplus income. Tax refunds outstanding, as at the date of the bankruptcy, also vest in the trustee for the benefit of the creditors.
What if I can make a proposal?
If a person has the ability to make a proposal (i.e. his or her income exceeds living expenses), then he or she should consider making a proposal. If any person files for bankruptcy when he or she has the ability to make a proposal, it is the Trustee's duty to oppose the bankrupt's discharge. In this case, the bankrupt may be in bankruptcy up to an additional 12 months beyond the usual 9 months. The bankrupt will be required to make payments in each of these months.
Why do I have to take counselling?
You must take counselling in order to be eligible for an "automatic nine month discharge". The counselling can be one-on-one, with yourself and your trustee, or if you prefer, it can be in a group consisting of other bankrupts and your trustee. The first counselling session must be held between 10 and 60 days following bankruptcy; the second counselling session must be held no later than 210 days following the date of bankruptcy. The cost for this is currently $85, plus sales tax, for each individual counselling session.
What happens during the bankruptcy?
The bankrupt must keep the trustee informed as to where the bankrupt is living and also must respond to the trustee's requests and assist him as required and provide whatever information is requested. The bankrupt must also provide the trustee with reports as to earnings and living expenses and any change in the bankrupt's family situation. The trustee will provide the bankrupt with appropriate forms to be filled in that will provide the trustee with the necessary information. A meeting of creditors is not required unless requested by the Superintendent of Bankruptcy or creditors with an aggregate of at least 25% of the proven claims. These meetings are usually held at the office of the trustee.
What about student loans?
If the date of bankruptcy is more than ten years after the finish of studies, the debt will be wiped out upon the bankrupt's discharge. A discharge from bankruptcy does not release a student loan if the bankruptcy occurs within ten years after finishing studies. A Court can order the discharge from a student loan at any time after ten years of ceasing to be a student, and after being discharged from bankruptcy, if the person has acted in good faith and the person will continue to experience financial difficulty in paying the student loan.