The Bankruptcy and Insolvency Act is federal legislation that was enacted to provide an honest but unfortunate debtor relief from their debt.  The objective of filing a bankruptcy or proposal is to enable a debtor to eliminate their unsecured debt and to move forward with a fresh start and to be a future contributor to society.

There are also provisions to maintain the integrity of the system and to ensure the process is not abused.  A little advice to debtors to avoid issues in their insolvency proceedings:

  • Do not max out your credit cards and lines of credit prior to filing. Creditors do not look favourably on considerable debt incurred just prior to an insolvency filing and could oppose your discharge or vote against a proposal.
  • Regardless of sound reasons to transfer an asset to a family member, the transaction will be subject to scrutiny by the trustee and creditors and could be reversed.
  • Paying a significant amount to a creditor to protect a co-signor could be considered a preferential payment that your trustee will try to recover.
  • Accurately prepare your monthly income and expense statements to track every dollar you spend. You can’t create a reasonable budget for future financial stability if you do not know where your money is spent.
  • Complete your statutory duties. There is a stay of proceedings once you file your bankruptcy, but it is your discharge that relieves you of your obligation to pay creditors.  If you don’t complete your duties (2 counselling sessions, providing tax information, etc.), you will not get your discharge, and your creditors may be able to pursue you for payment again.

If you are struggling with debt, reach out to Taylor Leibow Inc. to review your financial situation in detail and educate yourself on possible solutions.

Kathy LenartBy Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)