The Process

Personal Bankruptcy

The easiest way to describe a personal bankruptcy is that it brings you back to a starting point with no realizable assets and no liabilities, essentially debt free (excluding secured debt and debts that survive a bankruptcy).

financially stressed woman reviewing bills

At a free, initial assessment our trustees will review your financial situation in detail and explore debt relief options.  If you decide to proceed with an assignment in bankruptcy, we will prepare the statutory documents for your signing.  Once the bankruptcy is filed with the Office of the Superintendent of Bankruptcy, your bankruptcy trustee must realize on your assets that have value and you may have to make surplus income payments.

Stay of Proceedings

Upon the filing of a bankruptcy, there is a stay of proceedings which stops your unsecured creditors from pursuing you for payment of their debt.  The stay of proceedings will stop a wage garnishment and collection calls and provide you debt relief.  The stay of proceedings is effective against the Government of Canada and garnishments for tax debt.

Assets

Your Licensed Insolvency Trustee must realize on any assets you own that have a value. This means that the Trustee will sell investments, vehicles, shares, etc. You may be able to settle with the Trustee to retain these assets.

When analyzing your assets, the Trustee will compare the value of the asset to any debt secured against the asset. Thus, if you own a home worth $100,000.00 and have a mortgage secured against the house for $100,000.00, there is no equity in the house and your Trustee would not sell your home.

There are also certain assets that are exempt from seizure by your Trustee. These are:

  • Principle residence if equity is less than $10,783;

  • Household furniture up to a liquidation value of $14,180.00;

  • Personal automobile up to a liquidation value of $7,117.00;

  • Tools of the trade (required to perform your work) up to $14,405.00;

  • RRSP’s (except for contributions in the preceding twelve months) and life insurance policies.

Your Licensed Insolvency Trustee will explain these in full at your free, initial assessment.

Debts

A bankruptcy will relieve you of all debts owing at the filing of your documents except those under Section 178 of the Bankruptcy and Insolvency Act as follows:

  • fines or penalties imposed by a court;

  • award of damage with respect to intentional bodily harm, sexual assault or wrongful death;

  • debt for alimony, child support or maintenance;

  • debts arising from illegal activity such as fraud, embezzlement, misappropriation;

  • fraudulent misrepresentation;

  • false pretenses;

  • dividend for an undisclosed creditor; and

  • student loans if less than seven years from completion of your studies.

Amounts owing to Canada Revenue Agency for personal income taxes and other tax liabilities are discharged in a bankruptcy or proposal.

Surplus Income

The governing body of bankruptcies in Canada, the Superintendent of Bankruptcy, has set a minimum level of income that is required for living expenses. If your family income exceeds this level, you may be required to make monthly payments to the Trustee. Your Trustee will explain this in detail at your initial assessment in our Hamilton, Burlington, or St. Catharines offices or if you prefer virtually.

Discharge from bankruptcy

  • A first time bankrupt, with no surplus income payment requirement, will be eligible for an automatic discharge in nine months.  If you are obligated to make surplus income payments, this time period is extended to 21 months.
  • A second time bankrupt is eligible for an automatic discharge in twenty-four months (if no surplus income) or thirty-six months (if obligated to make surplus income payments).
  • A bankruptcy will impact your credit rating in that it is reported as an R9 for 7 years from discharge in a first-time bankruptcy.   A second bankruptcy will be reported for 14 years from discharge.  The relief from your debt problems typically outweighs the negative impact and the trustee will discuss rebuilding your credit in two mandatory counselling sessions.

Contact one of our Licensed Insolvency Trustees at our Hamilton, Burlington, or St Catharines offices to see if a bankruptcy is the correct debt solution for you.

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