Sometimes when we experience financial problems it can be difficult to know where to turn for assistance or what options are available for relief. On this page we have listed those questions we hear most often from our clients. Click on a question to jump directly to the answer.
If you are unable to meet your financial obligations as they come due and are unable to negotiate a settlement with your creditors, you may seek immediate relief from legal action from your creditors by voluntarily assigning your assets to a Licensed Insolvency Trustee.
Technically, everything you own vests with the Trustee at the date of filing an assignment in bankruptcy with the exception of assets exempt from seizure under provincial and federal law. Your assets include all existing assets as well as those you may acquire prior to your discharge. You cannot dispose of any vested assets without the Trustee’s knowledge or consent.
Property exempt from seizure under federal laws may include certain federal benefits, pensions and life insurance policies.
Amounts held in RRSPs are exempt from seizure in bankruptcy, subject to a possible clawback for contributions made in the 12 months preceding bankruptcy
Provincial exemptions include:
In order to make an assignment in bankruptcy you must:
Bankruptcy is not the only option available to individuals experiencing financial difficulties. For those individuals who may have sufficient income to deal with their credit obligations at a reasonable cost over a period of time, their options may include:
These options will be explained by a Trustee or bankruptcy administrator at an initial consultation. This assessment will review various topics, including your assets and liabilities, your monthly income and expenses, and the alternatives available to you.
As an alternative to filing an assignment in bankruptcy, a debtor can make a consumer proposal to their creditors based on their circumstances under the Bankruptcy and Insolvency Act. A consumer proposal must be offered to all preferred and unsecured creditors. It does not affect the rights of secured creditors and must be completed within 5 years. In order to file a consumer proposal, an individual must owe less than $250,000, excluding a mortgage on their principal residence.
Filing an assignment in bankruptcy will stop most wage attachments or garnishments creditors may have initiated.
The Trustee will review your monthly income and expenses and compare it to the standards set by the Superintendent of Bankruptcy. If your income exceeds the standards adjusted for your family circumstances, then a portion will be required to be paid to your Trustee for the benefit of your creditors.
In general, the Bankruptcy and Insolvency Act does not interfere with the rights of your secured creditors. If your creditors have a valid registered secured interest in any of your assets (home, car, etc.) they may allow you to continue with their existing contract in which you make your scheduled payments and retain the asset.
Should you owe a debt to Canada Revenue Agency, CRA could file a Certificate of Registration at the Registry of Deeds, which acts as a lien against your property.
Most legal action will not continue after filing bankruptcy or a consumer proposal. Secured creditors or support claims, however, may not be stopped by a bankruptcy.
The Official Receiver is a Deputy of the Superintendent of Bankruptcy. The purpose of an examination is to determine the cause of your bankruptcy, review the disposition of any previously owned assets and the status of your current assets and review your conduct.
If your bankruptcy falls under the summary administration guidelines (realizable assets not exceeding $15,000), a meeting of creditors may be required to be called by the Trustee, if requested by the Official Receiver or by creditors who have at least 25% of the total proven claims (these meetings are rarely requested). The purpose of the meeting is to:
You must attend the first meeting and any subsequent meeting of creditors. Failure to attend without a reasonable excuse could be considered an offence under the Bankruptcy and Insolvency Act.
The Trustee will prepare your tax returns for the year of your bankruptcy and any outstanding tax return for the year prior to if not already filed. Two tax returns are required to be filed for the year of the bankruptcy. A pre-bankruptcy return is prepared for January 1st to the date of bankruptcy and a post-bankruptcy tax return is prepared from the date of bankruptcy to December 31st. Any refunds generated from the pre- and post-bankruptcy income tax returns and any prior years income tax returns are considered an asset of your bankruptcy estate. Any balances owing to Canada Revenue Agency in the pre-bankruptcy period are dischargeable. Any balance owing to Canada Revenue Agency in the post-bankruptcy period must be paid by you.
An individual who has never been bankrupt previously could be entitled to an automatic discharge on the expiration of 9 months after the date of bankruptcy, or 21 months (depending on income), unless a creditor, the Trustee or the Official Receiver objects. If your discharge is opposed, application will be made to the Court for your discharge.
A second time bankrupt could be entitled to an automatic discharge twenty-four months after the date of bankruptcy, or 36 months (depending on income), unless a creditor, or the Trustee Official Receiver objects. If your discharge is opposed, application will be made to the Court for your discharge.
Absolute Discharge and Automatic Discharge: You are no longer responsible for debts incurred prior to the date of bankruptcy with the exception of those that fall under Section 178 of the Bankruptcy and Insolvency Act. An Absolute Discharge is granted by the Court. An Automatic Discharge does not require Court.
Conditional Discharge: There are certain conditions which you are required to complete as ordered by the Court prior to issuing an Absolute Order of Discharge. Conditions may include but are not limited to paying a specified amount of money into your bankruptcy estate for the benefit of your creditors for a specified time (e.g. $200.00 per month for 12 months). Your discharge is conditional upon you completing the terms and conditions of the order. An absolute order will be issued upon completion of the terms of your conditional order.
Suspended Discharge: There is a delay in your absolute discharge coming into effect or it is reviewed by the Court at a later date.
Refused Discharge: Under extreme circumstances, the Court has the discretion to refuse a discharge.
Debts not discharged by bankruptcy include:
Filing an assignment in bankruptcy becomes a part of your credit record and will remain on record for 6 years from the date of your discharge if you are a first-time bankrupt. If you declare bankruptcy more than once, the information will be kept on file for 14 years for each bankruptcy.
There are steps you can take after you are discharged to re-establish your credit, which are outlined at your financial counselling sessions.
Only your assets and debts are included in your bankruptcy. However, joint debts and assets must be reflected on your statement of affairs. Bankruptcy does not stop the liability of anyone who has guaranteed or co-signed a loan for you, including your spouse.
All assets acquired prior to your discharge become an asset of your bankruptcy estate and must be reported to your trustee. Lottery winnings, inheritance and life insurance proceeds are considered assets if acquired after filing for bankruptcy and prior to your discharge.
You can operate a bank account; however, if your current bank account is held at a financial institution for which you are currently indebted, you should consider opening an account with a different financial institution to avoid any possible offset of future deposits against pre-bankruptcy debts.
Any calls received after filing for bankruptcy should be referred to the Trustee. The bankruptcy process is there to alleviate the pressure from creditors.
All fees and costs associated with filing an assignment in bankruptcy are paid from your bankruptcy estate to which you contribute and are set by the Bankruptcy and Insolvency Act. The Trustee will review in detail the amount you may have to contribute. The amount you will have to pay will depend on your circumstances (earnings and assets that you have).
Your employer cannot fire, suspend or discipline you solely because you filed a consumer proposal. Upon filing a consumer proposal, all wage assignment and garnishments are stopped with the exception of third party demands on government benefits by Canada Revenue Agency, which may remain in effect until the proposal is accepted/deemed accepted by the Court.
The fees associated with filing a consumer proposal are determined by the Bankruptcy and Insolvency Act. All costs are paid from the contributions you make under the consumer proposal.