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What is Bankruptcy?
Declaring Bankruptcy in British Columbia
Having debt and unable to pay it back consistently can be an overwhelming challenge. Missed payments, collection calls and surmounting create stress and anxiety for many Canadians. If you are looking for help, a Licensed Insolvency Trustee can assess your financial situation and determine the best course of action for you.
There are different options to get relief from debt, but if you are unable to pay your bills with no solution in sight, the smartest choice for you may be to wipe the slate clean with a Declaration of Bankruptcy.
Commonly Asked Questions
What does it mean to declare bankruptcy?
Individuals who are unable to meet their debt obligations now or in the near future, can file for bankruptcy under the Bankruptcy and Insolvency Act (Canada). It is meant to protect creditors while still giving relief to those who are burdened with debt. Bankruptcy must be carried out through a Licensed Insolvency Trustee who will handle any assets and will be responsible for the administration of the bankruptcy until it is discharged.
Am I eligible to file for Bankruptcy?
If you are an individual that lives in Canada, has debt exceeding a minimum of $1,000.00 and cannot pay their obligations in a timely fashion, you are likely a good candidate for bankruptcy. Debtors whose debts exceed their assets are entitled to file for bankruptcy in order to get relief and a chance to effectively rebuild their financial future.
What is the process for filing for bankruptcy?
Once you have established that bankruptcy is the best way for you to manage your debts, your Licensed Insolvency Trustee will proceed to prepare and file the necessary paperwork with the Superintendent of Bankruptcy. Once filed, there will be a legal stay of proceedings, meaning creditors can no longer contact you, file a lawsuit against you or garnishee your wages to pay off your debt. Your obligation to your unsecured creditors will be expunged and you will no longer owe these debts.
What do I need to know to discharge my bankruptcy?
The first step is to ensure your Licensed Insolvency Trustee has all your financial information, including all assets and debts. Once bankruptcy has been filed, you will need to provide your Licensed Insolvency Trustee with monthly financial statements and any surplus income payments until your bankruptcy is discharged. You will also be required to attend credit counselling sessions, and to pay your administrative fees as required.
What happens if I have secured debts?
If you have secured a loan with your house, car or other asset, these may be seized during a bankruptcy process if the obligations go unpaid. In this case, you would only be responsible for the current value of the asset, as any amount over and above the current value would be eliminated as a result of the bankruptcy proceedings.
Can Canada Revenue Agency collect tax debts after I file for bankruptcy?
Tax debt is counted as unsecured debt for the purposes of bankruptcy filings. If you have taxes outstanding, you will no longer be contacted for repayment after the stay of proceedings is in place.
Are there debts that will not be eliminated upon discharge from bankruptcy?
Yes, there are several debts that cannot be erased through the bankruptcy process. These include student loans that are less than 7 years old, spousal and child support payments and court-imposed fines. Your Licensed Insolvency Trustee will be able to help you determine if any of your debts will not be discharged through bankruptcy.
Will I be able to keep any of my belongings?
The bankruptcy process is meant to provide relief from debt in a fair and equitable manner. There are some assets that are exempt in order to help individuals to secure work and maintain a reasonable standard of living. Every Province and Territory has its own rules regarding asset retention during bankruptcy.
Some assets that can be retained in British Columbia during bankruptcy include:
Furniture and household items up to a value of $4,000
Tools required for employment, up to a value of $10,000
Clothing for yourself and your children
A motor vehicle up to $5,000 in value
All medical aids required for yourself or your dependents
Home equity between up to $9,000 and $12,000, depending on where you reside
Pension and RRSP contributions can be exempt as well, except for payments made within the past year
Will I be able to earn income during the bankruptcy process?
You will be able to work and earn a wage during the bankruptcy process. You will be required to submit monthly reports, and to pay any surplus income to your Trustee. If your income exceeds the standard amounts set by the Superintendent of Bankruptcy, you will be required to submit a portion of this amount which will be applied against your original debts. This is to ensure that your creditors receive fair treatment if you are able to service some or all of your obligations during the bankruptcy proceedings.
When will my bankruptcy be discharged?
The length of time before discharge varies depending on several factors. First time bankruptcy usually results in a nine-month period, unless there is a large amount of surplus income, in which case it will usually take 21 months for the discharge. For a second and subsequent bankruptcy, it will likely take 24 months for a discharge, and 36 months if there is considerable surplus income.
All obligations under the bankruptcy, including filing of monthly statements, paying of surplus income and payment of administrative fees must be met for a bankruptcy to be discharged. First time bankruptcies will automatically be discharged unless it is challenged by a Trustee or creditor, either for non-compliance or non-payment. Subsequent bankruptcies require a court hearing to complete a discharge.
How long will my bankruptcy affect my credit rating?
A bankruptcy should be reported for about 6 years following your discharge. If more time has elapsed and you still have the bankruptcy on your file, you should contact the credit bureau to have this information updated.
Will my Licensed Insolvency Trustee charge fees for their services?
Professional fees will be charged for the services provided by your Licensed Insolvency Trustee. These fees are minimal and are meant to cover the cost of document preparation, administrative matters, tax preparation and client management. The fees can usually be paid over time instead of in one lump sum and are a worthwhile investment in your financial future.
After talking with a Licensed Insolvency Trustee, David and Julie decide that bankruptcy is the most appropriate option to handle their debts. The trustee explains the way their creditors will be paid and what they will need to do during the bankruptcy process...