How long will you be in bankruptcy?

Canada imposed harsher laws on bankrupts on September 18, 2009. It is now going to take longer to get out of bankruptcy and it will cost more. It is estimated that the harsher laws will affect 25% of the people who file bankruptcy.

If you are one of the persons affected you should seriously consider making a proposal.

Here are the rules:

- 9 month automatic discharge for 1st. time bankrupts who fulfill all their duties and who do not have excess income.  e.g. less than $3,062.00 a month take home pay for a family of 3. (Note: 1)

- 21 months (or more at the court's discretion) for 1st. time bankrupts who fulfill all their duties. and who have excess income. e.g. more than $3,062.00 a month take home pay for a family of 3. (Note: 1)

-24 months for 2nd time bankrupts who do not have excess income.. e.g. less than $3,062.00 a month take home pay for a family of 3. (Note: 1)

-36 months for 2nd time bankrupts who have excess income. e.g. more than $3,062.00 a month take home pay for a family of 3. (Note: 1)

-Bankrupts with personal income tax debt of $200,000.00 or more representing 75 percent or more of total unsecured claims, are not eligible for an automatic discharge. They must go to court for an adjudication.

Note: 1 Surplus Income Standards for 2009/10

Information on how the calculations are made is at this link.

What if your non-bankruptcy spouse refuses to divulge his or her income to the trustee?

The government has imposed a stiff penalty if your non bankrupt spouse refuses to divulge his or her income to the trustee.

If your spouse works and is not going to file for bankruptcy, the trustee is obligated to base your monthly payments on family income including the income of the non-bankrupt spouse.  The non-bankrupt spouse can refuse to divulge his or her income to the trustee, in which case the trustee will calculate the monthly payments excluding the non-bankruptcy spouse from the calculation but only allowing 50% of the applicable Superintendent’s standards corresponding to the number of person in the family unit, including the spouse who would not divulge his or her income. 

If you wish to see how this affects the monthly payments you will be obliged to make, you can get a close approximation by using the Personal Bankruptcy Predictor at www.BankruptcyCanada.com