Canadian Bankruptcy FAQ's and Proposal Information - FAQ's

Welcome to our FAQs Page:

> Trustee Video (29 secs.)

 

(Bankruptcy is a Federal law and except for Exemptions, which are set by the provinces and territories, is applicable to all provinces and territories)

1. Owe at least $1,000; 
2. Not be able to meet your debts as they are due to be paid.

 

 

What is a Trustee in Bankruptcy?

The website of the Superintendent of Bankruptcy describes trustees in bankruptcy as follows:

A trustee in bankruptcy is a person licensed by the Superintendent of Bankruptcy to administer proposals and bankruptcies and manage assets held in trust. The trustee can give a debtor information and advice about both the proposal and bankruptcy processes and make sure that both the debtor's rights and the creditor's rights are respected.

A person has to use a trustee if he or she goes bankrupt. However, trustees are not just for filing bankruptcy. They are also Professional Debt Consultants and can make arrangements with your creditors on your behalf; provide debt counselling; negotiate settlement agreements and help you make a proposal to your creditors to avoid bankruptcy. If a trustee feels you need the protection of independent legal advice the trustee will refer you to an insolvency lawyer. In some cases the trustee will be able to advise you of a solution that will cost you nothing and have you avoid bankruptcy.

When dealing with a trustee you are protected as follows:

1. By the fact that the federal government regulates trustees;
2. By the stringent code of ethics to which all trustees are subject;
3. If you have a dispute there is a mechanism in place to have the dispute mediated .

In most cases, It will cost you less to use a trustee than other Debt Consultants since trustees have their fees regulated by the government.

Trustees are the most highly trained and educated Debt Consultants in Canada. Almost all trustees have both an accounting designation and a university degree. In addition, all must complete and pass a rigorous three-year bankruptcy and law course and be investigated by the RCMP before being granted a trustee licence. Ongoing professional development is mandatory.

 

Will my Creditors Stop Harassing me?

> Trustee Video (35 secs.)

Yes, they will! By law, all actions against a bankrupt must cease once the documents are filed. This does not apply to secured creditors such as banks holding, for example, a lien on a car.
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Who Will Know?

> Trustee Video (30 secs.)

 

How is my spouse affected?

> Trustee Video (23 secs.)

Your spouse, whether common law or married will not be affected by your bankruptcy if he or she is not responsible for any of your debt (did not sign an agreement or contract for any of your debt). If they have a supplemental credit card they are probably responsible for that debt. Your spouse's credit rating will not be affected by your bankruptcy and any assets in the spouse's name will not be part of the bankruptcy.

If your spouse is responsible for any of your debt or has his own debt then the spouse may have to file bankruptcy too.

No. They cannot. If your bank cancels or refuses to open a bank account for you because you have been or are in bankruptcy they are breaking the laws of the land. For more information and to lodge a complaint please refer to this page.

What do I do if I have Canadian debt but now live in a foreign country?

You have a number of options, and may even be able to file Canadian bankruptcy from that foreign country. For details please refer to this page.

The property exempt from seizure is set by the provinces and territories as follows:

Alberta; B.C.; Manitoba; New Brunswick; Newfoundland; Nova Scotia; NWT/Nunavut;

Ontario; PEI;  Quebec; Saskatchewan;  Yukon.

In a bankruptcy, assets in excess of your allowed personal exemption, such as, real estate, automobiles and boats that are the property of the bankrupt as at the date of bankruptcy and anything that the bankrupt acquires during the bankruptcy vests in the trustee for the benefit of the creditors of the bankrupt. This would include inheritances received or to which the bankrupt might become entitled, by the death of someone during the time of the bankruptcy. It also includes such things as lottery winnings and anything that the bankrupt might accumulate, such as assets bought with any surplus income.

Tax refunds outstanding, as at the date of the bankruptcy, also vest in the trustee for the benefit of the creditors. Income Tax law requires a bankrupt to file two tax returns for the year of the bankruptcy. The first (pre bankruptcy tax return) covers the period January 1st through to the date of bankruptcy. The second (post bankruptcy tax return) covers the period starting with the date of the bankruptcy and ending December 31st. Pre and Post bankruptcy tax rebates vest in the trustee for the benefit of the creditors.
 

There are standards supplied to the trustee by the Superintendent of Bankruptcy which instructs the trustee to collect funds, for the benefit of creditors, from any earnings above what is reasonable for the number of people in the family and the bankrupt's personal situation.  To find out how much you would have to pay fill in this form.

The vast majority of 1st. time bankrupts are discharged in 9 months, at which time most of their debts are erased.

When is my bankruptcy over?

> Trustee Video (23 secs.)

 

What if I have the cash flow to make a proposal?

> Trustee Video (32 secs.)

 

PowerPoint presentation: Steps in a Consumer Proposal.

More information about proposals

If a person has the ability to make a proposal (i.e. his or her income exceeds living expenses), then he or she should consider making a proposal.

What about the terrible stress that I am under?

> Trustee Video (47 secs.)

Once you file bankruptcy or a proposal you'll find that your stress will be gone.

You have taken a positive step to regain financail control over your life. Once the bankruptcy or proposal papers are filed the trustee takes over all dealings with your creditors. If a creditor or collector calls tell him you have filed and refer him to your trustee.

It's the law in Canada that all legal action stops once a bankruptcy or proposal is filed.

Will I end up with a better credit rating if I use a credit counsellor?

> Trustee Video (64 secs.)

You must take counselling in order to be eligible for a discharge from bankruptcy and to complete your consumer proposal. The counselling can be one-on-one, with yourself and your trustee, or if you prefer, it can be in a group consisting of other bankrupts and your trustee. The first counselling session must be held between 10 and 60 days following bankruptcy; the second counselling session must be held no later than 210 days following the date of bankruptcy. The cost for this is $85, plus GST, for each individual counselling session.
 

Alimony or maintenance payments are not affected by bankruptcy. These payments must be kept up to date. A bankruptcy does not stop any actions for collection.  Alimony and maintenance are provable claims and will be paid as a preferred claim for amounts incurred in the year before bankruptcy.
 
 

If the date of bankruptcy is more than ten years after the finish of studies, the debt will be wiped out upon the bankrupt's discharge.

A discharge from bankruptcy does not release a student loan if the bankruptcy occurs within ten years after finishing studies.  A Court can order the discharge from a student loan at any time after ten years of ceasing to be a student, and after being discharged from bankruptcy, if the person has acted in good faith and the person will continue to experience financial difficulty in paying the student loan.

CRA's position is that they, after taking appropriate steps, can register as a secured creditor against real property (real estate) or personal property (furniture or a vehicle, etc.) of a debtor. 
 

Ninety days after an assessment, if there is no appeal lodged, CRA can make application to the Federal Court to have a judgement issued.  CRA then must register a secured claim under the person's name under the Personal Property Security Registry.  CRA, if real property is involved, will also register under Land Titles.
 

If the debt is large enough, you should see an insolvency lawyer or a Trustee immediately.  A search of the Personal Property Security Registry or land titles will reveal whether CRA has filed a secured claim against you.  You may want to consider filing for bankruptcy or consider filing a proposal under the Bankruptcy and Insolvency Act

N.B. CRA has advised that:
(a) they will honour provincial exemptions;
(b) they started registering their security position on or about May 1, 1999.
 

Most debts are erased by the bankrupt's discharge except for the following:

In the vast majority of cases the cost of a bankruptcy is regulated by the government and is less than $200 a month for each of 9 months.

What does it cost?

> Trustee Video 16 secs.)

 

 

Trustee fees, filing fees and counselling fees are regulated by the government. The trustee normally is paid out of the funds arising from the liquidation of the bankrupt's assets. If the bankrupt has no assets available, then the trustee will require a retainer or require the bankrupt, over time, to pay the trustee's fees and disbursements. In the simplest cases this amounts to $1,347 plus GST and counselling costs. The firms listed on BankruptcyCanada.com have a payment plan that allows you to pay the costs over time. To find out how much you would have to pay fill in this form.

> Trustee Video (41 secs.)

You will get credit again after a bankruptcy or a proposal. Please refer to our tips on reestablishing a good credit rating and our list of After Bankruptcy Lenders all across Canada.

View our audio PowerPoint presentation on How to Prepare for your Meeting with the Trustee.