- What Is Bankruptcy?
- How Do I Go Into Bankruptcy?
- Should I Have a Lawyer?
- What Debts Are Affected By Bankruptcy?
- Will My Creditors Stop Harassing Me?
- Who Will Know?
- How Much Am I Allowed to Keep?
- Will I Lose My House/Car?
- What Don't I Keep?
- Are A Spouse's Assets And Liabilities Affected By The Bankruptcy?
- What About My Wages During Bankruptcy?
- Can A Bankrupt Have A Bank Account?
- How Does A Bankruptcy Affect A Co-Signer?
- What Is Counselling And Do I Have To Take It?
- What Happens During The Bankruptcy?
- When Is My Bankruptcy Over?
- What About Alimony and Maintenance?
- What About Student Loans?
- What Does It Cost?
- Duties Imposed Upon The Bankrupt
Bankruptcy is a legal proceeding that is available to a person to cope with a financial crisis. One of the main purposes of bankruptcy legislation is to afford the opportunity to a person, who is hopelessly burdened with debt, to free himself of the debt and start fresh -- a new lease on life." To go into bankruptcy it is necessary for a person to be insolvent. To be insolvent means you:
a) owe at least $1,000;
b) are not able to meet debts as they are due to be paid;
c) your debts exceed the value of your assets.
There are two ways a person can become a bankrupt. The first and more common way is to make an assignment in bankruptcy (voluntarily go into bankruptcy). The second, and rarely used way, is for creditors to ask the court to make an order that a person is bankrupt. In both these cases a licensed Trustee in Bankruptcy is required to administer the bankruptcy.
Usually, you complete an application form and provide it, along with all related information and documentation, to the Trustee. The Trustee must do an assessment with you to ensure that bankruptcy is the most appropriate option in your circumstances. The Trustee then has the legal bankruptcy documents prepared for your signature, and once they are signed and filed with the Superintendent of Bankruptcy, you are officially bankrupt.
Generally, it is not necessary. However, if a person feels the need, the Trustee encourages the bankrupt to seek legal counsel. The Trustee is not a lawyer, nor does the Trustee represent the bankrupt.
Certain kinds of debts (including interest) are not erased by bankruptcy. They are:
1) Fines imposed by a court;
2) Debt incurred by misrepresentation (fraud);
3) Alimony or maintenance payments;
4) Debt for damages imposed by Civil Court for intentional bodily harm, sexual assault or wrongful death;
5) Student loans, if bankruptcy occurs within 7 years of ceasing full or part time studies.
Also, bankruptcy does not generally interfere with secured debts (i.e. a mortgage or vehicle lease) if there is no equity in the secured asset.
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 mortgage on a house or a lien on a car, nor does it apply to debt for alimony/maintenance.
In a bankruptcy, where there are significant assets, a notice is placed in the "legals" section of the newspaper notifying creditors of the date of the meeting of creditors. If there are minimal assets, the creditors are notified by mail only -- there is no advertisement in the "legals" section of the newspaper. Any legal filing of a bankruptcy is a public document that the general public can access. From this documentation, the Credit Bureau is notified and the bankruptcy is recorded and will remain on your credit record for approximately six years from the time of your discharge. This does not mean that you cannot obtain credit during this time. Any granting of credit is the responsibly of the creditor to approve. The bankrupt should send a copy of the discharge to the Credit Bureau to ensure their records are up to date.
Pursuant to the B.C. Court Order Enforcement Act, any individual in British Columbia who filed bankruptcy after May 1, 1998, is allowed to keep the following:
|Tools of Trade||$10,000||$10,000|
|Household and Personal Effects||$4,000||$4,000|
| Automobile (if behind in family |
maintenance payments - reduce
| $5,000 ||$5,000|
Plus: all necessary clothing and all required medical aids (debtor or dependent.
As well, under other legislation, certain superannuation plans, life insurance plans and settlements for "pain and suffering" are also exempt.
Note: a husband and wife could have total exemptions as high as $56,000 ($28,000 x 2) in the Duncan, Nanaimo and North Island area.
This depends on how much equity you have in the asset. With a house for example, your equity would be the amount left over after mortgages, penalties, taxes and estimated real estate commissions were taken into account. If your equity in the asset is within the allowable exemption limit, then the Trustee will generally "disclaim" any rights to it. You and the creditor would then make arrangements for you to keep the asset and continue paying the mortgage or loan, or the lender would have the right to take back the asset. If your equity exceeds the exemption limit, then arrangements can often be made with the Trustee for you to "buy back" anything over the exemption limit in order to keep your assets.
In a bankruptcy, assets (or equity in assets) in excess of your allowed personal exemption and anything that you acquire during the bankruptcy vests in the trustee for the benefit of your creditors. This would include inheritances received or to which you 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 you might accumulate, such as assets bought with any surplus income. As well, any cash assets you have at the time of your bankruptcy are generally not allowed as exempt, no matter the amount.
Tax refunds outstanding, as of the date of the bankruptcy, also vest in the trustee for the benefit of the creditors. Income tax law requires 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. Any pre-bankruptcy tax refunds (including GST refunds) vest in the Trustee for the benefit of the creditors.
You will be asked to volunteer to pay any refunds receivable from your post-bankruptcy return to the Trustee for distribution to the creditors. While you are not legally obliged to give up these funds, the Trustee or creditors may apply for a court order in this respect or your refusal may be reported to the court at the time of your discharge.
Not directly. Husbands and wives are separate individuals. Therefore, unless the spouse also files bankruptcy, the spouse's assets and liabilities are not affected. However, where assets are owned jointly, e.g. a house or car, it is the Trustee's responsibility to liquidate the one-half interest owned by the bankrupt.
Also, if a debt was signed by both spouses, then the bankruptcy of one spouse means that the other is now liable for the full debt.
You will be under income restrictions while you are in bankruptcy and must do monthly income and expense reporting to the Trustee. There are standards set out by the Superintendent of Bankruptcy stating the allowable net income level based on the number of people in the family. The Trustee determines any other allowances (such as alimony/support payments or daycare) based on the bankrupt's personal situation and monitors and collects funds, for the benefit of creditors, from any earnings above the Allowed Living Allowance. Subject to these restrictions, the earnings of a bankrupt after the start of a bankruptcy, such as wages and salaries or commissions, belong to the bankrupt person and are not interfered with by the Trustee in the ordinary course of events.
Yes. However, permission must be obtained from the Bank, after disclosing the bankruptcy, for any overdraft privileges.
The co-signer will continue to have liability for the debt. The bankruptcy does not cancel the responsibility of other parties.
You must take counselling in order to be eligible for an "automatic nine month discharge." Even if you have been bankrupt before and don't qualify for the automatic discharge, the courts generally will not allow your discharge if you have not attended for the counselling. The counselling relates to budgeting, financial management and causes of bankruptcy, and can be one-on-one or in a group session. 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.
You must keep the Trustee informed as to where you are living and as to any material changes in your circumstances. You also must respond to the Trustee's requests and assist and co-operate in your bankruptcy as required and provide whatever information is requested. You must also provide the Trustee with monthly reports of earnings and expenses. The Trustee will provide you with the appropriate forms to be filled in to provide the necessary information. As well, there may be a meeting of creditors approximately 1-2 months after the commencement of the bankruptcy that the bankrupt is required to attend. These meetings are usually held at the office of the trustee.
If you have never been bankrupt before and you have completed the required counselling sessions, and if there are no filed objections to your discharge, then you would automatically be discharged from bankruptcy after nine months.
If you have been bankrupt before, or if you chose to file bankruptcy when you could have made a viable proposal instead, or if a creditor, the Superintendent of Bankruptcy or the Trustee have opposed your discharge, then you will not qualify for an automatic discharge. Your discharge would then have to be decided either by a mediation process with the Trustee and the Superintendent's Office, or by the Bankruptcy Court.
It is the discharge of the bankrupt that cancels the debts.
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.
Also, if you have alimony or maintenance arrears outstanding when you file for bankruptcy, your vehicle exemption limit is reduced from $5,000 to $2,000.
Student loans (including interest) survive bankruptcy if the bankruptcy occurs within 7 years of ceasing full or part-time studies.
However, the court may order that the bankrupt is discharged from such debt at any time after 7 years of ceasing to be a student if the court is satisfied that:
a) the bankrupt has acted in good faith with regards to the liabilities under the loan; and
b) the bankrupt has and will continue to experience financial difficulty to such an extent that he or she will be unable to pay the liabilities under the loan.
The bankrupt would be responsible for retaining a lawyer and making any application to court to have this debt discharged.
The cost varies with the complexity of the administration. In the simplest cases it usually amounts to $1,850, which includes filing fees with the Superintendent of Bankruptcy, Trustee fees for administration and counselling sessions together with disbursements. In certain circumstances you may make payments for these fees over the duration of the bankruptcy.
The bankrupt must fulfill all of the following duties:
- Reveal and turn over to the Trustee all non-exempt assets in his possession or control;
- Turn over all credit cards to the Trustee, for cancellation;
- Make available to the Trustee all books and records relating to assets or affairs;
- Attend at the Office of the Official Receiver (Bankruptcy Administrator), if and when requested, to be examined under oath as to the facts relating to the bankruptcy;
- Provide a complete statement of assets and liabilities including creditors' names, addresses, account numbers, invoices and amounts. Where additional bills or legal documents are received by the bankrupt, they should be forwarded to the Trustee. If assets or debts were accidentally omitted, the Trustee must be informed promptly;
- Inform the Trustee of the details of all property disposed of for up to five years prior to the bankruptcy;
- Attend the first meeting of the creditors if called, and any other meetings when called upon by the Trustee;
- Attend first and second counselling sessions;
- Keep the Trustee advised of place of residence until discharge;
- Inform the Trustee of any material change in circumstances;
- Submit monthly budgets and make payments into the estate as required to do so; and
- Provide information to prepare tax returns.
While in bankruptcy, you:
- May not obtain credit in excess of $1000 unless you advise the creditor of the bankruptcy.
- May go into business provided you advise people you are dealing with that you are an undischarged bankrupt.
- May not sit on the Board of Directors of a limited company.
- May not own or acquire any assets in excess of current exemption limits.