Bankruptcy is a process that generally lasts nine (9) months or longer, depending on the circumstances. During the period of bankruptcy, an individual must fulfill certain duties and obligations. Generally speaking, a bankrupt must behave in a fair manner; must keep the trustee advised of where he or she is living; and must advise the trustee of any material changes in the bankrupt’s circumstances.
More specifically, a bankrupt must attend for two (2) financial counselling sessions and report to the trustee as to the bankrupt’s income and expenses, and that of his or her family unit. The bankrupt must provide information to enable the trustee to file certain tax returns. The bankrupt must also turn over to the trustee any assets that are not exempt from seizure by the trustee, and, where needed, aid the trustee in the sale of those assets.
Where a bankrupt’s family unit income exceeds a government-set guideline, the bankrupt must pay a portion of his or her earnings (called “surplus income”) to the trustee for the period of the bankruptcy. Generally speaking, the rule is that a bankruptcy must pay to the trustee 50% of his or her net earnings in excess of the guideline. There are other factors taken into consideration when calculating surplus income. Where a bankrupt has a duty to pay surplus income, the period of bankruptcy is at least 21 months.
The vast majority of bankruptcies filed in Canada are simple, streamlined cases, and involve nothing more than what is described above. Some cases – more complex cases – can involve additional duties and obligations not covered here.
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