Bankruptcy Questions

How do I qualify?
How to enter bankruptcy protection?
What does a Trustee in Bankruptcy do?
What do I get to keep?
Will I receive financial counselling?
Will going bankrupt affect my job?
How will filing for bankruptcy affect my spouse?
Where can I find the paperwork I need when I file for bankruptcy?
How long will I be bankrupt?
Do any debts survive a bankruptcy?
What happens to my creditors when I file bankruptcy?
What if I have a loan that is co-signed by someone?
Do I make payments to my Trustee?
Who will find out about my bankruptcy?
What happens to my income tax returns?
Can I keep my credit cards?
Who can file for bankruptcy?
Credit repair after bankruptcy?
Credit cards after bankruptcy?
Personal loans after bankruptcy?
Car loans after bankruptcy?
Buying a house after bankruptcy?
Can you file for bankruptcy yourself?
Can you file bankruptcy for free?
How much does it cost to file for bankruptcy?
When should I file for bankruptcy?
What are the different types of bankruptcy?
Bankruptcy vs. insolvency?
When can you file for bankruptcy?
What is Chapter 7 bankruptcy?
What is Chapter 11 bankruptcy?
What is Chapter 13 bankruptcy?
What is the Canada Bankruptcy and Insolvency Act?
How to enter Bankruptcy Protection?

How do I qualify?

If you owe more than $1,000 and you are unable to pay back your debt, you may be eligible for bankruptcy.

How to enter bankruptcy protection?

The only way to file for bankruptcy in Canada is through a licensed Trustee in Bankruptcy. The first step when filing for Bankruptcy is to contact an MNP Trustee to discuss your debt options. If filing for Bankruptcy is the right step for you, your MNP Trustee will guide you through the bankruptcy process.

What does a Trustee in Bankruptcy do?

Trustees in Bankruptcy, like those at MNP Limited, work with you one-on-one to understand your financial challenges, let you know what your options are and help you find a solution that's right for you. If you declare bankruptcy, your trustee will help you fill in all the required documents and file them with the Office of the Superintendent of Bankruptcy. Your trustee will also let your creditors know about the bankruptcy and deal with them directly on your behalf.

What do I get to keep?

Alberta

If you declare bankruptcy in Alberta, you can keep:

Clothing (up to $4,000 in value)
Household furniture and appliances (up to $4,000 in value).
One vehicle (up to a $5,000 value).
Tools and personal property you need to earn an income from your occupation (up to $10,000 in value).
The equity in your principal residence (house or mobile home) up to $40,000 in value.
Medical and dental aids you and your dependents need.
Most Pensions and RRSPs

If you are a farmer, you can keep:

Up to 160 acres of land provided your house is located on that land and the land is part of your farm.
If your main income is from farming operations, any personal property you need to run your farm for the next 12 months.

British Columbia

If you declare bankruptcy in British Columbia, you can keep:

Clothing
Household furniture and appliances (up to $4,000 in value).
One vehicle (up to $5,000 in value, or $2,000 if you are behind on child support payments).
Tools and other personal property (up to $10,000 in value) you need to earn an income from your work.
Medical and dental aids you or your dependents need.
The equity of your principal residence (up to a $12,000 value if you live in Greater Vancouver or Victoria, or $9,000 for the rest of the province).
RRSPs are generally exempt, except for contributions made in the past 12 months.

Manitoba

If you declare bankruptcy in Manitoba, you can keep:

Furniture, household furnishings and appliances (up to $4,500 in value).
Necessary and ordinary clothing for you and your family.
Food and fuel your family needs for the next six months (or the cash equivalent).
Tools, implements, professional books and other items you need for your trade, occupation or profession (up to a value of $7,500).
One motor vehicle, if you need it either for work or to drive to and from work (up to a value of $3,000).
Articles and furniture you need for religious services.
Medical aids you or your family needs (including wheelchair, air conditioner, elevator, hearing aid, eye glasses, prosthetic or orthopedic equipment).
Municipal or school property.
Your residence or home (up to $1,500 in equity each if you own it jointly, or $2,500 if in your sole title).

If you are a farmer, you can keep:

Animals you need to continue running your farm for the next 12 months.
Farm machinery, dairy utensils and farm equipment you need for the next 12 months.
One motor vehicle (if you need it for your agricultural operations).
Home and a quarter of the land.
Enough seed for any land you have that is being cultivated.

Ontario

If you declare bankruptcy in Ontario, you can keep:

Clothing: (up to $5,650 in value)
Household Goods: (up to $11,300 in value)
Tools of the Trade: (up to $11,300 in value)
Farmers: $28,300
Motor Vehicle: $5,650
RRSPs are generally exempt, except for contributions made in the past 12 months.

Saskatchewan

If you declare bankruptcy in Saskatchewan, you can keep:

Household furniture and personal effects (up to a value of $4,500 per person).
Tools of the trade, up to a value of $4,500.
A vehicle, if you need it for your employment.
Equity in your home (up to $32,000 in value, or $64,000 if jointly owned).
Certain life insurance policies.
Retirement savings plans including, RRSPs, RRIFs and DPSPs.
Certain pensions.
Certain life insurance policies.

If you are a farmer, you can keep:

Furniture, furnishings and appliances (up to $10,000 in value).
The cash equivalent of produce you need to provide food and fuel for heating until the next harvest.
All livestock, farm machinery and equipment, including one car or truck, necessary for the next 12 months.
One motor vehicle, if needed for business.
Seed grain equal to two bushels per acre of land under cultivation.
Cash equivalent of your crop equal to unpaid harvesting costs, living expenses until the next harvest and necessary costs of farming until next harvest.
The homestead.

Will I receive financial counselling?

Anyone filing personal bankruptcy must attend two financial counselling sessions. The first session will be one to two months after you filed for bankruptcy, while the second will be within six months of filing. Your first session will focus on budgeting, money management and goal setting. In your second session, you will learn more about the bankruptcy cycle, identify non-financial reasons that may have caused your problems and ways to repair your credit.

Your MNP Trustee office will set the date and time of your two financial counselling sessions after you formally sign and file for bankruptcy.

Will going bankrupt affect my job?

Usually filing for bankruptcy does not affect your job. Some professional bodies may require you to disclose your bankruptcy. If you're bonded in your current position, you may want to contact your Human Resources department to confirm if there will be any impact on your job/duty.

How will filing for bankruptcy affect my spouse?

Filing bankruptcy will not affect your spouse's credit rating. It will only affect your spouse if you have any joint debt, which they will then be responsible for paying in full.

Where can I find the paperwork I need when I file for bankruptcy?

It can be found in our Forms section. Please keep in mind MNP does not require you to fill these out prior to your appointment. If you have any questions about any of the forms, feel free to contact us.

How long will I be bankrupt?

The length of the bankruptcy process will depend on your final calculated surplus income. Where the total household income exceeds the level set by a government table rate, then additional payments called "Surplus Income" must be made to the Trustee during your bankruptcy. (Directive 11R, Bankruptcy and Insolvency Act.

If you meet and fulfill your duties and payments in a timely manner, you may receive an automatic discharge from bankruptcy.

For a first time bankruptcy:

9 months where there is no surplus income or
21 months when there is surplus income.

Your credit rating will reflect the bankruptcy for 6 years after you are discharged from the bankruptcy process.

For a second time bankruptcy:

24 months where there is no surplus income or
36 months when there is surplus income.

Your credit rating will reflect the second bankruptcy for 12 years after you are discharged from the bankruptcy process.

High income tax debtors are individuals where their total personal income tax debt, which includes penalties and interest is over $200,000 and represents at least 75% of their total unsecured proven debt. The minimum duration of the bankruptcy process for high tax debtors is outlined above. The only difference is the Trustee will have to apply to the Court for a hearing and the discharge application will have to be heard in Court.

Do any debts survive a bankruptcy?

There are debts that survive a bankruptcy filing. These include student loans less than 7 years old (from the time you cease being a student), child, spousal support and certain court fines or penalties. They are outlined in Section 178 of the Bankruptcy and Insolvency Act.

What happens to my creditors when I file bankruptcy?

When you file for bankruptcy, creditors will be given the chance to prove the amount they are owed in order to receive their share of any financial distribution in your bankruptcy. Your creditors will deal directly with the Trustee and are required by law to immediately stop contacting you regarding collections. If a creditor persists in contacting you, you should notify your MNP Trustee immediately.

What if I have a loan that is co-signed by someone?

If the debt is relieved during bankruptcy, the co-signer will be responsible for making the payments in full.

Do I make payments to my Trustee?

Once your bankruptcy is accepted, you will typically make monthly payments to your MNP Trustee, as agreed upon by you and the Trustee. The MNP Trustee will make dividend payments to the unsecured creditors on your behalf.

Who will find out about my bankruptcy?

Once you declare bankruptcy, your Trustee has the duty to notify your creditors. Also, Canada Revenue Agency, credit reporting agencies and the Superintendent of Bankruptcy must be informed. Certain bankruptcies require an advertisement in the Classified section of a local newspaper.

A bankruptcy is a matter of public record with the Superintendent of Bankruptcy and it will appear on your credit report. In addition, the Trustee is required to notify all of your creditors. If you provide the Trustee with a copy of your most recent pay statement, then your employer is not usually notified, unless the Trustee is required to stop a garnishee of your wages.

What happens to my income tax returns?

Your Trustee is required to file your prior year's income tax return if it remains unfiled at the date of bankruptcy as well a pre-bankruptcy income tax return for the period from January 1st to the date of your bankruptcy. The Trustee will retain any refunds arising from these income tax returns. If there is a balance owing on these income tax returns, the amount owed is included in your bankruptcy.

Your Trustee will also file a post-bankruptcy income tax return for the period from the date of your bankruptcy to December 31. Again, any refund from this income tax return will be retained by the Trustee. If there is a balance owing on the post-bankruptcy income tax return, the amount due is your responsibility.

Can I keep my credit cards?

When you file for bankruptcy you will need to turn over all of your credit cards to your MNP Trustee. At that time, they will be canceled on your behalf as your credit will be reset once you declare bankruptcy. You will be unable to obtain new credit cards until after your discharge. However, you may be able to obtain a prepaid credit card to use during your bankruptcy.

Who can file For bankruptcy?

In order to file for bankruptcy, certain conditions must be met:

Debt must be at least $1,000.00;
Debtor must be discharged from a previous bankruptcy;
Debtor must reside, carry on business or have property in Canada;
Debtor must be unable to meet regular payments as they become due;
Property owned by the debtor must be insufficient to enable payment of all debts.

Credit repair after bankruptcy?

Once you have been discharged from bankruptcy, the process of rebuilding your credit begins. Establishing a new credit history and earning the trust of potential creditors may be slow. You will have to show that you have the ability to meet your obligations and repay debt when it is due. If you make your payments on time, do not bounce cheques or when you borrow money from a bank and pay the loan off in a short period of time, these will help boost your credit rating. If you are able to obtain a credit card, expect a low credit limit and make sure that monthly balances are paid off by their due date.

Credit cards after bankruptcy?

As mentioned in the question above, if you are approved for a credit card after bankruptcy, expect a low credit limit and make sure that balances are paid off every month. Obtaining a secured credit card is also an effective means to improve your credit rating and accelerate your ability to get a credit card after bankruptcy.

Personal loans after bankruptcy?

If you need a personal loan after bankruptcy, you will likely have to secure a co-signor depending on the state of your credit. A co-signor is an individual is an individual that promises to pay your debt if you cannot pay it yourself.

Car loans after bankruptcy?

Whereas prior to the financial difficulties it may have been possible to obtain a personal loan to finance the purchase of a vehicle, lenders now will require the vehicle as security. In addition, the interest rate that is payable on that loan will likely be higher to reflect the higher credit risk associated with the loan as a result of the bankruptcy.

Buying a house after bankruptcy?

Like many loans after bankruptcy, it is likely you will need a co-signor to obtain a mortgage. To improve your chances of being approved for a mortgage you should save as much money as possible for the down payment. If you can show steady, reliable employment income this will also help.

Can you file for bankruptcy yourself?

The Bankruptcy and Insolvency Act requires that all bankruptcies be filed by a licensed Trustee.

Can you file bankruptcy for free?

Bankruptcy services are not provided for free. If you are filing for consumer bankruptcy but aren't financially able to afford the cost, there is a bankruptcy assistance program available through the Office of the Superintendent of Bankruptcy.

How much does it cost to file for bankruptcy?

The cost of a Trustee administering a consumer bankruptcy is set by government regulations. This will be discussed with you at your initial meeting with the Trustee.

When should I file for bankruptcy?

Initiating bankruptcy proceedings may be appropriate when you find yourself owing at least $1,000 dollars. If you are unable to pay your debt as it comes due and the net worth of your assets is less than the total amount of your debt, bankruptcy is an option.

What are the different types of bankruptcy?

There are two options for Canadians under our bankruptcy law: file for bankruptcy or a proposal. Both individuals and corporations can file for bankruptcy under the same law but utilize two different processes. For most individuals, bankruptcy is a relatively streamlined process referred to as a Summary Administration. However, depending on the amount of assets an individual owns, an Ordinary Administration may be applicable. All corporate bankruptcies are processed as Ordinary Administrations.

Bankruptcy vs. insolvency?

These terms do not mean the same thing. Bankruptcy is a formal legal process whereby you assign your assets to a Trustee in order to be relieved of your unsecured debts. Insolvency is a financial term that indicates you are unable to pay your debts as they come due or your total assets are worth less than the amount of all of your debt. You must be insolvent in order to file for bankruptcy but you are not automatically bankrupt just because you are insolvent.

When can you file for bankruptcy?

You can file for bankruptcy at any time when you are insolvent. This is when your debts total at least $1,000 and you are unable to pay your debts as they come due.

What is Chapter 7 bankruptcy?

Chapter 7 is a section of the United States bankruptcy code (law) which is used by individuals to file for bankruptcy in order to get a fresh financial start. This law does not apply in Canada.

What is Chapter 11 bankruptcy?

Chapter 11 is a section of the United States bankruptcy code (law) which is used by businesses to obtain protection from creditors while it restructures its operations so that it can sustain itself in the future. This law is similar to the two Acts that apply to companies in Canada, the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act (CCAA).

What is Chapter 13 bankruptcy?

Chapter 13 is a provision in the United States bankruptcy code (law) which is comparable to the consumer proposal option under Canadian bankruptcy law.

What is the Canada Bankruptcy and Insolvency Act?

It is a piece of legislation that governs the orderly liquidation of a bankrupt's estate and oversees the distribution of its value to the estate's creditors. Your Trustee, as an authorized administrator of the Bankruptcy and Insolvency Act, is focused on securing a discharge for debtors so that they can make a fresh financial start.

How to enter Bankruptcy Protection?

Bankruptcy is a legal process in which you may be discharged from most of your debts. It is regulated by the Bankruptcy and Insolvency Act. The purpose of the Act is to permit an honest, but unfortunate debtor to obtain a bankruptcy discharge from his or her debts, subject to reasonable conditions.

To start the bankruptcy process, first contact your local MNP Trustee Office and discuss your particular circumstances with a consultant or Trustee. They will arrange a meeting with you at our office depending on the path you decide on. Your Trustee will conduct a financial appraisal to assess your situation from an economic perspective.
The Trustee will discuss and explain all of your options based on your assessment. If you decide that bankruptcy is the best solution for you then we will help you complete the various forms and let you know what to expect going forward. You are only considered 'bankrupt' when the Trustee files these forms with the Official Receiver.
After filing bankruptcy, the Trustee's office will notify all of your creditors and create an Estate Fund. You will make monthly payments to your Trustee who may also sell any non-exempt assets for the benefit of the Estate. In most cases, your unsecured creditors will not be able to take legal steps to recover their debts from you (such as seizing property or wage garnishment).
During the process of the bankruptcy you will be required to make monthly payments to the Estate and comply with required duties such as submitting monthly Income and Expense reports with appropriate supporting documents, attend two financial counseling sessions and provide relevant tax information so the Trustee can file your pre and post Income Tax returns for the year of your bankruptcy.
Upon the timely completion of the above steps, the Trustee will be in a position to recommend your discharge from bankruptcy. If there is no objection, the Trustee will sign the Certificate of Discharge and all your eligible unsecured debts will be discharged.
When all matters have been completed, the Trustee will distribute the available Estate funds among your creditors after fees and disbursements.

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Bankruptcy Questions

Trustees in Bankruptcy & Proposal Administrators