PERSONAL BANKRUPTCY FREQUENTLY ASKED QUESTIONS

What is bankruptcy?
Do I qualify for bankruptcy?
What does a Trustee in Bankruptcy do?
How do I choose a trustee?
Are there any fees involved in filing for bankruptcy?
What are the major steps in filing an Assignment in Bankruptcy?
What type of counseling will I receive?
What assets can I keep?
What about my secured creditors?
Who can find out about my bankruptcy?
What happens to my creditors when I file bankruptcy?
Are there any debts that won’t go away after filing bankruptcy?
How long will my bankruptcy last?
How will my credit rating be affected after bankruptcy?

What is bankruptcy?

Bankruptcy is a legal process giving immediate protection to individuals who are in financial difficulty. A bankruptcy must be administered by a Trustee in Bankruptcy. Bankruptcy can give you a fresh financial start, often within nine months after filing an Assignment in Bankruptcy.

Do I qualify for bankruptcy?

To be able to file a bankruptcy in Canada, you must meet the following criteriaL:
• You owe more than $1,000; and
• You are unable to pay your debts as they become due; and
• You either live in Canada, have assets in Canada, or operate a business in Canada.
• What does a Trustee in Bankruptcy do?

What does a Trustee in Bankruptcy do?

Trustees in Bankruptcy, like our experienced Trustees at Meyers Norris Penny Limited, work with you to identify and assess your financial challenges, let you know what your options are, and help you find the solution that’s right for you. When you declare bankruptcy, your MNP Trustee will prepare all of the required documents, explain them to you, and file them with the Official Receiver. Your MNP Trustee will also notify your creditors of the bankruptcy, ensure that collection action stops, and will deal with your creditors directly.

How do I choose a trustee?

Your MNP Trustee will help you deal with what is probably a challenging and stressful time in your life. To make this process as smooth as possible for you, it’s important you feel comfortable with the person you choose to be your trustee. You want someone who listens closely to your concerns; who can explain your bankruptcy options in an easy-to-understand manner; who can recommend a plan of action; and who can work with you every step of the way to help you back on the road to financial recovery. MNP has many conveniently located offices across Canada.

Are there any fees involved in filing for bankruptcy?

For most personal bankruptcies, the fees are governed by federal law. Your MNP Trustee can determine the applicable fee in your particular situation and discuss manageable, no interest, payment arrangements.

There may be other payments required of you in a bankruptcy. For example, if your income is above a certain level, you may be expected to make payments (referred to as “Surplus Income” payments) based on your income level. These amounts would be applied firstly to cover the cost of your bankruptcy and any excess is dstributed by your trustee to your creditors. Federal government guidelines are in place to determine whether or not an individual should be expected to make surplus income payments in a bankruptcy.

What are the usual steps in filing and completing a Bankruptcy?

Meet with your MNP Trustee for an initial assessment.
Inform your MNP Trustee of all your assets, debts, income and expenses.
Meet with your MNP Trustee to discuss and sign the documents, after which your MNP Trustee will efile the documents, immediately placing you into bankruptcy protection and stopping collection action by most creditors
Attend two credit and money management counselling sessions.
Provide your MNP Trustee with any books, records or other key information related to your financial affairs, including income tax information.
Abide by any requirements you may have to make Surplus Income payments or to cover the minimum administration costs.
If you have assets that are not protected from creditors, you must surrender those to your MNP Trustee who will sell the assets and distribute the proceeds to your creditors.
Obtain your discharge (many individuals qualify for an automatic discharge at the end of 9, 21 or 36 months,)
Rebuild your credit rating and return to financial health.

What type of counselling will I receive?

Anyone filing personal bankruptcy must attend two credit counselling sessions. The first session will be in the first 2 months after you have filed for bankruptcy, and the second will be completed within seven months of your filing date.

Your first session will focus on budgeting, money management and goal setting . Your second session will help you identify non-financial reasons that may have caused your problems, the bankruptcy cycle, and how to repair your credit.

At this time, we will review your file to ensure there are no outstanding issues that may prevent you from obtaining a discharge after nine months and one day of your assignment in bankruptcy filing. This applies for first time bankruptcy filers, different conditions apply for second and third time filers.

What assets can I keep?

Exempt assets in B.C.

If you declare bankruptcy in B.C., you can keep:

Essential clothes you and your dependents need.
Household furnishing and appliances up to $4,000 in value.
Equity in one vehicle up to $5,000 (or up to $2,000 if you are behind on child family support payments).
Tools and other assets (up to $10,000 in value) you need to earn an income from your work.
Medical and dental aids you or your dependants need.
Equity in your principal residence (up to a $12,000 value if you live in Metro Vancouver or Victoria, or $9,000 for the rest of the province).
RRSPs – in some cases, you keep the full amount; in other cases, you keep the full amount except for contributions made in the past 12 months.

Exempt assets in Alberta

If you declare bankruptcy in Alberta, you can keep:

Food you and your dependants need for the next 12 months.
Clothes you and your dependents need for the next 12 months.
Household furniture and appliances (up to $4,000 in value).
One vehicle (up to a $5000 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.
If you co-own a house, the percentage of equity you own.
Medical and dental aids you and your dependents need.
RRSPs – in some cases, you keep the full amount; in other cases, you keep the full amount except for contributions made in the past 12 months.

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 that 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.

Exempt assets in 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 to next harvest, and necessary costs of farming until next harvest.
The homestead.

Exempt assets in 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 value each if you live in joint tenancy, or $2,500 if you do not).

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 quarter.
Enough seed for any land you have that is being cultivated.
RRSPs – in some cases, you keep the full amount; in other cases, you keep the full amount except for contributions made in the past 12 months.

Exempt assets in Ontario

If you declare bankruptcy in Ontario, you can keep:

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

What about my secured creditors?

In most cases, bankruptcies and consumer proposals do not affect the rights of secured creditors. As a result, if you own an asset that is subject to a security interest, you may be allowed to keep that asset. Talk to your trustee for more information.

Who can find out about my bankruptcy?

Most bankruptcies are not published in the newspaper, unless they are corporate or are major personal bankruptcies. Once you declare bankruptcy; however, your trustee must notify all of your creditors. Your employer is typically only notified if your trustee has to stop a garnishee of your wages.

What happens to my creditors when I file bankruptcy?

Your creditors will have a chance to prove the amount they are owed, so they can receive their share of any distribution in your bankruptcy. Your creditors must stop contacting you directly when you file and will have to talk to your trustee instead.

Are there any debts that won’t go away after filing bankruptcy?

Even if you declare bankruptcy, you will still owe money on some debts. These include:

Court fines, penalties and restitution orders
Any award by the Court for bodily harm inflicted intentionally, sexual assault or wrongful death
Alimony, child support and maintenance
Any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity
Any debt or liability for obtaining property under false pretences or fraudulent misrepresentation
Liability for any dividend a creditor would have been entitled to receive when you fail to disclose the creditor to your trustee
Student loans, if you ceased to be a student (i.e., ended your studies) less than 7 years before the filing of your Bankruptcy. In cases of hardship, the Court can reduce this period from 7 years to 5 years.

How long will my bankruptcy last?

If you are declaring bankruptcy for the first time, you will likely be discharged from the bankruptcy after nine months.

How will my credit rating be affected after bankruptcy?

Your credit rating will be lower. Once you have been discharged; however, your unsecured debts will be forgiven and you can start rebuilding your credit rating.

More questions about bankruptcy? Contact an MNP advisor.