Bankruptcy Basics (pdf) For cases filed before October 17, Bankruptcy Basics (pdf) For cases filed on or after October 17, Bankruptcy Basics is not a substitute for the advice of competent legal counsel or a financial expert, nor is it a step-by-step guide for filing for bankruptcy. Exceptions to discharge from personal bankruptcy in nine months. The length of your bankruptcy will be nine months, unless one of the following is true. You fail to perform all your bankruptcy duties, such as regular payments of surplus income to the trustee.; You have surplus income (see below). You have been bankrupt before.; There is an objection filed to your discharge. A Licensed Insolvency Trustee can help you learn personal bankruptcy rules and regulations, figure out if filing makes sense for you, and more. Whether you’re considering personal bankruptcy in Ontario or in any other region of the country, speaking with a trustee can help.
Bankruptcy law gives a person who is struggling financially two options: come up with a financial proposal, or file for bankruptcy. For individuals there are 3 possible insolvency proceedings they can choose to deal with their debt. Personal bankruptcy is a legal procedure available to Canadians to be discharged from the obligation to repay the eligible debts that were in place when the bankruptcy was filed.
In exchange for the elimination of their debts, the bankrupt surrenders certain assets and, depending on their income, may make additional surplus income payments. A consumer proposal is an offer to creditors to pay a percentage of what is owed. Creditors vote on the proposal; they can choose to accept or reject it. In a proposal the debtor does not surrender any assets. Instead, they make the agreed upon proposal payments over a period of up to five years.
Once all the terms of the consumer proposal are met, the debtor is legally released from the debts included in the proposal. In the case of unincorporated companies small businesses that operate as sole proprietors and partnerships it is not the business that files bankruptcy or any insolvency proceeding.
Instead, in the case of a small business bankruptcy , the owners file insolvency as an individual. The primary parties involved in an insolvency proceeding whether it is a proposal or a bankruptcy are the debtor, the creditors, and the licensed insolvency trustee. A debtor is someone who owes money to a creditor. The debtor files an assignment in bankruptcy or makes a proposal to their creditors.
When an insolvent individual files for bankruptcy, they are known as a bankrupt. A bankrupt person must make a full disclosure of all of their assets and debts to the LIT, inform the LIT of any property that was disposed of in the past few years; and give up all credit cards to the LIT. Creditors are the people that the debtor owes money, goods, or services to.
There are 3 types of creditors — secured, preferred, and unsecured. Creditors who are parties to a proposal may participate in meetings of creditors and vote at these meetings, appoint and serve as inspectors, and inform the LIT of any irregularities on the part of the debtor. Once filed, the debtor receives protection under the BIA until they complete all requirements of the proceeding.
This bankruptcy protection is known as a stay of proceedings. A Stay of Proceedings is a legal benefit of bankruptcy that provides debtors with creditor protection in Canada. Upon filing a bankruptcy or proposal, creditors can no longer continue with most legal actions against the debtor.
The debtor will supply the trustee with a list of all legal actions against them whether pending, started, or completed and the parties involved are given notice that a filing for a proposal or a bankruptcy has been made and that the stay is in place. Creditors can ask the court to lift a Stay of Proceedings. However, to do so, a creditor must bring a motion before the court and argue that the action needs to proceed to determine how much the creditor is actually owed or that the type of debt is not covered by a consumer proposal or a bankruptcy.
The debtor has the right to attend the hearing on the matter and argue against the request to lift the stay. It should be noted that it is quite unusual for a creditor to bring a motion to lift a stay. To file bankruptcy, the debtor supplies the Licensed Insolvency Trustee with a list of debts and assets. Bankruptcy proceedings begin with an electronic filing of bankruptcy documents with the Canadian government through the Office of the Superintendent of Bankruptcy Canada.
Within five days of the bankruptcy commencing, the LIT will send a copy of the bankruptcy paperwork to the creditors so that they can file claims. With certain exceptions, known as bankruptcy exemptions , all of the property and rights to property owned by the insolvent on the effective date of the bankruptcy vests in the trustee for the creditors.
Property can include investments, goods, and land situated anywhere not just in Canada. The trustee proceeds to liquidate the property and distribute the proceeds to the creditors in accordance with the distribution priorities prescribed under the BIA. Meetings of creditors may be held and inspectors appointed. If a meeting is called, the bankrupt is required to attend.
The bankrupt is required to prepare monthly income statements which will be used to determine if they must make additional payments. We are now available by phone and video chat. No-one wants to go bankrupt, but sometimes declaring bankruptcy is the best way to deal with debt and get debt relief.
As an Ontario bankruptcy trustee firm licensed to file bankruptcies by the Canadian government, Hoyes Michalos has been helping individuals eliminate debt since Personal bankruptcy is a legal process designed to help an honest but unfortunate debtor who cannot afford to repay their debts find debt relief. At the end of the bankruptcy, your debts are legally discharged, meaning you are no longer required to pay them back.
People file bankruptcy for a lot of reasons; in most cases, something happens that triggers the knowledge that they can no longer pay back their debts on their own. This might be harassing phone calls from debt collectors, a wage garnishment, or the inability to get more credit.
A life event like a divorce or separation, illness, or job loss are common causes of bankruptcy in Canada. Officially, debtors assign their rights to non-exempt assets for the benefit of their creditors in exchange for which they are released from unsecured debts.
This is why bankruptcy is known as a fresh start. The BIA defines three types of insolvency proceedings available to individuals seeking a resolution to their debts:. Bankruptcy can only be filed with a Licensed Insolvency Trustee.
The role of the bankruptcy trustee is to ensure that the rules and laws around the bankruptcy process are applied fairly to both the debtor and creditors. Bankruptcy legislation is what provides immediate protection from creditor actions, known as an automatic stay of proceedings. It is the stay that ensures collection agencies and creditors stop calling and allows your trustee to stop a wage garnishment.
Provincial laws also impact your bankruptcy, including legislation that defines what assets are exempt from seizure when you declare bankruptcy. You do not need to be a citizen to claim bankruptcy. You can be a permanent resident or even live abroad but have property here. Get a free consultation to see if you qualify. We will review your debts and budget to help you decide if bankruptcy is the right solution for your situation. Bankruptcy is meant to help you start over financially; it is not intended to be punitive.
Provincial laws and exemption amounts vary, but in general, you can keep most personal belongings, household furnishings, tools of the trade used to earn your income, and a vehicle you own that is valued below the provincial limit.
Learn more about Ontario bankruptcy exemptions. In Canada, secured creditors like your mortgage or car loan are not affected by bankruptcy. Secured creditors retain their rights to the collateral or assets you pledged against the loan if you are behind on payments. As long as you can keep up with your monthly payments, it is possible to keep assets like your car and your home in a bankruptcy.
If you have a lot of equity in your house, or other possessions you might lose after filing bankruptcy, you may want to consider a consumer proposal as an option to make a repayment offer to your creditors. RRSPs are also protected in a bankruptcy in Canada except for contributions made in the last year.
You will lose your tax refund for the year of bankruptcy, plus any tax refunds for previous years that you have not yet received.
Bankruptcy will clear most, if not all, of your unsecured debts. Debts that you owe as of the date of filing are included in your bankruptcy. Specifically, bankruptcy eliminates credit card balances , unsecured bank loans, lines of credit, payday loans, outstanding bill payments, even tax debts.
Student loans can also be included in a bankruptcy if you have been out of school for seven years. Some debts cannot be forgiven through bankruptcy including spousal and child support payments, debts due to fraud, and court fines.
Bankruptcy Basics is not a substitute for the advice of competent legal counsel or a financial expert, nor is it a step-by-step guide for filing for bankruptcy. Such advice may be obtained from a competent attorney, accountant, or financial adviser.
While the information presented is accurate as of the date of publication, it should not be cited or relied upon as legal authority. It should not be used as a substitute for reference to the United States Bankruptcy Code title 11, United States Code and the Federal Rules of Bankruptcy Procedure, both of which may be reviewed at local law libraries, or to local rules of practice adopted by each bankruptcy court.