FAQ

Here are some frequently asked questions that we receive about bankruptcies. Should you have any additional questions or need further information, we encourage you to call us today!

Do I need a lawyer to file bankruptcy?

No a lawyer is not required. However, the bankrupt may opt to retain a lawyer should they feel it necessary to obtain legal advice. A trustee is not a lawyer.

Who will know that I filed bankruptcy?

Filing a bankruptcy is a matter of public record. The records are permanently maintained with the Court and the Superintendent of Bankruptcy. Notices of personal bankruptcy are not usually advertised in the newspaper and typically your employer is not notified.

Can I still be sued?

When you file an assignment in bankruptcy, all legal actions such as wage garnishments and lawsuits are stopped. However if you have child support or alimony claims, you will still be responsible for maintaining payments throughout the bankruptcy and afterwards.

What happens to my assets in a bankruptcy?

With some exceptions, all of your assets in excess of the allowed provincial exemption vests with the trustee for the benefit of your creditors. This would include inheritances received or which the bankrupt may become entitled, by the death of someone during the time of the bankruptcy. Lottery winnings and income tax refunds are also considered assets of the estate.

Can I continue to pay my mortgage or car loan/lease when I file bankruptcy?

In most cases, as long as you haven’t defaulted on the required payments, the bank or finance company will allow you to maintain the secured asset. The trustee will determine if there is any value (equity) to the secured asset that’s over and above the secured loan. If there is equity available in the secured asset, you may be able to make arrangements with the trustee to settle on the amount. If the amount owing on your home or car is greater than the value of the home or car, the trustee has no interest in the asset and you could make arrangements directly with the secured creditor to continue payments.

What assets can I keep?

In Ontario, certain assets are considered exempt from seizure in accordance with provincial law. They are as follows:

  • Personal effects up to a value of $5,650
  • Household furniture up to a value of $11,300
  • Motor vehicle up to a value of $5,650
  • Tools of trade up to a value of $11,300
  • Most pension plans, life insurance policies and certain RRSPs
  • There are also special exemptions for farmers

How does filing a bankruptcy affect co-signers?

Filing an assignment in bankruptcy does not cancel the liability of anyone who has co-signed or guaranteed a loan on your behalf.

How does filing a bankruptcy affect my spouse?

Unless your spouse also files a bankruptcy, the spouse’s assets and liabilities are not affected. However, if your spouse has co-signed or guaranteed a loan on your behalf, the spouse is still liable for the debt in full.

Can I have a bank account?

Yes you can maintain a bank account. It would be wise to open a new bank account with a bank or trust company where you don’t have any credit cards or loan obligations.

What happens to salaries, wages and commissions?

Income after the initial bankruptcy event, belong to the bankrupt and are not usually interfered with. However, when you earn income in excess of the Standard set by the Superintendent of Bankruptcy, you will be required to make payments to the trustee from that excess until the date of your discharge. The excess amount is called surplus income. The amount of surplus to be paid is determined by taking into consideration the Standards issued by the Superintendent of Bankruptcy as well as what is reasonable for the number of people in the family as well as the bankrupt’s personal situation. You will be required to report your income to the trustee on a monthly basis. Should there be any significant change in your financial situation during the bankruptcy you must notify the trustee as the amount of surplus you are required to pay may change as a result.

Will filing bankruptcy eliminate all my debts?

Filing an assignment in bankruptcy will relieve you from most, if not all of your debts except those under Section 178 of the Bankruptcy and Insolvency Act as follows:

  • Fines or penalties imposed by a court;
  • Award of damages by a court with respect to intentional bodily harm, sexual assault or wrongful death;
  • Alimony, child support or maintenance payments;
  • Debts arising from illegal activity such as fraud, embezzlement or misappropriation;
  • Debts incurred by fraudulent misrepresentation or false pretenses;
  • Dividend for creditors not disclosed to the trustee, and
  • Student loan debts less than 7 years old

What happens to my student loans?

Student loans will survive a bankruptcy if the initial bankruptcy event occurs within seven years of ceasing to be a full or part-time student. If anytime after the seven year period of ceasing to be a full or part-time student the Court may order the bankrupt be discharged from the debt if they are satisfied that:

  • The bankrupt has acted in good faith with respect to the debt obligations under the loan; and
  • The bankrupt will continue to experience financial difficulty to such an extent where they will no longer be able to pay the debt obligations under the loan.

How long am I bankrupt?

If you are filing an assignment in bankruptcy for the first time and have successfully completed all the duties imposed upon you and if there are no oppositions to your discharge, you are eligible for an automatic discharge nine months after the initial bankruptcy event or 21 months in the event you have a required surplus income payment. If you are filing and assignment in bankruptcy for the second time and have successfully completed all the duties imposed upon you and if there are no oppositions to your discharge, you are eligible for an automatic discharge 24 months after the initial bankruptcy event or 36 months in the event you have a required surplus income payment. If you chose to file an assignment in bankruptcy when a viable proposal could have been made, or if there is an opposition to your discharge by a creditor, the Superintendent of Bankruptcy or the trustee, you will not be entitled to an automatic discharge. If you are filing an assignment in bankruptcy for the third time there is no automatic discharge. Application to the court for your discharge will have to made by the Trustee which the court will not hear until at least 36 months from the date of the initial bankruptcy event has passed.

How is my credit rating affected?

When your level of debt is so great that bankruptcy is the only option available, your credit rating is usually at its lowest. The bankruptcy will remain on your credit report for a period of six years after the date of discharge for a first time bankruptcy. A second time bankruptcy will remain on your credit report for fourteen years. Once you are out of bankruptcy, it is solely up to you to convince a potential lender of your financial maturity and capability to repay new credit. Prior to your discharge we will discuss various ways to re-establish your credit privileges.

Consumer Proposal vs Personal Bankruptcy – What’s the difference?

 Consumer ProposalPersonal Bankruptcy
Who can claimThe only requirements are, your total debt cannot exceed a $250,000 (excluding a mortgage) and you must have the ability to repay a portion of your debts. However, you are not guaranteed to be granted a proposal just by filing one. It must be accepted by your creditors.Any person, who owes more than $1,000 in debt, is eligible to file a personal bankruptcy in Canada. Ideal candidates are those who need rapid financial relief.
CostsOnce you and your creditors agree to a proposal amount, your monthly payment is fixed and it will remain the same until your proposal is completed.Monthly payments vary as they are based on your income. The more you earn, the more you will be required to pay
AssetsYou will not lose any assets and you are not requirement to surrender anything.In order to be absolved of your debts you are required to surrender certain assets.
Credit RatingYou will receive an R7 credit rating which indicates that you have made a settlement with your creditors. This is not a good credit rating, but it is better than a bankruptcy R9.You will receive an R9 credit rating, which is the worst rating you can have. Depending on your circumstances, it will remain on your credit report for 7 to 14 years.
Monthly ReportingYou have no monthly tasks or reporting.You are required to complete a monthly budget for all income and expenses, as well as supply copies of your paystubs to your trustee.
TaxesYou are still entitled to all tax refund(s) and/or credits which you are owed.You will lose all tax refund(s) and/or credits which you are owed.
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