What About Your Assets?

Filing bankruptcy does not mean you are going to lose all your assets. There are certain assets that are exempt from seizure. Most of your personal belongings and household assets will be exempted. The assets that you are required to surrender will be sold and the money received will be distributed amongst your creditors. Your trustee and creditors cannot take your exempt assets.

EXEMPT ASSETS

Vehicle valued up to $6,600 - If you own a vehicle that is leased or secured by a car loan, you can continue making your payments. As long as you don’t fall behind on your monthly payments, you will be able to keep this asset.

Household Belongings valued up to $13,150 - All of your furniture, appliances, electronics, would not be taken by the trustee or creditors.

Necessary Clothing

Tools of the Trade valued up to $11,300 - This applies to any self-employed person requiring equipment to work.

RRSPs - RRSPs are exempt other than contributions made in the 12 months prior to bankruptcy.

Pension Plans and Life Insurance - As long as your pension plan is ‘locked in’ until retirement it will generally be exempt. If you have a preferred beneficiary on your life insurance policy, (generally a direct family member), it will also be exempt from seizure.

Home Equity valued up to $10,000 - In order to determine whether you will be able to keep your home, your trustee will need to calculate the equity in your home. After calculating the equity, if it is less than $10,000 it will be exempt from seizure.

NON-EXEMPT ASSETS

Equity in your home - If the equity in your home is considerably higher than the amount owing on the mortgage, it will not be exempt. In order to keep your home you may have to pay to the trustee the equity with the proceeds distributed for the general benefit of your unsecured creditors.

Value of your vehicle - If you own a car outright and it is worth more than the exempted amount, you have the option to pay the difference to your trustee in order to keep your vehicle.

Investments - A non-exempt asset such as a Canada Savings Bond, regardless of when contributions were made will be realized by the trustee and money received will be distributed to your unsecured creditors.

Tax Refunds - Any tax refunds that haven’t been filed prior to bankruptcy must be surrendered to your bankruptcy estate along with your tax refund for the year of bankruptcy.

RRSPs - Any contributions made to your RRSPs in the 12 months prior to filing for bankruptcy will be paid into the bankruptcy estate for the general benefit of your unsecured creditors.

What Will Happen To My Spouse?

INDIVIDUAL DEBTS

Each spouse is responsible for their own debt. As long as your debts are only in your name, your spouse will not be affected.

JOINT DEBTS

In circumstances where there is a joint debt held by both spouses then each spouse is fully responsible for the debt. If you file a bankruptcy or consumer proposal you are protected from your creditors, your spouse will not be and remains fully liable for the debt.

It is essential to provide as much information on your debts, to ensure you get the best solution for your financial problems.

The Cost of a Bankruptcy

The cost of a bankruptcy will differ depending on your situation such as income and expenses, family members living in the household, and assets.

WHAT CAN AFFECT THE COST OF YOUR BANKRUPTCY

• Monthly Income: The more money you make, the more money you will have to pay. Your income will be calculated either for a single person or a family which will determine if you are over the monthly income limit. If so, you will be required to pay surplus income.

• Family Members: The size of your family can affect your monthly payments. Income beyond the limit is paid at a rate of 50% of the excess.

• Assets: Some assets that are non-exempt can be realized and the proceeds paid into the bankruptcy estate.

• Previous Bankruptcy: If you are a second or third time bankruptcy, your monthly payments will automatically be extended.

• Surplus Income: After calculating your monthly income vs. family size, you may have to pay surplus income. You are required on a monthly basis to submit proof of income. If your income changes during the process, it may change your required payments.

This can be overwhelming and confusing. Schedule a free, no obligation appointment with one of our trustees so we can review your finances and give you a more accurate assessment of the cost of filing for bankruptcy. It may be that a consumer proposal could be the better option.

How Long Does A Bankruptcy Last?

If you complete all your duties and there are no oppositions:

• First time bankrupt with no surplus: 9 months
• First time bankrupt with surplus: 21 months
• Second time bankrupt with no surplus: 24 months
• Second time bankrupt with surplus: 36 months
• Third time bankrupt: Trustee is required to apply for a discharge hearing

Bankrupts Duties

As a bankrupt you are required to complete duties. Failing to do so, will affect your discharge.

Duties include:

• List all exempt and non-exempt assets to the trustee.
• All credit cards must be submitted for cancellation.
• Any documents requested by trustee must be submitted.
• Monthly income and expense statements must be provided.
• Monthly payments must be paid.
• Attend two mandatory credit counselling appointments.
• Tax information must be provided.

Bankruptcy Discharge

As a first time bankrupt you will qualify for an automatic discharge after either 9 or 21 months. As long as you have completed your duties and there are no oppositions, your unsecured debt will be eliminated.

What Debts Are Eliminated?

Debts Covered In Bankruptcy

• Credit cards
• Overdrafts
• Payday loans
• Lines of credit
• Bills unpaid
• Income tax
• Student loans (more than 7 years)

Debts Not Covered In Bankruptcy

• Spousal support
• Child support
• Alimony
• Court fines
• Student loans (less than 7 years from completion of school)

Credit Rating In A Bankruptcy

The government provides credit reporting agencies notice of your bankruptcy. You may be concerned about how your credit score is going to be affected however it likely has already been. Each time you miss or are late in making a payment, it automatically affects your credit rating.

First time bankrupt: After your date of discharge, your credit report will be affected for 6 years.

Second time bankrupt: The reporting period is extended to 14 years.

How A Bankruptcy Works

Free Initial Consultation

An initial consultation will be held with a Licensed Insolvency Trustee who will review your financial situation thoroughly. Our licensed trustees will recommend a debt relief option is best suited to your situation. It is important to remember that every financial situation is different.

Are You Eligible

• Can you pay a percentage of your debts?
• Are your debts greater than your assets?
• Are you able to make your monthly payments?
• Is your debt over $1,000?

Cost Of A Bankruptcy

In a bankruptcy you will be required to make a monthly payments over a period of 9 months (with no surplus). Our trustee will review your finances and calculate the potential cost involved. You will be required to submit proof of income on a monthly basis.

Surplus Income

Income and expense statements will be reviewed to determine if there is surplus income. In cases where there is surplus income, you will be eligible for an automatic discharge in 21 months.

Filing A Bankruptcy

The trustee has reviewed your finances and determined your payment, now the required forms must be completed to start the process. The bankruptcy will be electronically filed with the Office of the Superintendent of Bankruptcy. You will then be assigned an estate number. This will enable protection against most creditors. Once the bankruptcy has been filed your debts will be frozen stopping any interest from accruing and most wage garnishments will be lifted. Any communication from the creditors will now be redirected to the trustee.

Credit Counselling

There are 2 credit counselling sessions that are mandatory when filing a bankruptcy. You will meet with a credit counsellor that will discuss budgeting skills and money management.

Completing Your Bankruptcy

Once you have completed your required duties, you will receive an automatic discharge.