Bankruptcy FAQ

Will I lose everything in bankruptcy?

 

No. There are certain common assets that are protected in a bankruptcy situation.

You are generally able to keep the following property:

• Food required by you and your dependents during the next 12 months.
• Necessary clothing up to a value of $4,000
• Household furnishings and appliances to a maximum value of $4,000
• One motor vehicle with equity not exceeding a value of $5,000
• Medical and dental aids required by you and your dependents.
• Where you are a bona fide farmer and your principal source of livelihood is farming: 160 acres if your principal residence is located on that 160 acres and the 160 acres is part of your farm.
• The equity in your principal residence, including a mobile home, up to a value of $40,000. If you are a co-owner of the residence, the amount of the exemption is reduced to an amount that is proportionate to your ownership interest. For example if two people own a house, and both people are filing a bankruptcy, they can protect $20,000 equity each. Equity is the difference between selling price and mortgage. Selling costs are not considered.
• Personal property (i.e., tools, equipment, books) that you require to earn income from your occupation up to a value of $10,000.
• Where your primary income is from farming operations, personal property that you require for the proper and efficient conduct of your farming operations for the next 12 months.

Who can file bankruptcy or make a proposal?

You can file bankruptcy or make a proposal if:

• you are not presently in bankruptcy and;
• you owe at least $1,000 and;
• you are not able to meet your regular payments as they become due; or
• you would not be able to pay all of your debts if all of the assets you are not allowed to keep are sold.

Your company, partnership, or business may also file bankruptcy or make a proposal if it meets the above requirements.

 

You should be aware that any unsecured creditor to whom you owe more than $1,000 could try to force you into bankruptcy. This is called a petition in bankruptcy. In this case, the creditor must prove that you have committed an act of bankruptcy, such as not paying your bills as they came due. The court reviews the facts and, if the petition is allowed, issues a receiving order which places you in bankruptcy with a trustee selected by the petitioning creditor.

 

Will bankruptcy get rid of all debts?

Most debts, but not:

• secured debts (eg. mortgage or car loan);
• child support, maintenance, alimony
• Court fines, penalties and traffic offenses
• debts obtained by fraud or fraudulent misrepresentation
• student loans, if less than ten years since leaving university or college
• civil claims arising from personal or sexual assault

What is the bankruptcy fee?

The fee is dependent on your particular circumstances. It will be explained to you by a trustee once your situation has been reviewed. All fees are set by the government and are the same for all trustees across Canada.

 

Do I have to pay the fee up front?

No, there are a number of ways to pay the fee, such as monthly payments or by having a third party pay the fee for you.

 

Can my creditors continue to harass me after I file bankruptcy?

No, they may call you, but you should direct their questions to us.

 

Will I be able to keep my vehicle?

In some provinces, the law allows a person filing bankruptcy to keep the equity in a motor vehicle not exceeding $5,000.

 

Can my wages be garnished or my assets seized after I file bankruptcy?

Normally, all legal proceedings against you stop at the date of bankruptcy.

 

If I file bankruptcy, can I still pay my family and friends?

No, while you are in bankruptcy you are only responsible for paying your ongoing living expenses. All payments to any of your unsecured creditors stop.

 

Will you tell my employer that I filed bankruptcy?

No, that is your business.

 

Do I still handle my own money?

Yes, you continue to receive your income and you can have a bank account if you wish.

 

What happens to my credit cards?

Your credit cards must be given to the Trustee, except in certain, extremely rare cases.

 

Will I be able to get credit in the future?

That will depend on your earning and repayment ability and will be between the lender and you.

 

Do I have to be living in Canada to file bankruptcy?

No, as long as you lived or carried on business in Canada in the last 12 months you may file bankruptcy.

 

What if I win a lottery or receive an inheritance while in bankruptcy?

Any “windfall” must be given to the Trustee to distribute to your creditors. If there is any money left over, it will be returned to you.

 

Can I file bankruptcy more than once?

Yes, but it may be harder to get out of bankruptcy after the first time.

 

What happens to my R.R.S.P. and/or pension plan?

Depending on the type of plan you have, it may be protected from seizure by Provincial law. If not, it must be paid over to the Trustee to distribute to your creditors.

 

Will I lose everything in bankruptcy?

In many Provinces, what you are entitled to keep is determined by the Civil Enforcement Act. In summary, you are generally able to keep the following property:

• Food required by you and your dependents during the next 12 months.
• Necessary clothing up to a value of $4,000
• Household furnishings and appliances to a value of $4, 000
• One motor vehicle not exceeding a value of $5, 000
• Medical and dental aids required by you and your dependents.
• Where you are a bona fide farmer and your principal source of livelihood is farming: 160 acres if your principal residence is located on that 160 acres and the 160 acres is part of your farm.
• The equity in your principal residence, including a mobile home, up to a value of $40,000. If you are a co-owner of the residence, the amount of the exemption is reduced to an amount that is proportionate to your ownership interest.
• Personal property (i.e., tools, equipment, books) that you require to earn income from your occupation up to a value of $10,000.
• Where your primary income is from farming operations, personal property that you require for the proper and efficient conduct of your farming operations for the next 12 months.

Federal Legislation also allows you to keep:

• cash surrender value of life insurance policies (including some R.R.S.P.’s) where the beneficiary named is the spouse, child, parent or grandchild.
• generally, pension plans.