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WHAT YOU NEED TO KNOW ABOUT BANKRUPTCY
125,000 People Declare Bankruptcy each year.
You are not alone.
What is bankruptcy?
Bankruptcy is a legal proceeding that is available to help a person cope with a financial crisis. You can go into bankruptcy if you owe more than $1000 and are not be able to meet your debts as they are due to be paid. One of the main purposes of bankruptcy legislation is to afford the opportunity to a person, who is hopelessly burdened with debt, to free himself of the debt and start fresh - a new lease on life.
How do I go into bankruptcy?
There are two ways a person can go into bankruptcy. The first and more common way is to have the person make an assignment in bankruptcy (voluntarily go into bankruptcy). The second, and rarely used way, is for creditors to ask the Court to make an Order that a person is bankrupt. In both these cases a Trustee in Bankruptcy is required to administer the bankruptcy.
Will creditors stop harassing me?
Yes, they will. By law, all actions against a bankrupt must cease once the documents are filed. This does not apply to secured creditors such as banks holding, for example, a lien on a car.
What does it cost?
Trustee fees, filing fees and counselling fees are regulated by the government. The trustee normally is paid out of the funds arising from the liquidation of the bankrupt's assets. If the bankrupt has no assets available, then the trustee will require a retainer or require the bankrupt, over time, to pay the trustee's fees and disbursements. In the simplest cases this amounts to $1,347 plus taxes and counselling costs. Most firms have a payment plan that, ironically, allows you to pay the costs over time.
What about my wages during bankruptcy?
Earnings of a bankrupt after the start of a bankruptcy, such as wages and salaries or commissions, belong to the bankrupt person and are not interfered with by the trustee in the ordinary course of events. There are standards supplied to the trustee by the Superintendent of Bankruptcy which instructs the trustee to collect funds, for the benefit of creditors, from any earnings above what is reasonable for the number of people in the family and the bankrupt's personal situation.
When is my bankruptcy over?
For those people who have not been bankrupt before, an automatic discharge will take place after nine months if the creditors, Superintendent of Bankruptcy or trustee have not opposed your discharge and you have received counselling. Occasionally, creditors do object and the matter goes to mediation or is heard before a Registrar or a Judge. The discharge is usually granted where the bankrupt is only earning sufficient income to keep himself and his dependents reasonably provided for. It is the discharge of the bankrupt, with minor exceptions, that cancels the bankrupt's debts. In the event that you have been bankrupt before, your discharge will not be automatic and must be heard before a Judge or a Registrar.
Who Will Know?
In a bankruptcy, where there are significant assets, a notice is placed in the "legals" section of the newspaper notifying creditors of the date of the meeting of creditors. If there are minimal assets, the creditors are notified by mail only - there is no advertisement in the "legals" section of the newspaper. Any legal filing of a bankruptcy is a public document which the general public has access to. From this documentation, the Credit Bureau is notified and the bankruptcy is recorded and will remain on your credit record for 6 years. This does not mean that you cannot obtain credit during this time. Any granting of credit is the responsibility of the creditor to approve.
How is my spouse affected?
Your spouse, whether common law or married will not be affected by your bankruptcy if he or she is not responsible for any of your debt (did not sign an agreement or contract for any of your debt). If they have a supplemental credit card they are probably responsible for that debt. Your spouse's credit rating will not be affected by your bankruptcy and any assets in the spouse's name will not be part of the bankruptcy. If your spouse is responsible for any of your debt or has his own debt then the spouse may have to file bankruptcy too.
How much am I allowed to keep?
The property exempt from seizure is set by the provinces and territories. Consult a lawyer or trustee for current amounts in your area.
Can my bank refuse to let me open a bank account or cancel my existing account?
No. They cannot. If your bank cancels or refuses to open a bank account for you because you have been or are in bankruptcy they are breaking the laws of the land.