What is bankruptcy?
WHAT IS A PROPOSAL?
ARE ALL DEBTS ERASED IN BANKRUPTCY?
HOW MUCH WILL IT COST?
HOW DO I STOP A GARNISHMENT?
WHY IS IT IMPORTANT TO SEEK PROFESSIONAL HELP EARLY?
WHAT CAN I KEEP IN A BANKRUPTCY?
A person who files for bankruptcy is allowed to keep any property that qualifies as exempt under provincial or federal legislation and that has not been given as collateral to the creditors.
Some Typical Manitoba Exemptions:
• Household furnishings not exceeding a total value of $4,500 (note: this is resale value, not replacement value)
• Tools of the trade not exceeding a total value of $7,500, includes:
• One motor vehicle not exceeding the value of $3,000, if necessary as a tool of the trade. This includes a vehicle used to get to and from work
• Equity in a home owned by the person who filed for Bankruptcy, to a maximum of $1,500 each, if in joint tenancy, or $2,500 if not in joint tenancy
• Locked-in pension plans and RRSP
• Some life insurance policies
Manitoba Farmers’ Exemptions:
• Animals necessary for farming operation for 12 months
• Farm machinery and equipment necessary for the ensuing 12 months of operation
• One motor vehicle if required in agricultural operations
• One quarter section of land
Please contact us for a more detailed list of exemptions. Exemptions vary from one province to another.
HOW LONG AM I BANKRUPT?
In most cases, after a prescribed period of time you are automatically discharged from the bankruptcy. This means that you are no longer bankrupt, and that you no longer have any legal obligation to pay the debts that were included in the bankruptcy.
The length of a bankruptcy varies depending on the circumstances of the individual.
First time bankruptcy, with no surplus income according to the national guidelines: 9 months.
First time bankruptcy with surplus income according to the national guidelines: 21 months.
Second time bankruptcy with no surplus income obligation according to the national guidelines: 24 months.
Second time bankruptcy with a surplus income obligation according to the national guidelines: 36 months.
Third or more time bankruptcy, regardless of surplus income obligations: A person in this situation is not eligible for an automatic discharge, and must attend a court hearing to determine what conditions must be met before the debts are erased.
In all cases, if the person who has filed for bankruptcy does not meet their obligations under the Act, or if a creditor, the Trustee, or the Superintendent of bankruptcy opposes the discharge, then they are not eligible for an automatic discharge, and must attend a court hearing to determine what conditions must be met in order to receive a discharge.
SHOULD I CASH IN MY RRSPS TO PAY BACK MY CREDITORS?
Cashing in RRSPs is one option your Trustee will review with you. It may not be the best solution for you.
HOW DO I KNOW IT IS TIME TO SEEK PROFESSIONAL HELP TO DEAL WITH MY DEBT PROBLEM?
Generally, one or more of the following things have been happening to you:
• You find you do not have adequate funds in your bank account to pay for necessities, and you are often using your credit card to “tide you over”
• You are borrowing money from family or friends, or from a payday loan service to get you from payday to payday
• You are not paying off, or down, the balance on your credit cards each month, but are just making the minimum payment
• It would take more than a year to pay off all your outstanding debt (except your mortgage)
• Your monthly installment debt payments exceed 20% of your net income
• Creditors are harassing and threatening you
• Utility companies are cutting off services
• You have had cheques bounce or your debit card refused
• Your wages have been garnished
HOW IS MY CREDIT RATING AFFECTED?
Information concerning your bankruptcy or proposal could show up on your file at the credit bureau for a period of six (6) to seven (7) years after your discharge from bankruptcy. If you have been bankrupt before, this period could be extended to as much as 14 years. This only means potential lenders will know you have been bankrupt. It does not mean they will refuse you credit. It is the lender’s individual credit scoring system that determines access to credit.
Should you wish to improve your credit record after obtaining your discharge from bankruptcy you may wish to talk to your bank or credit union to find out what steps they suggest for you. If you have saved up a down payment, you are borrowing money to purchase something on which the lender can take security, and you have not had credit problems since the bankruptcy, it is unlikely obtaining credit again will be a significant problem.
HOW DO I GO ABOUT FILING A BANKRUPTCY OR PROPOSAL?
The best way to get detailed information about filing an assignment in bankruptcy or a proposal is to contact us. There is no cost for this and there is no obligation to proceed.
When you contact us we will set up an appointment to speak with you and review your financial situation. We can do this either by telephone, if you live in a remote community, or in person at our office in either Winnipeg, Manitoba or Kenora, Ontario. We will review all options available to you including options other than those offered under the Bankruptcy and Insolvency Act. We will ensure all your questions are answered and that you have a clear understanding of what the various options and processes are.
Once we have spoken with you, you are free to either take further time to think about your options or to make arrangements to proceed with the filing of a bankruptcy or proposal.
DO I HAVE TO TELL MY EMPLOYER IF I GO BANKRUPT?
In most cases, the employer does not need to know that you are filing an assignment in bankruptcy. There are exceptions, however. For example, if your wages are being garnished, the Trustee would need to contact your employer in order to have the garnishment stopped.
WHEN IS A CREDIT PROPOSAL A VIABLE OPTION?
A credit proposal is a viable option if you have either a lump sum to offer your creditors, or a reliable source of income on which you can depend for the entire length of the proposal. If your income fluctuates greatly, or if your current employment is not long-term, a proposal might not be a viable option for you.
WILL I LOSE MY HOUSE?
Many people do not lose their homes in a proposal or bankruptcy. However, every situation is unique and careful review is needed. Much will depend on the value of the house and the amount owing on it.
WILL I LOSE MY CAR?
Whether or not you lose your car will depend on a many factors. Have you given it as security? Do you use it to get to and from work? How much is it worth? If it is secured, can you afford the payments? We will review all for the issues involved in determining whether you lose your car, and that information will help you decide what option would be best in your situation.
A FAMILY MEMBER HAS OFFERED TO LEND ME MONEY, IS THIS A GOOD IDEA?
People with significant debt problems often borrow from family and friends, or get family and friends to co-sign for them. You need to understand the problems that this can cause both you and your family members.