Filing for bankruptcy is uncharted territory for many people. If you’re thinking of going bankrupt in the near future, it’s helpful to know what is required of you beforehand so you can know what to expect. During bankruptcy, there are certain rules you must follow before your bankruptcy is discharged.
Here are five bankruptcy rules you need to know:
1. You must inform your trustee of your assets and debts.
In a bankruptcy, your assets, or belongings, are divided into two categories—exempt and non-exempt. You must inform your trustee of all assets you own in Canada and elsewhere. This includes property, vehicles, checking and savings accounts, valuables, and so forth. You will also need to provide prior tax returns, proof of income, and other documents required by your licensed insolvency trustee.
Your trustee will also need to know how much you owe and to whom. Your list of creditors should include anyone you have borrowed money from, including family and friends.
2. You must disclose all information about assets you’ve recently sold or given away.
In addition to informing the trustee of what you currently own, you are also required to inform him or her of any assets you’ve recently sold, transferred, given away, or cashed within the past twelve months. This rule is designed to help identify and curb potential fraud. For example, let’s say you plan on filing bankruptcy and own a motorcycle that you know would be seized in a bankruptcy. A few months before you plan to file, you sell your motorcycle to a family member for $1. Because you didn’t receive fair value for this, it can be seen as fraud, and the court may recover the asset.
3. You must complete credit counseling.
Before your bankruptcy is discharged, you must complete two credit counseling sessions. These sessions take place in your trustee’s office. During your credit counseling sessions, your trustee will help you identify the reasons that led to your bankruptcy. You will learn how to budget and manage money, how to use credit wisely, and what you can do to avoid serious debt problems again in the future.
4. You must keep your trustee informed.
During the bankruptcy process, it’s your responsibility to stay in touch with your trustee and keep him or her informed of certain things. If you change your phone number or other contact information, move and have a new address, or experience a change in income or employment, you must report these changes to your trustee.
5. You may need to make surplus income payments.
If you are employed, you may be required to make surplus income payments to your trustee each month. Surplus income payments are determined by guidelines set forth by the government, depending on your family size and income. The money you pay to your licensed insolvency trustee is then distributed to your creditors to help pay off your debts.
Bankruptcy rules may seem daunting at first, but following your duties as a debtor helps ensure your bankruptcy is completed as quickly and easily as possible.