LCTaylor is here to help you figure out whether bankruptcy is right for you and – if it is – provide bankruptcy services to help you file an Assignment in Bankruptcy.
The Bankruptcy and Insolvency Act governs the whole area of bankruptcy and is designed to act as a safety net for the people who find themselves over their heads in debt.
While bankruptcy is not the only solution to debt problems or money trouble, it is sometimes the best solution depending on your circumstances.
To qualify for bankruptcy, you must be insolvent, (which means you are in a situation where your non-exempt assets if sold, would not pay your debts) or be unable to pay your debts as they become due.
When you go bankrupt you assign all of your assets – everything you own, have a right to, or interest in – to the Licensed Insolvency Trustee (LCTaylor) for the general benefit of your creditors.
Most assets – your household furnishings, tools of your trade – including a motor vehicle to get to and from work, your pensions and RRSPs and some insurance policies – are exempt from seizure by your creditors meaning that they are NOT signed over to the Trustee as part of the bankruptcy. Farmers are often eligible for other exemptions, as well as the ones listed above – in Manitoba that includes machinery and livestock needed to maintain the farm for a year, as well as the home quarter section of land.
Your Licensed Insolvency Trustee will be able to define more precisely which assets are exempt and how the exemptions apply in your particular situation.
It is important to remember that, while assets may be exempt from seizure, this only applies if you have not assigned them to a creditor as security. In that case, the creditor does have the right to realize on their security. In most cases, such as a mortgage, the creditor will allow you to keep up the mortgage payments through the bankruptcy, rather than to foreclose on the property.
Bankruptcy is often an excellent opportunity to assess whether you want to, or can afford to, keep certain assets. If you decided not to keep your home, and turn it over to the secured creditor, then any shortfall on the mortgage would be discharged in the bankruptcy along with your other debts. If, however, you continue mortgage payments, you have re-assumed the responsibility for the entire amount of the mortgage.
The Bankruptcy and Insolvency Act also states you should – if you can afford it – make payments to your Trustee, for the benefit of your creditors through the course of bankruptcy. Your monthly payment capabilities will be worked out with your Trustee and will vary depending on your financial circumstances.
Each year, the federal government, through the Superintendent of Bankruptcy, issues guidelines as to how much it should cost for families of various sizes to live in Canada. Based on those guidelines, you are required to pay 50% of the income that is considered excess (over and above the guidelines for a family your size) to the Trustee for the duration of the bankruptcy.
Any monies that come into your bankruptcy estate, either from payments you make, or the sale of an asset, are distributed to your creditors at the completion of the bankruptcy.
How to claim bankruptcy
Filing for bankruptcy is not as difficult as you might think. Deciding to proceed with Bankruptcy is typically the toughest part.
Once you realize that you need professional assistance with your debt, the process begins by contacting a Licensed Insolvency Trustee such as LCTaylor. Trustees are the only licensed, federally-regulated individuals authorized to help hard-working Canadian debtors like yourself.
At your initial, free consultation, you’ll provide your trustee with the information they need to gain a comprehensive view of your current financial circumstances. Your trustee will discuss all available debt relief options with you, their pros and cons, and even provide an informed, educated opinion as to which would work best in your situation. There are often solutions other than bankruptcy that may fit your needs and situation better. All options will be reviewed.
Everyone’s situation is unique, and bankruptcies can vary a great deal depending on your situation, what your assets are — their value, whether they are encumbered — who your creditors are, and whether they have proper security on your assets. Only by meeting with a LIT and going over your situation in detail, will you have the necessary information to make a decision about bankruptcy.
If you ultimately decide to proceed with bankruptcy, your trustee will work with you to prepare the requisite paperwork. Your trustee will then have you come in again, explain the process once more, review the paperwork for accuracy, and – if you want to go ahead – have you sign the documents. It should be noted that the process can be done more quickly if there is a need to do so — for example, to stop the garnishment of your wages by a creditor.
The trustee then files the paperwork and notifies your creditors of the bankruptcy. It’s at the point of filing that your creditors must stop all of their collection efforts against you including court action and garnishments. Contact us today to get started on your journey to a better financial future.
Are all my debts discharged in bankruptcy?
There are some debts that are not discharged in a bankruptcy. They are as follows:
- Alimony and child support
- Fines and penalties imposed by a court
- Any debt that arose as the result of fraud, embezzlement, or fraudulent misrepresentation
- Student loans that are less than seven years old
- Intentional injury claims
Will I lose everything in bankruptcy?
In short, no. Bankruptcy was created so that hard-working, honest debtors could get a fresh financial start. The process isn’t meant to leave you empty-handed.
Personal bankruptcy exemptions are those assets that are protected from liquidation in the bankruptcy process. They are intended to cover the necessities of life. However, what you can keep varies across the provinces.
In Manitoba, you will be allowed to keep:
- Furniture and household appliances up to $4,500;
- Some Health aids;
- Food and fuel necessary for you and your family for six months, or the cash equivalent;
- Tools that you require for work up to $7,500. This includes one motor vehicle of a value up to $3000 if you use it to get to and from work. Many times people will have a vehicle worth more than $3000 but owe money on it to a secured creditor. In that case, it is not the value of the vehicle that counts, but the amount of equity left in it. For example, an $8000 vehicle, on which $6000 is owed, would be exempt, if the creditor has properly registered their security on it.
- Registered pension and retirement savings;
- There is a small exemption for equity in your home. Whether you keep your home or not will depend on your specific circumstances — the amount of your mortgage, the equity you have in the home, and where the home is located.
- As mentioned earlier, Manitoba farmers have additional exemptions over and above those listed above.
Remember, if you’re behind on your mortgage or car payments, your secured creditors can still protect their interest by taking the vehicle or foreclosing on the home, despite your bankruptcy filing.
Contact us today to learn more about what happens when you file for bankruptcy.
How long will I be bankrupt?
First-time bankrupts, with no ability to pay according to the Superintendent’s guidelines, can be automatically discharged at the expiration of 9 months. If there is an ability to pay, the bankruptcy will be extended for an additional 12 months, for a total of 21 months.
If there are any objections to the discharge, the matter is referred to the court for review at the end of the 9th or 21st months, whichever is the case.
Who can object to a discharge?
- A creditor can object
- Your trustee can object. This would happen if you failed to comply with your statutory obligations during the course of the bankruptcy. For example, as Officers of the Court, trustees are required to object to your discharge if you have failed to do things like: submit monthly income and expense statements, provide tax information to allow the filing of taxes, complete the two compulsory Financial Counselling sessions. Your responsibilities during the bankruptcy will be explained to you in detail before you sign the Assignment in Bankruptcy, and you will be given reminders during the bankruptcy if you appear to have forgotten something.
Will Bankruptcy affect my spouse?
No. Or at least, not directly. A consumer bankruptcy filing is personal to the individual filing. Your debts are yours and yours alone. Creditors cannot go after your spouse for debts in your name, and your spouse’s credit rating will not be affected by the bankruptcy you file. Likewise, the debts discharged in your bankruptcy are yours. Your spouse is still responsible for their own personal debt.
There is an important exception. Your spouse will be liable where he or she signed for the debt. Credit cards or loans that your spouse guaranteed or co-signed are legally also their obligation. Thus, even if you are discharged of the debt through bankruptcy, your spouse, unless they also go bankrupt, will still be responsible for payments.
Sometimes the implications of one’s actions are not so clear cut. For example, in Manitoba, your partner may be responsible for your credit card debt where:
- Your spouse requests a secondary card and signs an agreement accepting full responsibility for the card’s current and future debt; or
- The credit card company sends your spouse a card in his or her name with your primary cardholder number, and your spouse signs and uses the card. Your spouse will be liable for both current and future debt on that card.
If you are looking for a Licensed Insolvency Trustee in Winnipeg or North-Western Ontario, contact us at LCTaylor to talk about whether bankruptcy is right for you.