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How Do You Declare Bankruptcy In Canada

The Three Main Costs Of Bankruptcy And How Much Bankruptcy Costs

What Happens When You Declare Bankruptcy in Canada – BSCC

No matter which trustee you go with there are certain fees set by the government that youll need to pay. However, the overall costs of bankruptcy will depend on how much you make, how big your family is, your assets and more.

In total, there are three main costs associated with bankruptcy and they are:

Base Contribution

In Canada, the minimum cost for filing for bankruptcy is $1,800. This can be paid at once or in $200 installments over 9 months. This fee is used to cover certain costs like administration fees, your LIT, government fees, and more.

Surplus Income

Surplus income payments are calculated using the income limits created by the Office of the Superintendent of Bankruptcy. To calculate your surplus income payment simply take the difference between your income and the income limit and then divide it by two. If your surplus income payment is less than $200, you can be discharged from bankruptcy after 9 months. All youll need to pay is the base contribution mentioned above.

However, surplus income payments are required if your surplus income payment is more than $200. Moreover, if it is, your bankruptcy will be extended for another year . This basically means that those who make a lot of money will generally have to pay more for their bankruptcy than those who are barely scraping by.

Learn to calculate your bankruptcy payments.

Assets You Lose

Additional Reading

How Do I Declare Personal Bankruptcy In Canada

There are processes you need to follow to be able to declare bankruptcy in Canada.

Bankruptcy must be filed through a Licensed Insolvency Trustee, who will be able to assess your present circumstances and complete the necessary processes to make bankruptcy possible.

Filing bankruptcy can be an effective debt solution for many reasons:

  • It will put protection in place so that you no longer have to deal with creditors
  • Prevent legal action such as wage garnishment
  • It will help you take care of your debts to help you get debt-free.

If youre exploring filing bankruptcy in Canada, then the first step is to consult an insolvency trustee who will assess your circumstances and help you decide if bankruptcy is the right solution for you.

Pros & Cons Of Going Bankrupt

Bankruptcy is a legal process that you have the right to take advantage of if you are insolvent, and for many people it is their best chance at a fresh start.

While there are certainly many benefits of bankruptcy it must be stated that there are also certain drawbacks to bankruptcy.

For most people declaring bankruptcy, however, most of these disadvantages do not exist or are minimized.

Your trustee will be honest and straightforward with you, as this is a requirement of our professional ethics code.

You will always receive the best advice of your trustee, so no matter what you are told by your trustee, you can feel comfortable following their advice.

Since the trustee is also required to tell you how you can avoid bankruptcy if possible, you have nothing to worry about when speaking with a trustee about making the decision to claim bankruptcy.

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How The Ontario Executions Act Can Help You Save Your Home

In 2015, the Ontario Executions Act was updated to define how much equity you could have in your home that would qualify for an exemption. If you have $10,000 or less of equity in your home, then you are not at risk of losing your home when you file for bankruptcy.

Equity is defined as the current market value of your home, minus the remaining balance on your mortgage, as well as any tax arrears and liens on the property. Lets say your home is worth $200,000. Your mortgage balance is $190,000 and you owe $1,000 in tax arrears, then you have $9,000 worth of equity. In this case, you would not be at risk of losing your home.

On the other hand, if your home is worth $200,000 and the remaining balance on your mortgage is $150,000 and you have no tax arrears, then you have $50,000 worth of equity. Your home would then be at risk of being seized and sold by the bankruptcy trustee.

Its important to consider your home and its equity before you file for bankruptcy. If you have equity in your home, then you may want to explore other options other than bankruptcy. Its in your best interest to avoid filing if youll lose your home.Explore Options to Avoid Bankruptcy

Bankruptcy Exemptions On Prince Edward Island

Do people declare bankruptcy as a ruse to not pay back ...
  • No limit on clothing for you and your family
  • No limit on medical or health aids
  • Any motor vehicle needed for transportation to work up to $6,500, or up to $3,000 if not used for work
  • Household furniture, utensils, equipment, food and fuel up to $5,000
  • Tools used by you in your business or trade, up to $2,000

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The Case: Role Of Unsecured Creditors Trying To Lift The Stay Of Proceedings

The Registrar, in this case, followed the reasoning of a 2001 decision from the Court of Appeal for Ontario. It is far from routine to lift the stay, and therefore the court has to make sure that the reasons for lifting the stay are sound and consistent with the objectives of the Bankruptcy and Insolvency Act of Canada.

In the case of Mcculloch , 2021 SKQB 259 , the two creditors were alleging that Ms. Mcculloch induced them to loan her the money on a fraudulent basis. It was their argument that they should be allowed to continue legal action against the bankrupt so that they could prove in a separate court action that the debt was a result of fraud and that, therefore, their claim would survive the bankruptcy and her discharge. In addition, they stated that they would be more severely affected than the commercial creditors if the bankruptcy stay bars them from taking action against McCulloch.

According to the Registrar:

  • Bankruptcy often disproportionately affects individual creditors over commercial creditors. Generally, creditor relationships are based more on trust than on cost-benefit analysis. When advancing a loan, the commercial creditor such as a company, unpaid suppliers, or a sophisticated secured creditor, generally assesses the risk and determines whether it can absorb the loss in the event of default. Individual lenders do not usually do this.
  • Due to the potential cost increases to other creditors, the equities are opposed to lifting the stay.
  • How Much Does It Cost To File Bankruptcy In Canada

    The expense of declaring bankruptcy is something you will certainly need to take into consideration. Just how much you will need to pay to go bankrupt relies on a number of variables, including:

    • your month-to-month income
    • the size of your family members and also
    • whether you have ever been bankrupt in the past.

    You are required to your surplus income into your estate every month. Surplus income is defined by the federal government. If your household makes over a certain amount every month, you pay a component of your earnings over that base set by the government each year. That base is essentially the poverty line.

    The surplus income computation is reasonably complicated. I recommend you bring your current pay stubs to your meeting with me to make sure that I can accurately estimate it for you.

    The fee a Trustee is entitled to charge in an ordinary personal bankruptcy must be approved by the Court. In a bankruptcy where there really are no assets, the fee is set in the statute.

    If you have non-exempt assets, the Trustee sells them and receives the proceeds of the sale. If you have surplus income to pay, the Trustee collects those payments from you. The Trustees fee, which is the cost of the bankruptcy, comes from the money collected by the Trustee. So, in this example, where the Trustee has collected more than the cost of the bankruptcy approved by the Court, there is no additional cost to you at all. In this way, the Trustee is free!

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    New Brunswick Bankruptcy Exemptions

    In New Brunswick, property exempt from seizure in bankruptcy is set by the provincial government and applies to the equity in an asset. Equity is the difference between the value of the asset and what you owe on the asset.

    Example: If you have a car worth $6,000 and you still owe $3,000 on the loan, the equity you have in the car is $3,000. In New Brunswick, the exemption for a car is $6,500. In this case, you would be entitled to keep the car and your unsecured creditors cannot take this from you during the bankruptcy process.

    How To File Bankruptcy The Bankruptcy Process

    What happens after I file for bankruptcy in Canada? MUST SEE!

    Filing for bankruptcy does not have to be a scary process. In fact, the act of declaring bankruptcy is a positive step towards eliminating overwhelming debts.

    Bankruptcy in Canada is a legal process in which a debtor assigns non-exempt assets for the benefit of his creditors in exchange for which he will be discharged from most debts. It is regulated by the Bankruptcy and Insolvency Act. The purpose of the Act is to permit an honest, but unfortunate, debtor to obtain a bankruptcy discharge from his or her debts, subject to reasonable conditions.

    Bankruptcy in Canada must be filed through a Licensed Insolvency Trustee. The trustees role in the process is to act as a sort of referee, ensuring that both the debtor and the creditors, are treated fairly and evenly.

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    It Gives You A Fresh Start

    When you declare personal bankruptcy in Canada you will receive an Automatic Stay of Proceedings which prevents your creditors from taking collection action to collect their debts.

    Collection agencies will stop calling.

    Wage garnishments will stop and interest of your debts stop accruing.

    When you receive your bankruptcy discharge all your eligible debts will be erased.

    As a legal process under the BIA, personal bankruptcy will eliminate most of your debts and the bankruptcy process will give you a fresh start and allow you to rebuild your credit.

    Consider A Consumer Proposal

    Another form of insolvency are consumer proposals which involve paying your creditors a portion of what you owe, while avoiding some of the six big downsides of bankruptcy. LITs handle consumer proposals too, so if you’re considering bankruptcy, ask an LIT if a consumer proposal might be a better option for you instead.

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    Take Out A Debt Consolidation Loan

    If your credit is good, you may be able to get a debt consolidation loan to pay all your debts off. Then you’ll only have to make payments on the new, lower-interest loan, as long as you don’t continue to use your credit cards and other credit products. This makes consolidation loans an excellent alternative to filing for bankruptcy.

    Bankruptcy And Insolvency Act Of Canada Tr1es To Give Everyone Undeniable Equitable Treatment

    Guide To Filing Personal Bankruptcy in Canada

    We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

    If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

    bankruptcy and insolvency act of canada

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    Many People Cant File For Bankruptcy In Canada And Need Alternatives

    One of the biggest bankruptcy myths in Canada is that anyone can declare bankruptcy. Many Canadians actually find out that they cant file for bankruptcy because they have either too much income or too many assets. If they did file for bankruptcy, it could be more expensive than repaying the debt.

    An interesting debt relief interview even says that only 10% of the clients who see a trustee can file for bankruptcy. Lets take a closer look at what bankruptcy is and why some people cant file for bankruptcy.

    How To File Bankruptcy

    Filing bankruptcy in Canada is available for any insolvent individual who needs a fresh start and an end to their overwhelming debt problems.

    Bankruptcy is a formal process conducted by a Licensed Insolvency Trustee under the BIA .

    Need Help Reviewing Your Financial Situation?Contact a Licensed Trustee for a Free Debt Relief Evaluation

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    Learning More About Bankruptcy In Bc

    Choosing a personal bankruptcy in BC is the option of last resort, and you should learn about the other options available to you before applying. Speak to us on a free confidential call for some useful information on debt management and declaring bankruptcy. Or fill out the Canadian debt relief form for more information on debt solutions and your options.

    Can I Get A Credit Card If I Declare Bankruptcy In Canada

    How long does bankruptcy last in Canada?

    No. Once you file for bankruptcy, you must hand over your credit cards to your trustee so they can be cancelled. Additionally, your credit rating will be negatively affected by your bankruptcy and Canadian credit bureaus will keep a note about your bankruptcy on your credit report for up to 7 years, depending on your province.

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    Signing A Bankruptcy Petition

    To file for bankruptcy protection, you sign various bankruptcy forms, including an Assignment and a Statement of Affairs. In your bankruptcy assignment, you state that you are handing over your property to the Licensed Insolvency Trustee for the benefit of your creditors. The statement of affairs is a list of all your assets and liabilities.

    You will also be required to answer several questions about your situation including details about your family, work, and disposition of assets before bankruptcy. It is an offence under the Bankruptcy & Insolvency Act to sell or hide assets from your creditors when you know you intend to go bankrupt.

    With the advent of COVID-19 and the required social distancing, it is now possible to file bankruptcy online by video-conference and electronic signature. However, you must still file with a trustee in the province where you live or where most of your assets are if you live outside of Canada.

    How Do I Claim Or Declare Bankruptcy

    Before you file, the trustee will review all your debt relief options so you can .

    The trustee will ask questions about your income, assets, and debts . If you cannot afford to repay your debts in full, the trustee may recommend bankruptcy, but they might also suggest you consider filing a consumer proposal as an alternative to bankruptcy if this makes more sense for your financial situation.

    If you are considering bankruptcy, talk with a Licensed Insolvency Trustee today.

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    What Assets Are Exempt From Bankruptcy In Ontario

    When you file for bankruptcy in Ontario, you dont need to be concerned that you will lose everything. These assets are exempt under federal and provincial law:

  • Your primary residence, as long as the homes equity does not $10,000
  • One vehicle worth less than $6,600
  • $13,150 of household furnishings and appliances
  • $11,300 of tools of the trade
  • All necessary clothing for you and your dependents
  • All necessary medical devices for you and your dependents
  • Certain types of life insurance
  • All savings in Registered Retirement Savings Plans , Registered Retirement Income Funds and Savings and Profit Sharing Plan funds, not including contributions from the 12 months before your filing
  • When Should Someone File For Bankruptcy Rather Than Taking Other Debt Reduction Measures

    Canadian Bankruptcy Law

    Image source: Shutterstock

    If you find that your debts are more than you can handle to repay within the time periods allotted by your creditors, it may make sense to consider filing for bankruptcy or a consumer proposal. Consumer proposal is a less damaging route, but it is expensive and still lowers your credit score. You may have to remain in consumer proposal for up to five years while you pay off the remaining debts, but this process can be sped up by applying for a consumer proposal loan. This loan pays off your creditors which allows you to exit consumer proposal early and helps you rebuild your credit score by reporting your monthly payments to Canadas credit agencies.

    The decision to file for bankruptcy is a personal one. For instance, if you have an annual household income of $150,000, you may be able to handle $100,000 in unsecured debt. However, if your annual household income is only $60,000 because the breadwinner is on maternity leave, then handling $100,000 in unsecured debt may be tough and you might find yourself on the brink of filing for bankruptcy.

    I cant emphasis enough the importance of speaking with a Licensed Insolvency Trustee. Although you may think that bankruptcy is your only choice, a Licensed Insolvency Trustee may be able to come up with alternative arrangements to help you avoid bankruptcy.

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    Does Bankruptcy Take Care Of Any Tax Money I Owe To The Canadian Revenue Agency

    Many people assume that income tax debt is not dischargeable in bankruptcy. However, in a bankruptcy, your debt to the CRA is treated the same as any other unsecured debt, such as credit cards or lines of credit. After filing for bankruptcy, all interest and collection activity by the CRA will stop. Additionally, your trustee will communicate directly with the CRA on your behalf.

    Is It Better To Pay My Debt Or File Bankruptcy

    Each persons situation is unique, and factors that may indicate bankruptcy as the best solution to one persons financial problems may not be the same for someone else. The amount of debt that you need to have in order to file personal bankruptcy in Canada is just $1,000 this means there is access to bankruptcy as a debt solution, if it makes sense in your situation.

    Many people believe that when they are facing unmanageable debts they have two basic options in addition to borrowing more paying the debts in full or declaring bankruptcy. In Canada, another powerful debt solution exists that will allow you to consolidate your debts without borrowing and avoid filing bankruptcy, this is called a Consumer Proposal.

    When you meet with a Licensed Insolvency Trustee or Insolvency Estate Manager to discuss bankruptcy and bankruptcy alternatives such as Consumer Proposals, some of the factors that will be taken into consideration when evaluating the options that may fit you best will include:

    • The overall amount of debt you have and who you owe money to.
    • Any assets that you may own and whether any have been pledged as security .
    • Most people keep all their assets when they file bankruptcy in BC it is a myth that you are not entitled to have any assets.
  • Your income, as well as your overall household income and circumstances.
  • Your income tax return filing and assessment status .
  • Your goals and objectives when it comes to seeking debt relief.
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