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How Do You Declare Personal Bankruptcy

How Much Does It Cost To Go Bankrupt

Personal Finance Q& A: How do I know when to declare bankruptcy?
Remember

Its important to talk to a free debt adviser before you pay the fee to make sure that bankruptcy is the best solution for you.

It costs £680 to apply for bankruptcy and youll need to pay this before you submit your application.

If you cant afford the fee you might be able to pay in instalments.

To find out more about this, contact the insolvency enquiry line.

What Happens To Your Information

Any previous name included in the bankruptcy petition will appear on the bankruptcy order, and in the:

  • notice of your bankruptcy, which is permanently recorded in the Gazette but excluded from search engine results one year and three months after publication
  • Individual Insolvency Register which will be removed within three months of your discharge

Exceptions To The Surrender Of All Assets

Some assets are not taken from you in bankruptcy. These are the exemptions that the federal and provincial governments have determined you need to survive and be a productive member of society. The goal of bankruptcy is to give you a fresh start not to punish or humiliate you. You will typically retain personal items and furnishings.

The list of exemptions is set by each provincial or territorial government. For example, in Saskatchewan, a motor vehicle with a value not exceeding $10,000.00 is exempt along with personal items such as clothing and jewelry to the extent of $7,500.00 and all household furnishings and appliances. In addition, RRSPs, RDSPs as well as equity in your residence to a maximum of $50,000.00 per registered owner are exempt from seizure. For the relevant exemptions in your province, we recommend speaking with a Licensed Insolvency Trustee.

For most people, the assets that may be lost in a bankruptcy include certain non-registered investments, RESPs, recreational equipment such as a boat, snowmobile, or motorcycle, etc.

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What You Can Expect From Your Initial Free Consultation With A Trustee

If you want to learn more about how filing for a bankruptcy would affect you, and whether there are other alternatives that are available to you, booking a free personal consultation with a local Licensed Insolvency Trustee is an easy next step.

The Trustee will discuss your personal situation with you, answer your questions, and advise you on whether a bankruptcy is the right solution in your case, or if a different insolvency solution an alternative to bankruptcy might be more suitable for you.

The consultation is confidential, and also risk-free as you have no obligation to continue to work with the same Trustee in the future, nor can the Trustee make any decisions on your behalf. You will leave the Trustees office with lightened emotional load, knowing you have gotten trusted professional advice.

Find a local trustee you can trust. We have trustees from coast to coast in Canada including Toronto and Ottawa. Talk to one today!

Exemptions For Your Home

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In British Columbia, homeowners exemptions are higher if you live in Vancouver or Victoria. In this case, $12,000 of the equity in your home is protected in Greater Vancouver and the Victoria capital area. Elsewhere in the province, $9,000 in home equity is exempt from bankruptcy. For more information on bankruptcy exemptions in British Columbia, you can request a call from a local Licensed Insolvency Trustee.

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Discharging Debt Through Bankruptcy

When you file for bankruptcy protection, a discharge from the court will relieve you of your obligation to repay your creditors for certain debts. Once your debt is discharged, your creditors cannot contact you or attempt to collect the debt in any way. A discharge of your debt is also permanent and final for all unsecured debt you include in your bankruptcy filing.

The timing of your discharge will vary according to the type of bankruptcy you filed. A Chapter 7 bankruptcy discharge order can take as little as four months while a Chapter 13 bankruptcy discharge can take three to five years.

If you are represented by a lawyer in your bankruptcy filing, you and your lawyer will each receive a copy of your debt discharge order. Your lawyer will help you understand what happens if you declare bankruptcy and which debts were discharged by your bankruptcy filing as well as those you might still be obligated to pay.

Surplus Income Adds To The Cost Of Bankruptcy

In addition to the trustee fee and potential loss of assets, you may be required to pay a portion of your monthly income towards your debts, depending on how much you earn and the size of your household. The principle is that, if you earn more than your household needs to survive, you must pay a portion of the surplus income to your trustee for the creditors. The formula is prescribed by law. The idea is that the more you earn, the more you can presumably afford to repay to your creditors. In general, the greater your level of income, the greater the cost of a bankruptcy and the more attractive the alternatives to bankruptcy become.

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What Happens If I Declare Bankruptcy In Canada

Once you declare bankruptcy , all collection and enforcement action against you stops. Creditors can no longer sue you or harass you trying to collect the outstanding debts. You are now protected by the stay of proceedings.

Then the Trustee needs to take possession of your assets that are not exempt from seizure under provincial law. Before you file, I always tell you what those assets are and what will happen.

If you declare bankruptcy , you will have to attend two counselling sessions. Those sessions are conducted in my office by the Trustee who is also a qualified credit counsellor.

If you have met all of your duties and responsibilities in your bankruptcy, including the payment of surplus income if required, you are then entitled to a discharge from bankruptcy. If no creditor or the Trustee objects to your discharge, then you receive an absolute discharge. If there is something in your activities or your background where there is an objection to your discharge, then the matter must be heard in the bankruptcy court.

Before you file, I will give you my best-educated guess on the likelihood of an objection to your discharge arising.

What Does Bankruptcy Cost

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In a straightforward bankruptcy, the government regulates trustee fees, filing fees, and counselling fees.

In the simplest cases this amounts to $1,800.

Many trustees have payment plans that allow you to pay the costs over the nine months of the bankruptcy.

Our Bankruptcy Calculator will tell you the exact cost of your bankruptcy and how long you will be in bankruptcy.

The other administration fees are taken from excess income payments.

If there is no excess income, the bankrupt will usually make these payments monthly so that they are paid in full before the nine month discharge date.

How Excess Income Payments are Calculated

The trustee calculates the amount that the bankrupt person must pay into the bankruptcy estate each month while in bankruptcy, based on the Superintendent of Bankruptcys standards.

Lets look at an example.

Mike is a single person with a monthly take home pay of $2,462 .

Because he is in bankruptcy, he does not have to make payments on any debt.

The Superintendents standards say that Mike needs $2062 to live on.

This leaves an excess of $400.

Fifty percent percent of the excess must be paid into the bankruptcy estate monthly.

This amount is known as the surplus income payment.

The excess income calculations are adjusted for things such as:

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Discharging Debts In Bankruptcy

A bankruptcy discharge releases a debtor from being personally responsible for certain types of debts. So, after a bankruptcy discharge, the debtor is no longer legally required to pay any debts that are discharged.

The discharge prohibits the creditors of the debtor from collecting on the debts that have been discharged. This means that creditors have to stop all legal action, telephone calls, letters, and other type of contact with the debtor. This prohibition is permanent for the debts that have been discharged by the bankruptcy court.

You cannot discharge all debts in bankruptcy. Some of the most common debts that you cannot get rid of in bankruptcy are debts from child or spousal support, most student loans, most tax debts, wages you owe people who worked for you, damages for personal injury you caused when driving while intoxicated, debts to government agencies for fines or penalties, and more.

When Is A Bankrupt Discharged

There will be an automatic bankruptcy discharge for a first-time bankrupt nine months after they became bankrupt unless the trustee recommends a discharge with conditions or it is opposed by either a creditor, the trustee or the Superintendent of Bankruptcy. In addition, if you have surplus income of more than $200 per month, your bankruptcy will be extended to 21 months in the case of a first bankruptcy.

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Find And Meet With A Licensed Insolvency Trustee

The first step is to find a Licensed Insolvency Trustee, or LIT. An LIT is a person licensed by the Superintendent of Bankruptcy to administer proposals and bankruptcies, and is often an accountant. The trustee represents your creditors and is an officer of the court.

Once you have decided upon an LIT, arrange a meeting with them. To prepare for your meeting, you should gather together as much of your financial information as possible, such as your most recent credit card statements and loan documents. At your first meeting, the LIT will explain the bankruptcy procedure, evaluate your financial situation and help you decide whether bankruptcy is your best option. You may also discuss the their fee for handling your bankruptcy. Most charge in the range of $2,000-$3,000. This fee must be paid by the person filing for bankruptcy. If you do not have enough money to cover the fee up front, your LIT can make other arrangements with you. For example, the LIT may be able to collect the fee from your tax refund, or may accept monthly payments. If your income after expenses exceeds certain levels, you will be required to pay a portion of the excess to the LIT while you are in bankruptcy.

The Basics Of A Bankruptcy In Bc

Do I Have Bankruptcy Options? Yes, There Are Alternatives

Bankruptcy in Canada is designed to help individuals who have no reasonable chance of paying off unsecured debts such as and installment loans. The Bankruptcy and Insolvency Act of 1985, which is periodically revised and updated, governs bankruptcy in British Columbia and the rest of the country. According to this law, a person who owes at least $1,000 to his or her creditors is eligible to file for bankruptcy. BC residents who end up filing for bankruptcy, however, usually owe a lot more .

You file for bankruptcy in British Columbia through a licensed bankruptcy trustee, who administers your personal property through a trust to settle debts with creditors. Essentially, the trustees job is to make sure that your creditors get as much of what you owe them as possible. This means that while a bankruptcy erases your debts, you will often have to surrender at least some property in the process. Proceeds from the sale of your property are distributed to your creditors, and sometimes even the property itself is handed over. However, when you file for bankruptcy in BC, there are property exemptions that allow you to keep at least some of what you owe. The bankruptcy process typically lasts no more than nine months. If you abide by the bankruptcy agreement during that period, your trustee will recommend a discharge that erases your unsecured debts.

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Duties During Your Bankruptcy

During the bankruptcy period you are required to do the following:

  • Provide the trustee with your tax information to file your outstanding tax returns, including the current year
  • Submit each month copies of your pay stubs and proof of other income
  • Attend two credit counselling sessions to help with budgeting, and help you get a fresh start at the end of the bankruptcy
  • Make the required contribution to your bankruptcy estate
  • Surrender any non-exempt assets

Bankruptcy Exemptions On Prince Edward Island

  • 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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Your Responsibilities When A Bankruptcy Order Is Made

You must:

  • give the official receiver information on your finances
  • give the official receiver a full list of your assets
  • tell your trustee about any rise in income during your bankruptcy
  • tell anyone who offers to loan you over £500 that youre bankrupt
  • go to court to explain why you owe money if asked to do so

There are also things you cant do while bankrupt. These are called restrictions.

Your Interview With The Official Receiver

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If your bankruptcy is approved, youll have an interview with the official receiver. If youve presented your own bankruptcy petition, this may happen directly after the bankruptcy order is made. Alternatively, your letter from the official receiver may invite you to an interview either in person or by telephone. If offered a telephone interview you can ask to be interviewed in person if you prefer.

If you have been made bankrupt by one of your creditors the official receiver may also contact you by telephone to find out if there is anything that needs to be sorted out urgently.

You must attend the interview and cooperate with the official receiver. If you dont, your bankruptcy could be extended beyond the normal 12 months and you could face an examination in court. The more organised you are, the more straightforward the process will be.

Before the interview, telephone the official receiver to confirm or rearrange the appointment let them know if:

  • you require special facilities
  • there is anything that needs to be sorted out urgently
  • you need more time to gather the paperwork for the meeting

If you have been sent a questionnaire, fill it in, noting anything you dont understand .

Collect together all the paperwork you have been asked to take to the interview or have with you during the telephone call.

Face-to-face interviews may take 2 to 3 hours.

After you arrive:

Telephone interviews take at least 30 minutes.

The examiner will:

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What Happens To Your Credit Rating After Discharge

The official receiver wont tell the credit agencies when your bankruptcy ends. You may need to ask the credit agencies to update their records to include details of your discharge.

The bankruptcy can stay on your record for 6 years after the date of the bankruptcy order.

Read more on this in the Information Commissioners Office Credit explained document.

What Happens After Bankruptcy

Most debt is erased when a person is discharged from bankruptcy, except for the following:

* Fines that are court imposed * Debt related to stolen items * Assets obtained by fraudulently representing yourself * Spousal and child support payments * Damages levied by the court for certain serious crimes * Student loans if the bankruptcy is filed prior to or within seven years after the finish of studies.

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If You Dont Live In England Or Wales

You can declare yourself bankrupt in England or Wales if you live outside the UK, provided you lived in England or Wales or have had a business there at some point in the last three years. The Bankruptcy Order made in England and Wales may not be recognised in other countries outside the UK.

You cant declare yourself bankrupt in England or Wales if you live in Scotland or Northern Ireland.

Work Through The Bankruptcy Process And Fulfill Your Personal Bankruptcy Duties

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There are a few main duties that you will need to fulfill as part of your bankruptcy filing in Canada. Your Licensed Insolvency Trustee will help guide you through the process and will be available for ongoing support through the proceeding.

These required duties generally include:

  • Completing a monthly Statement of Income & Expenses budget form tracking the income and expenses of your household and paying any surplus income calculated.
  • Your payments in personal bankruptcy are set by a government tariff and are primarily based on your household size, certain allowable expenses and national low-income guidelines. We will review these guidelines with you in detail and explain how they impact the payment you will make in your personal bankruptcy. Most people will pay $200 per month for the duration of their bankruptcy.
  • Attend two financial counselling sessions.
  • Counselling sessions are private, one-on-one sessions focused on providing you with information and resources around credit improvement and debt management.
  • Providing your Licensed Insolvency Trustee with the documents needed to complete your income tax returns, such as T4s, receipts, etc.
  • Ensuring you keep your Licensed Insolvency Trustee updated with your contact information in the event you move.
  • Most personal bankruptcies last for only nine months from the date of signing bankruptcy documents until you are discharged from bankruptcy.

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    How Much Debt Do I Have To Be In To File Bankruptcy

    Bankruptcy eligibility in Canada is very simple: You must owe $1,000 or more and be insolvent, meaning that you are unable to pay your debts as they generally become due. A BC Licensed Insolvency Trustee will be able to help you assess your situation, consider and evaluate all your options and help you decide which makes the most sense to get back on track.

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