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.
Fill Out The Bankruptcy Forms
You’ll complete a few dozen pages of forms, in which you tell the court about all of your property, debts, income, expenses, and prior transactions. You’ll list the names of all your creditors, property, and income, list your property exemptions, and decide what you want to do about each of your secured debts. Finally, you’ll disclose property transactions that occurred up to ten years before your case.
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.
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Who Can File Bankruptcy
To go into personal bankruptcy in Canada, a person must have lived or done business in Canada within the last year or, have the majority of their property in Canada, and must be insolvent.
To be insolvent essentially means:
What Not To Do Before Filing Bankruptcy
If you are considering bankruptcy, there are certain things you should not do before filing.
- Dont max out your credit cards and lines of credit or take on new debt just before filing.
- Do not sell or transfer any assets to someone else with the intent to hide them from your creditors.
- Dont omit creditors from your creditors list thinking you can keep that debt or pay them separately.
- Dont make a preferential payment to or pay off any single creditor at the expense of your other creditors.
- Dont hide information about a potential future inheritance, bonus, or windfall.
- Dont forget to tell your trustee if you have filed a bankruptcy or consumer proposal before.
Activities like this will affect the advice you are given by the trustee, at best, and if viewed as fraudulent, could jeopardize your bankruptcy discharge. Your trustee is required to ask a series of general questions to review past transactions like these, so avoid these reviewable actions and be honest with your trustee in your disclosure.
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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
Your Documents Are Filed And Your Creditors Are Notified
After you sign your documents they are filed electronically by your trustee with the federal government. You are considered bankrupt when these forms are filed with the court and a file number is issued.
Filing with the Official Receiver creates the automatic stay of proceeding that prohibits creditors from pursuing you to collect on your debts.
Your trustee will then begin the process to notify your creditors. Notices may be sent electronically, by fax or by mail. That means your creditors find out fairly quickly that you have filed bankruptcy and collection calls and other actions should stop. If they do not, speak to your trustee about how to proceed.
If your wages have been garnished, or a garnishment order has been issued, your trustee will also immediately notify your employer to stop the garnishment.
Bankruptcy deals with unsecured creditors like credit card debt, payday loans, tax debt to Canada Revenue Agency and certain student loan debt. Your trustee will provide you with information on what debts are included and excluded and how to continue to meet any obligations to your secured creditors like a car loan or mortgage.
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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.
Attend Your 341 Meeting
Your 341 meeting, or meeting of creditors, will take place about a month after your bankruptcy case is filed. Youâll find the date, time, and location of your 341 meeting on the notice youâll get from the court a few days after filing bankruptcy. Due to the COVID-19 pandemic, all 341 meetings are held either by video conference or via telephone until at least October.
The main purpose of the 341 meeting is for the case trustee to verify your identity and ask you certain standard questions and most last only about 5 minutes. Your creditors are allowed to attend and ask you questions about your financial situation, but they almost never do.
ââ You must bring your government-issued ID and social security card to the meeting. If you donât bring an approved form of both, the trustee canât verify your identity and the meeting cannot go forward. You should also bring a copy of your bankruptcy forms to the meeting, along with your last 60 days of pay stubs, your recent bank statements, and any other documents that your trustee has asked for. ââ
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Know What You Should And Shouldnt Do
Being able to loosely answer the question How does the bankruptcy process work? isnt enough. You should also know the ins and outs of the process. It is very important to understand what you shouldnt do. Here are some important dos and donts of filing bankruptcy.
If you need to sell your things, keep a record of it. It is not illegal to sell your things before filing for bankruptcy. It may be a necessity, particularly if you are strapped for cash. If that includes finding the highest prices paid for gold and diamonds or taking part in cash for gold programs, do it. Sell what you need to, but keep a meticulous record of it to disprove any wrongdoing.
Be honest about your income and your debts. Speaking of wrongdoing, do be honest about your debts. Do not lie. If your papers and documents do not reflect the truth, the court will likely throw out your case. This includes purposely omitting details or taking questionable actions, like giving a second car or valuables to relatives and asking for them back later.
Work with a bankruptcy attorney. Bankruptcy law is complicated. Dont get too confident in knowing the basics of How does the bankruptcy process work? You will need to know far more than the basics. Those who choose to represent themselves during bankruptcy filings are rarely successful.
Your Creditors May Hold A Meeting
Sometimes, a meeting of creditors is required or requested. The purpose of this meeting is to
- allow creditors to obtain information about the bankruptcy
- confirm the appointment of the LIT
- appoint up to five inspectors to supervise the administration of your estate and
- allow creditors to give direction to the LIT.
If a meeting is called, you will be required to attend.
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Complete Bankruptcy Forms And Documentation
If you decide to declare bankruptcy, the next step is to pull together all the necessary paperwork and complete the required government forms to file your bankruptcy petition. This typically begins with a bankruptcy application form from your trustee .
The trustee will then draft the legal documents for the court including:
- A Statement of Affairs which lists your assets, debts, income and expenses. It also includes your address, marital status, household size and disposition of any assets before bankruptcy.
- An Assignment of Assets which is the document that assigns all of your eligible assets to the benefit of your creditors.
It is important that you complete these bankruptcy forms accurately and honestly. These documents are signed by you to ensure that they are correct.
Stopping Creditors With Bankruptcy’s Automatic Stay
Filing for Chapter 7 bankruptcy puts into effect something called the “automatic stay.” The automatic stay immediately stops most creditors from trying to collect what you owe them. So, at least temporarily, creditors cannot legally grab your wages, empty your bank account, go after your car, house, or other property, or cut off your utility service.
Learn more about bankruptcy’s automatic stay.
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Who Can File Chapter 7 Bankruptcy
Not everyone qualifies for a Chapter 7 discharge. You’ll qualify if your gross income is lower than your state’s median income. If it’s higher, you’ll still qualify if, after paying allowed monthly debts, you don’t have enough left over to feasibly complete a Chapter 13 repayment plan.
Other requirements exist, too. For instance, you won’t be able to use Chapter 7 bankruptcy if you already received a bankruptcy discharge in the last six to eight years . And where you can file will depend on how long you’ve lived in the state.
Learn more about the Chapter 7 eligibility requirements.
Understand The Advantages Of Filing For Bankruptcy
You may have wondered, what is the downside of filing for bankruptcy? There are some advantages to filing for bankruptcy, too, however. When you need a fresh start to get out from under a heavy debt load, filing for bankruptcy could be just the answer you need. In addition to a new start, federal bankruptcy offers consumers, business owners, and corporations many benefits, including the following:
- Complete relief of all dischargeable debts with no further obligation to repay them.
- The ability to hold on to some personal property and assets like your home and vehicle.
- Relief from the constant pressure and invasive contact from debt collectors.
- Over time, your credit score can improve when discharged debts are removed from your .
Your wages cannot be garnished by your creditors and your car cannot be repossessed while you are going through the bankruptcy process. Your lawyer can explain other advantages to filing bankruptcy that apply to your specific situation. Bankruptcy can give you the opportunity to create a new financial picture for yourself, your family, or your business.
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Consult A Licensed Insolvency Trustee Near You
As you can see the bankruptcy process in Canada is a safe and regulated procedure. It is not as bad as you may think and can be a very good option for individuals if you cant pay your debts.
Under Canadian bankruptcy law only a federally licensed trustee can file bankruptcy for you.
If you are considering bankruptcy in Ontario, contact Hoyes Michalos for a free, no-obligation consultation where well answer any questions you have.
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.
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Debtor In Possession Vs Case Trustee
In the course of bankruptcy proceedings, the court will often assign a trustee to the case to make decisions on behalf of the company for the use of its assets, property and estate throughout the legal process. Control over the company in making significant financial and operational decisions would be ceded to the assigned case trustee, and requiring its approval to proceed.
However, Debtors can have the right to maintain control of their own operations and decision making. This is referred to as debtor in possession. A debtor in possession has several of the same rights and powers that a traditional case trustee gains when assigned. The debtor in possession can additionally employ different resources to assist them in developing a Plan of Reorganization, as long as the Debtor obtains approval from the court.
The rights a debtor in possession has also come with responsibilities, which include:
- Accounting for all property comprising the bankruptcy estate
- Reviewing creditors claims
- Filing all required documentation relative to the case
- Ensuring company operations continue
The required documentation may include inventories, appraisals and tax returns. Debtors in possession must handle these responsibilities while also continuing to operate the business in its existing state until the Plan of Reorganization is effectuated by the court.
How Long Does Bankruptcy Last
Bankruptcy lasts approximately 9 months, provided that it is your first bankruptcy and you complete all of the duties assigned to you. Your bankruptcy may last up to 21 months if you have to pay surplus income, which is calculated according to standards established by the Office of the Superintendent of Bankruptcy Canada and coordinated by your trustee after examining your income, expenses, and dependents in your household.
If it is your second bankruptcy, you will be bankrupt for 24 or 36 months. If you have been bankrupt more than once previously, have not complied with your duties, or have committed one or more bankruptcy offences, your bankruptcy timeline will be determined by the court.
After you have received an Absolute Discharge from your bankruptcy, you will no longer be responsible for any of the discharged debts. However, the fact that you filed a bankruptcy will appear on your credit rating for 6 to 7 years, depending on the province you live in.
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How Divorce And Death Play A Role In Bankruptcy
While medical bills are the most common reason, it is hardly the only reason that drives people to file for bankruptcy. Two other big reasons that people begin to wonder how does the bankruptcy process work are divorce and death.
Marital dissolutions create a tremendous financial strain on both partners in several ways. First come the legal fees, which can be astronomical in some cases, followed by a division of marital assets, decree of child support, and/or alimony, and finally the ongoing cost of keeping up two separate households after the split, Investopedia writes. As if that wasnt enough, some recent divorcees have their wages garnished if they fail to pay child and/or spousal support.
Divorcees can turn to bankruptcy for relief up to a point. To reiterate, Chapter 7 bankruptcy erases credit card debts, certain bills, and unsecured loans. Having some bills paid off can be tremendously helpful and give filers a fresh start. You will, however, still be responsible for child support payments after filing for bankruptcy.
This may leave your family filing for bankruptcy to make ends meet after the sudden death. Another possible reason for filing bankruptcy after the death of a loved one is that he or she was in the process of filing for bankruptcy at the time of their death. If that is the case, a designated relative will take over their Chapter 7 case and see it through to the end.
Whats The Difference Between Bankruptcy And A Formal Debt Agreement
This is very important when trying to understand how does the bankruptcy process work?. Personal insolvency agreements and formal debt agreements, also known as Part IX debt agreements so-called because they are Part IX of the Bankruptcy Act are an alternative to bankruptcy. Like bankruptcies, formal debt agreements are administered by AFSA.
Whereas bankruptcy releases you from your debts, a Part IX debt agreement is an opportunity to negotiate a reduced sum payable to your creditors in instalments over a set amount of time. Should your creditors accept your proposal, your debts will no longer attract interest and your payments will be consolidated into a single, easier to manage repayment for a fixed period of time, usually up to five years.
It is important to recognise that entering into a debt agreement is considered an act of bankruptcy and that the consequences are not dissimilar. Applicants also face the possibility of being forced into bankruptcy by their creditors against their will.
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