Select A Licensed Insolvency Trustee To Help You Understand Canada’s Debt Regulations
Licensed Insolvency Trustees are the only people licensed by the Canadian Superintendent of Bankruptcy to administer consumer proposals and bankruptcies.
In order to declare bankruptcy or file a consumer proposal vou must work with a Licensed Insolvency Trustee.
Your trustee will provide information about consumer proposals, the process for filing bankruptcy, and about other debt relief options. Also, during the bankruptcy or proposal process your trustee will ensure your rights are respected.
When selecting your trustee, you should keep the following in mind:
- Your trustee should be local or at least easy to access.
- You should feel comfortable with your trustee. Ask them questions about your situation and make sure you understand their answers.
- Confirm they are licensed by the Superintendent of Bankruptcy .
must work with a Licensed Insolvency Trustee when filing bankruptcy in Canada.
Here on Bankruptcy-Canada you can find and connect with one of the top Licensed Insolvency Trustees that is local to you. We list only Trustees who have shown a long standing ability to help people find debt relief.
Social And Economic Factors
In 2008, there were 1,117,771 bankruptcy filings in the United States courts. Of those, 744,424 were chapter 7 bankruptcies, while 362,762 were chapter 13. Apart from social and economic factors such as education and income, there is often also a correlation between race and bankruptcy outcome. For example, for personal bankruptcy claims, minority debtors had an approximately 40% decreased chance of receiving a discharge in Chapter 13 bankruptcy. These racial disparities are aggravated by the fact that many minority debtors lack appropriate attorney representation.
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Personal bankruptcies may be caused by a number of factors. In 2008, over 96% of all bankruptcy filings were non-business filings, and of those, approximately two-thirds were chapter 7 cases.
Although the individual causes of bankruptcy are complex and multifaceted, the majority of personal bankruptcies involve substantial medical bills.Personal bankruptcies are typically filed under Chapter 7 or Chapter 13. Personal Chapter 11 bankruptcies are relatively rare.The American Journal of Medicine says over 3 out of 5 personal bankruptcies are due to medical debt.
There were 175,146 individual bankruptcies filed in the United States during the first quarter of 2020. Some 66.5 percent were directly tied to medical issues. Critical illness insurance Association report June 2, 2020
What Is An Automatic Stay
After you file for bankruptcy, you have the protection of an immediate, but temporary, automatic stay. The automatic stay can, for example, immediately stop a foreclosure, an eviction, car repossession, or wage garnishment. It can also stop debt collection, harassment, and disconnection of utilities.
The automatic stay may provide a powerful reason for filing for bankruptcy. In most of the situations listed above, the automatic stay can buy you a few days or weeks in which to figure out your next move. If your primary motivation in filing bankruptcy is to gain the benefits of the automatic stay, you donât need to file all of your papers at once. You just need to file the three-page petition, a signature declaration, and a listing of your creditors. In addition, within 180 days prior to filing, you will have to visit an approved credit counseling agency for advice and budget analysis. You will have to file a certification of such counseling when you file your petition. You have 15 days in which to file the rest of your papers. If you donât, your case will be dismissed.
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Chapter : For Municipalities
Sometimes, local governments run into financial problems that cant be solved by some combination of taxes, cuts to services and/or personnel, or floating bonds. In these dire circumstances, these local government entities including cities, townships, counties, school districts, municipal utilities, taxing districts, and any number of other instrumentalit of the state may file for bankruptcy protection.
The goal is to reorganize and possibly even resize debt. For instance, when Detroit filed for bankruptcy in 2013, city pensioners took a slight hit but a major bondholder got a small fraction of the $333 million it was owed. The storied Joe Louis Arena was demolished, and the site surrendered to a bondholder for construction of a hotel.
Although Chapter 9 bankruptcies were once a fixture of the American landscape about 680 have been filed since 1937 no city, town, village, or county has filed since July 2013.
But the century is young.
Chapter 9 bankruptcies made the news in April when U.S. Senate Majority Leader Mitch McConnell suggested Congress might want to extend bankruptcy protection to states to help alleviate some of the effects of bad management that were exacerbated by the coronavirus shutdown.
Not unexpectedly, the blowback was immediate. From constitutional scholars. And from politicians Republicans as well as Democrats.
Anyway, bankruptcy courts are full enough as it stands.
Why You Should Not Be Embarrassed By Bankruptcy
According to the Office of the Superintendent of Bankruptcy, approximately 100,000 Canadians every year turn to bankruptcy or consumer proposal as a way to deal with their debt problems.
It is important to recognize that there should be no shame associated with declaring personal bankruptcy. People find themselves in this stressful position for a wide variety of reasons, from a sudden loss of employment to large, unexpected bills.When your bankruptcy is completed , the debts included in your bankruptcy will be extinguished and you can begin to improve your right away.
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Finding A New Place To Live During Bankruptcy
While you cant expect to qualify for a mortgage and buy a home while you file for bankruptcy, renting may be easier than you think.
Filing for bankruptcy makes it more of a challenge to rent, but not impossible, Leslie Tayne explains. She advises that while many apartment complexes may turn renters down solely based on their credit report, there are other options.
Individual landlords are a safer bet and might be more willing to work with individuals that have filed for bankruptcy. You might need a cosigner or a bigger security deposit to secure housing with a bankruptcy ongoing or discharged and reported on your credit.
Typically those two factors are the biggest concerns. Keep in mind that most landlords will, in fact, run a credit report. So, be prepared to explain why and how you can afford the property.EXPERT: Mark Scribner, oXYGenFinancial
Exceptions To The Discharge Of All Debts
Some debts are not erased. Bankruptcy generally only extinguishes unsecured debts such as those to credit cards, personal loans, income taxes, overdrafts, etc.
A secured debt, such as a car loan or mortgage, may not be included. This is because this type of creditor can recover the amount owing to them via the collateral you posted as security. Your Trustee can advise further if you have a secured loan you want to include in the bankruptcy.Some unsecured debts are also not discharged in a bankruptcy. An example is student loans, if you attended school less than seven years from the date of bankruptcy. Alimony or child support obligations, fines or penalties imposed by the Court, as well as any debt arising from fraud are not discharged in a bankruptcy.
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Wipe Out Credit Card Debt And Most Other Nonpriority Unsecured Debts
Bankruptcy is very good at wiping out unsecured , medical bills, overdue utility payments, personal loans, gym contracts. In fact, it can wipe out most nonpriority unsecured debts other than school loans.
The debt is unsecured if you didn’t promise to give back the purchased property if you didn’t pay the bill. By contrast, if you have a secured credit card, you’ll have to give the purchased item back. Jewelry, electronics, computers, furniture, and large appliances are often secured debts. You can find out by reading the receipt or credit contract.
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
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Explore Your Bankruptcy Options
Get the financial relief you are entitled to by filing for bankruptcy protection. Our team represents individuals and small business owners in Chapter 7 and Chapter 13 bankruptcy cases. We can also provide help filing for Chapter 11 reorganization bankruptcy and Chapter 12 bankruptcy for family farmers and fishermen.
We can help you through the petition and filing process. We can help you retain your assets when you choose Chapter 7 bankruptcy. We can even help you restructure financial debt through other bankruptcy filings with complex financial structures or extremely large debt loads. Call Farmer & Morris Law, PLLC, at to speak to a member of our client intake team and learn what happens if you declare bankruptcy today.
What Bankruptcy Can’t Do
Bankruptcy doesn’t cure all debt problems. Here’s what it can’t do for you.
Prevent a secured creditor from foreclosing or repossessing property you can’t afford. A bankruptcy discharge eliminates debts, but it doesn’t eliminate liens. A lien allows the lender to take property, sell it at auction, and apply the proceeds to a loan balance. The lien stays on the property until the debt gets paid. If you have a secured debta debt where the creditor has a lien on your propertybankruptcy can eliminate your obligation to pay the debt. However, it won’t take the lien off the propertythe creditor can still recover the collateral. For example, if you file for Chapter 7, you can wipe out a home mortgage. But the lender’s lien will remain on the home. As long as the mortgage remains unpaid, the lender can exercise its lien rights to foreclose on the house once the automatic stay lifts.
Eliminate child support and alimony obligations. Child support and alimony obligations survive bankruptcy, so you’ll continue to owe these debts in full, just as if you had never filed for bankruptcy. And if you use Chapter 13, you’ll have to pay these debts in full through your plan.
Eliminate most tax debts. Eliminating tax debt in bankruptcy isn’t easy, but it’s sometimes possible for older unpaid tax debts. Learn what’s needed to eliminate tax debts in bankruptcy.
Eliminate other nondischargeable debts. The following debts aren’t dischargeable under either chapter:
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Whats The Difference Between Chapter 7 And Chapter 13 Bankruptcy
The major difference is time Chapter 7 takes 4-6 months Chapter 13 takes 3-5 years and money. You can have most, or all your unsecured debt discharged in Chapter 7 bankruptcy. In Chapter 13, some of your debt is forgiven, but only if you meet the conditions approved by the trustee and bankruptcy judge.
Impact On Your Credit Score
When you declare bankruptcy, the Office of the Superintendent of Bankruptcy will register the fact that you filed on your credit report. Your credit rating will be recorded as an R9 for the duration of your bankruptcy and the bankruptcy will remain on your credit report for a maximum of 7 years after you are discharged from bankruptcy if youre a first-time filer, or 14 years for a repeat filer.
The best way to deal with this consequence of the bankruptcy is to work on the plan to rebuild your credit as soon as you are discharged from the bankruptcy. This could include obtaining a secured credit card, borrowing for an RRSP or borrowing money with some form of security given to the lender.
Keep in mind that in order to rebuild your credit, you need to USE credit . Here are some tips on how to do that:
- Pay all bills on time. If possible, always pay the balance in full to avoid excessive interest charges but at the very least pay the minimum amount due by the due date.
- Dont exceed the credit limit on your credit card.
- Dont apply for too many new loans. Continuous applications does not look good on anyones credit report.
These, and more, strategies will be discussed as part of the counselling youll receive during the bankruptcy process.
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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. Residences, motor vehicles and certain investments are partially or completely exempt from seizure in most provinces. To learn about the relevant exemptions in your province, we recommend speaking with a Licensed Insolvency Trustee.
For most people, typical assets that may be lost in a bankruptcy include certain non-registered investments, RESPs, recreational equipment such as boats, snowmobiles, motorcycles, etc.
Complete An Application Form And Then Sign The Official Personal Bankruptcy Documents
You will be provided with a bankruptcy application form which allows us to compile the information needed to produce your formal bankruptcy documents. Once your application form has been completed by you, Sands & Associates will draft the official bankruptcy documents you will sign to file for personal bankruptcy.
If your situation is urgent, we can process these documents very quickly if you need immediate relief from your creditors often in as little as 24 hours.
We will walk you through each of these legal documents during your meeting to sign the bankruptcy paperwork . Once your official bankruptcy documents are signed, your bankruptcy will be registered with the Office of the Superintendent of Bankruptcy and automatic legal protection from creditors will be in place immediately. This protection is known as a stay of proceedings.
At this stage, your creditors will no longer be able to charge you ongoing interest or pursue you for payment and all collection attempts must cease. The bankruptcy filing will also serve to immediately cease wage garnishments and/or bank account seizures.
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Chapter 1: For Foreign Creditors
A fairly recent addition to the federal Bankruptcy Code, Chapter 15 was adopted to enhance cooperation in international insolvencies. Such filings are rare, but they are useful to parties representing debtors, creditors, and assets involving more than one country seeking efficient and reasonable bankruptcy processes.
A Chapter 15 filing typically is not central to a bankruptcy involving a foreign individual or entity. Instead, it is considered ancillary, the main event unfolding in the foreigners home nation.
House And Car In Bankruptcy
Keep Your Home and Vehicle When You Declare Bankruptcy While some individuals dont want to retain their home or vehicle and are looking for a completely fresh start, others wont file for bankruptcy if their house and car are at risk of being lost. These are very important questions that we will thoroughly discuss with
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About Licensed Insolvency Trustees
In a bankruptcy, people or companies who can no longer pay their debts give all of their non-exempt property to a Licensed Insolvency Trustee who then sells it and distributes the money to creditors. Bankruptcy can be voluntary or forced by a creditor through the Courts.
Roughly 90 percent of bankruptcies in Canada are consumer bankruptcies where the business-related debts make up less than 50 percent of the bankrupt’s total debts.
When the bankrupt’s realizable assets do not exceed $15,000, the bankruptcy may be processed under summary administration. Almost all consumer bankruptcies are processed this way.
Bankruptcies processed as summary administrations are simpler for example, they don’t require a meeting of creditors. If your debtor’s bankruptcy is to be handled as a summary administration, you will find a notation saying so near the top of the documents you receive.
As soon as the debtor is declared bankrupt, creditors can no longer start or continue legal proceedings against the debtor without the Court’s permission.
If you are a secured creditor, however, you can take possession of the asset on which you hold a security unless the Court, under certain conditions, orders otherwise. For example, a bank holding a security on a car may take possession of the car and sell it even if the debtor has declared bankruptcy.
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.
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Disadvantages Of Filing For Bankruptcy:
The Bankruptcy and Insolvency Act is the legislation by which Licensed Insolvency Trustees administer bankruptcy files. The laws and regulations of the Act are meant to balance the scales between the need of an honest but unfortunate debtor for a fresh financial start, and the rights of the creditors. For this reason, filing for bankruptcy in Canada has some disadvantages:
- Filing for bankruptcy will lower your credit score for a minimum of six years from the time your bankruptcy is completed
- Some of your assets may need to be surrendered, and/or a portion of your income above a certain level may need to be paid into your bankruptcy
- In bankruptcy, you must provide the Trustee with detailed income and expense information
- Your income tax refund, if you get one, is part of the bankruptcy and is forfeited to the Trustee for the year of bankruptcy
If you have reached the point where you are over-extended and can no longer afford your debt, the advantages of filing for bankruptcy or consumer proposal likely far outweigh the disadvantages.