How Long Does The Bankruptcy Process Last
There are two major factors that will determine the length of the bankruptcy process: whether its your first filing and whether you have what is known as surplus income. A person who files for bankruptcy for the first time without any surplus income can be discharged from bankruptcy after nine months. If you do have surplus income, it can take 21 months for you to be discharged from bankruptcy. Read more about how surplus income is calculated
If you file for bankruptcy a second time, it would take 24 months to receive a discharge if you dont have surplus income, or 36 months with surplus income. In any case, the bankruptcy process could take longer than expected if the bankruptcy is opposed by a creditor or the court.
If you file for bankruptcy three or more times, the length of the bankruptcy will vary depending on your individual circumstances.
What Happens To Your Spouses Credit Or Assets
If your debts are your own, your spouse is not affected by your bankruptcy. Your bankruptcy does not appear on their credit report.
If you have joint debt, your creditor will pursue your spouse for collection. In this case, you may want to talk to your trustee about a joint bankruptcy.
Only your share of any assets you own is included in your bankruptcy. If you own any assets jointly, such as a marital home, it is essential to discuss options with your trustee. Again, a consumer proposal may be a more viable alternative in this scenario.
If your spouse, or anyone, co-signed a loan for you, they are still liable for repayment of any debts forgiven to you in your bankruptcy.
Meet With Your Trustee
This will occur at your trustees office or online during the pandemic. The trustee will explain all options available to you. He or she will ask about your income, your assets, how much you owe, and what your expenses are.
You should also ask questions as well, including how to start, what the costs are, when to make payments, what assets you may have that would qualify for exemption and any other questions you have.
At the end of the meeting, if you decide to move forward, the trustee will file the bankruptcy application and all the necessary paperwork with the Office of the Superintendent of Bankruptcy Canada.
Once it is filed, the trustee will begin overseeing the legal obligations for your bankruptcy. You will stop making payments and any legal action against you, including wage garnishment, will end. Unless a meeting of creditors is requested, you will skip to Step 5.
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Could Anything Prevent Me From Being Discharged
It is possible that your discharge could be opposed by a creditor, an LIT or the Superintendent of Bankruptcy. Generally, a bankruptcy discharge is opposed when the debtor has not fulfilled the requirements of the bankruptcy process. This might be due to:
- Not making the required monthly payments
- Failing to attend two mandatory credit counselling sessions
- Committing an offence related to the bankruptcy claim
There are a few other reasons why a bankruptcy claim could be opposed. For instance, if the bankruptcy was caused by gambling or if a creditor suspects fraudulent activity, it could be opposed by the creditor.
If the bankruptcy discharge was opposed, the debtor would have to attend a court hearing to determine the conditions they would need to fulfil in order to be discharged from bankruptcy.
Take Your First Step Towards A Debt Free Life
If you are overwhelmed by debt and live in the Toronto area, call us at 416-498-9200 to book a FREE, confidential appointment. We will review your financial situation in detail and discuss all of your options with you. Alternatively, you can fill out the form below and our team will reach out to you.;
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Which Types Of Debt Are Not Subject To The Statute Of Limitations
Under the Ontario Limitations Act, the statute of limitations on most debts expires after two years from the date the account originally became delinquent. However, some amounts you owe are not subject to the statute of limitations, including:
- Government-guaranteed student loans
- Court-ordered debts, such as child support and fines
Its important to note that you cannot discharge some of these debts during bankruptcy. For example, court-ordered obligations are not typically eligible for discharge. You can discharge tax debt unless the Canada Revenue Agency placed a lien on your property. Finally, you can only discharge student loans if more than seven years have passed since you were a student.
Consumer Proposals Vs Bankruptcy And Cra Debt
A consumer proposal is a popular alternative to bankruptcy because it provides debt relief from unsecured creditors, including debt forgiveness from CRA. When you file a consumer proposal with a licensed insolvency trustee you are not required to sell any of your assets to repay your debts or pay any surplus income.
To start the consumer proposal process, you will first need to schedule a consultation with a licensed insolvency trustee where you will review your finances. After reviewing your income, expenses, and total debts, the two of you will find a fair amount that you can pay each month to all of your creditors. These payments can last up to five years after which, you will be discharged from all debts covered by the proposal, including CRA debts.
Tax debt in Canada can be included in a consumer proposal and the CRA will often accept less than your full amount owing, though how much they will settle for will depend on the situation. In order to get the CRA to accept your proposal, you will have to file any and all outstanding tax returns. If you want CRA debt relief and 50% or more of your total unsecured debts are owed to the agency, you will have to get them to accept the proposal.
If a consumer proposal is not a viable option for you, then filing for bankruptcy may be your next solution. With this, your trustee would be required to file a pre-bankruptcy tax return and a post-bankruptcy tax return.
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Laws Governing Bankruptcy In Canada
Federal;bankruptcy laws;are set out in the;Bankruptcy & Insolvency Act.
The BIA defines three types of insolvency proceedings available to individuals seeking a resolution to their debts:
- personal bankruptcy,
- consumer proposal,
- and a Division I proposal.;
Bankruptcy can only be filed with a Licensed Insolvency Trustee. The role of the bankruptcy trustee is to ensure that the rules and laws around the bankruptcy process are applied fairly to both the debtor and creditors.
Bankruptcy legislation is what provides immediate protection from creditor actions, known as an automatic stay of proceedings. It is the stay that ensures collection agencies and creditors stop calling and allows your trustee to stop a wage garnishment.
Provincial laws also impact your bankruptcy, including legislation that defines what assets are exempt from seizure when you declare bankruptcy.
Which Debts Can I Eliminate By Filing For Bankruptcy
Filing for bankruptcy allows you to eliminate all of your unsecured debts, including credit cards, lines of credit, bank loans, payday loans and income tax debts. Student loans can only be eliminated in bankruptcy if youve been out of school for more than seven years. If you have been out of school for less than seven years you may still be able to eliminate student loans under certain hardship conditionsyour local LIT can review those conditions with you.
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Your Insolvency Trustee Administers The Insolvency Process
Your LIT will guide you through the entire bankruptcy process from start to finish if you decide that filing for bankruptcy is the best option for getting your fresh financial start.
The trustee will help you prepare your bankruptcy paperwork, and will submit the paperwork to the OSB which will officially start your bankruptcy.
Your Licensed Insolvency Trustee will generally administer your bankruptcy, will collect your payments, calculate any surplus income payments , and will collect any of the assets that you will lose and will sell these assets and distribute the funds to your creditors.
Many debtors lose no assets when claiming bankruptcy, and your trustee will explain any assets that you will lose before you make the decision about filing for bankruptcy.
You can explore bankruptcy alternatives which will allow you keep assets that might be lost in a bankruptcy.
Who Will Know Ive Gone Bankrupt?
Although bankruptcy records are publicly accessible, in almost all cases no one other than your creditors will find out about your bankruptcy unless you tell them.
In rare cases a notice in the legals section of the newspaper will appear but this is only in the case of a bankruptcy with many high-value assets.
Second Bankruptcy Automatic Bankruptcy Discharge Timing
If you are a second time bankrupt without surplus income payments you will receive an automatic bankruptcy discharge in 24 months from the official date of your bankruptcy filing;
If you are a filing a second bankruptcy with required bankruptcy surplus income payments you will receive your automatic bankruptcy discharge in 36 months from the start of your bankruptcy.
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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.
Ontario Bankruptcy And Insolvency Statistics
- 38,856 consumers in Ontario were insolvent in 2018
- 38% of those consumers went on to declare bankruptcy
- Average assets at the time of filing: $30,774.14
- Average liabilities at the time of filing: $98,577.12
- With an average household income of $74,287 in Ontario, the average filer effectively owed $1.33 for every dollar they earned
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Key Concepts On Surplus Income
In summary, the more you make the more you pay, and the longer you are required to make the payments. Lets review these calculations in more detail.
How do the surplus income rules work ?
The government sets a threshold for what you are allowed to earn each month, based on the size of your family. Here are the limits set for 2021, based on your family size:
Heres an example of how the calculation works:
Joe is single, with no dependents. He earns $400 per week. In a typical four payday month he earns $400 x 4 = $1,600 after tax. He is allowed to earn $2,248, so Joe is below the surplus limit, so he is not required to make any surplus income payments to the trustee during his bankruptcy.
Should You Claim Bankruptcy
A good trustee does not assume declaring bankruptcy is what you should do. The goal of talking with a Licensed Insolvency Trustee is to discuss your personal financial situation and debts. Your trustee will look at the big picture. Something that is hard to do when you are avoiding calls from collection agencies and trying to figure out how to make your next bill payment.
If;filing bankruptcy;in Ontario is the right solution for you, your trustee will fully explain the process and answer any further questions you may have.
At Hoyes, Michalos and Associates we are proud to be a team of understanding professionals who can help you decide if personal bankruptcy is the right solution to deal with your debts.
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Should You File Bankruptcy In Canada If Living Abroad
Reading time: 29 minutes
If you owe a debt in Canada, but live elsewhere in the world, should you ignore past due Canadian debts you cant afford to pay, or can you file bankruptcy in Canada when living abroad? As the Licensed Insolvency Trustee in charge of our Windsor office, Rebecca Martyn deals with a lot of cross-border consumer insolvency questions and is often contacted by Canadians living across the border who receive multiple creditor calls a day on their Canadian debts. Rebecca explains the requirements for filing a Canadian bankruptcy when living in the United States, the principles of which apply to those living in any;country outside of Canada.
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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Finding A Licensed Insolvency Trusteeto Assist In The Bankruptcy Process
If your overwhelming debt is so high that you are considering bankruptcy you can set up a free meeting with a local bankruptcy trustee to learn more about declaring bankruptcy in Canada.
A LIT is a highly trained, experienced ethical individual who has been licensed by the OSB to administer to bankruptcies for individuals and businesses.
One of our government licensed trustees will provide you with an initial consultation and will help you evaluate your finances and debts and will explain the pros and cons of filing for bankruptcy and might be able to help you explore other bankruptcy alternatives that can help you get out of debt.
You can always trust the advice of your LIT / bankruptcy trustee because they are ethically required to give you their best advice.
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.
I Will Lose My Possessions
Personal effects, furniture and household goods are exempt in bankruptcy. Exceptions would be made if you had items of extraordinary value such as fine art, which you would be asked to declare on your sworn Statement of Affairs to the creditors. You can exempt one car with a net value of $6,600 or less. So if you have a fully encumbered car , keep it if you wish, provided you continue to make the payments in the normal course of business. Keep your stuff.
What Happens To My Debt If I Declare Bankruptcy In Canada
Bankruptcy will eliminate most of your debts, such as unsecured debts including credit card bills, medical bills, and payday loans. You may still be required to pay your secured debts, such as your mortgage or motor vehicle loan.
Some debts cannot be eliminated by your bankruptcy. Those include:;
- Court-imposed fines;
- Debt incurred by misrepresentation
- Alimony or maintenance payments
- Debt for damages imposed by Civil Court for intentional bodily harm, sexual assault, or wrongful death
- Student loans, if bankruptcy occurs within 7 years of ceasing full- or part-time studies
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