You Will Attend A Meeting Of Creditors
The first thing the trustee will do will be to call a meeting of creditors. This is also called the 341 creditors meeting. During this meeting, the trustee will ask you, under oath, about your assets and debts. Creditors can attend this meeting and ask you questions. But usually, it will be just you and the trustee.
You May Make Surplus Income Payments
When you file for bankruptcy, you must do the following:
- disclose to the LIT information about all of your assets and liabilities
- advise the LIT of any property that was sold or transferred in the past few years
- surrender all your credit cards to the LIT
- attend the first meeting of creditors
- attend two counselling sessions
- advise the LIT in writing of any address changes
- if required, attend an examination at the Office of the Superintendent of Bankruptcy and
- assist the LIT as needed in administering your estate.
You may be required to make additional payments to your LIT for distribution to your creditors.
In addition to paying the LIT’s fees, you may be required to make additional payments to your LIT for distribution to your creditors. These are called surplus income payments.
Each month during the bankruptcy process, you must submit a copy of your pay stubs and proof of other income to the LIT. The LIT then calculates your surplus income.
Surplus income is the part of your earnings that exceeds the amount of income a family needs to maintain a reasonable standard of living. This amount is set by the OSB annually. The larger your family, the more you are allowed to keep the more you earn, the more you are required to contribute.
In other words, if your household income exceeds the level set by the OSB, then you must make additional payments to your LIT during your bankruptcy.
The Means Test For Chapter 7
Whether to file for Chapter 7 or Chapter 13 is not your decision alone. The courts also impose a means test to determine whether you are eligible for Chapter 7. The means test first compares your average income over the previous six months with the median income for a household of your size in your state if you earn less than the median, you should be eligible for Chapter 7.
Even if your income is higher than the median, you may be eligible after subtracting certain allowable expenses. But if the calculation shows that you’d have enough disposable income left over to begin repaying your debtsrather than having the slate simply wiped cleanthe court may decide that Chapter 13 is your only option. To help determine your eligibility, you will be required to fill out this 122A-2 Form.
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Bankruptcy Exemptions In New Brunswick
- Furniture, household furnishings and appliances up to $5,000
- No limit on clothes for you and your family
- Enough food and fuel for you and your family for three months
- Tools used by you in the practice of your trade up to $6,500
- One motor vehicle up to $6,500, if needed for employment
- Dogs, cats, and other domestic animals belonging to you
- No limit on medical or health aids for you and your family
- Certain government pension plans are exempt from bankruptcy
What Happens To Your Home
If you own your home it can be sold if it is the only way to pay your creditors.
Sole owners
If youre the only owner of the property:
- the value of the property after any secured debts have been paid transfers to the trustee. This is known as the beneficial interest and is sometimes called equity
- the legal title transfers to the trustee and a bankruptcy restriction is added to the land registry record. This will stop you from selling your home or making deals connected to it
The restriction will be removed once the trustee has been paid for their interest in the property.
Joint owners
If you own the property with someone else:
- your share of the property after any secured debts have been paid transfers to your trustee. This is known as the beneficial interest
- a Form J restriction is added to your Land Registry record and the trustee will be told of any deals affecting the property, including a sale
You can still sell the property, but the trustee will get your share of the money from the sale. The Form J restriction will be removed once the trustee has been paid this money.
The sale of your home
The trustee cant usually sell the property without your agreement for a year from the date of the bankruptcy order if you have a partner or children living with you.
You can stop a sale taking place later if a family member or friend buys the beneficial interest in your home. The buyer should contact the trustee.
Rented property
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Bankruptcy Is A Powerful Tool For Debtors But Some Kinds Of Debts Can’t Be Wiped Out In Bankruptcy
By Cara O’Neill, Attorney
If you’re facing severe debt problems, filing for bankruptcy can be a powerful remedy. It stops most collection actions, including telephone calls, wage garnishments, and lawsuits . It also eliminates many types of debt, including credit card balances, medical bills, personal loans, and more.
But it doesn’t stop all creditors, and it doesn’t wipe out all obligations. For instance, you’ll still have to pay your student loans and arrearages for child support, alimony, and most tax debts. Read on to learn more about:
- what you can expect in both Chapter 7 and Chapter 13
- the benefits offered by Chapter 13 alone, and
- things that can’t be accomplished by filing for bankruptcy.
If you’d like step-by-step guidance through the bankruptcy process, read What You Need to Know to File for Bankruptcy in 2021.
When To File Chapter 13 Bankruptcy
We advise our clients to file Chapter 13 bankruptcy when they have fallen behind on mortgage and/or car payments and they are facing foreclosure or repossession of their vehicles. Chapter 13 immediately stops any active foreclosure or repossession activity. The moment a Chapter 13 bankruptcy is filed, all collection activity must stop. Chapter 13 bankruptcy also eliminates credit card and medical debt, similar to a chapter 7 bankruptcy filing.
It makes sense to file Chapter 13 bankruptcy once a person has gotten back on their feet after losing a job or going through an illness and they need to catch up on missed mortgage or car payments in a payment plan. Chapter 13 provides a court-ordered payment plan that allows a person up to 5 years to repay missed mortgage or car payments.
If you are facing foreclosure or repossession of your vehicles or overwhelming debt and you need immediate relief, call and talk to a Chapter 13 bankruptcy lawyer today.
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How Do I Get Out Of Bankruptcy
Generally, there are 4 methods to get out of bankruptcy:
Depending on which method is used, it is also possible to have your name removed from the bankruptcy register after that.
For more information on these 4 methods, please refer to our article on getting out of bankruptcy.
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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The Bankruptcy Filing Process
There are a number of legally required steps involved in filing for bankruptcy. Failing to complete them can result in the dismissal of your case.
Before filing for bankruptcy, individuals are required to complete a credit counseling session and obtain a certificate to file with their bankruptcy petition. The counselor should review your personal situation, offer advice on budgeting and debt management, and discuss alternatives to bankruptcy. You can find the names of government-approved credit counseling agencies in your area by calling the federal bankruptcy court closest to you or by visiting its website.
Filing for bankruptcy involves submitting a bankruptcy petition and financial statements showing your income, debts, and assets. You will also be required to submit a means test form, which determines whether your income is low enough for you to qualify for Chapter 7. If it isnt, you will have to file for Chapter 13 bankruptcy instead. You will also need to pay a filing fee, though it is sometimes waived if you can prove you cant afford it.
You can obtain the forms you need from the bankruptcy court. If you engage the services of a bankruptcy lawyer, which is usually a good idea, they should also be able to provide them.
Assuming the court decides in your favor, your debts will be discharged, in the case of Chapter 7. In Chapter 13, a repayment plan will be approved. Having debt discharged means that the creditor can no longer attempt to collect it from you.
Filing For Bankruptcy In Alberta
Filing for bankruptcy in Alberta is something many Canadians think they have to undergo. Although the recent economic downturn exacerbated the problem of debtors being unable to pay their debts, the truth of the matter is that there are always people in Canada who find themselves in over their heads when it comes to what they owe their creditors. From mortgages to student loans to credit cards, some residents find themselves in a situation they never anticipatedthey cannot keep up with their bills.
Average consumer debt levels in Alberta are the highest in the country with Calgary and Edmonton leading the way. Non-mortgage consumer debt in Alberta hit $29,117 in Q1 of 2019, an increase of 3.4% from 2018. Because of these high-debt loads, bankruptcies in the province are up 13.5% over 2018 with Alberta the only other province to see a significant increase in the rate of bankruptcies.
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Responsibilities Of And Restrictions On A Bankrupt
Once you are declared as a bankrupt, your responsibilities will include:
- Disclosing to the OA all your assets
- Disclosing to the OA all of the property that you disposed of prior to the bankruptcy or property disposed of by way of a gift or settlement within the 5 years preceding this bankruptcy
- Making monthly contributions to the bankruptcy estate
- Keeping the OA informed of your place of residence and contact details
- Attending any meeting of your creditors unless prevented by sickness or other sufficient cause
There will also be several restrictions imposed on you that you will have to comply with. Importantly, a bankrupt cannot:
- Be appointed as a trustee or personal representative in respect of any trust or estate, unless the court approves
- Commence legal action against another person, except on the grounds of personal injury suffered by yourself or divorce, unless the OA gives permission
- Leave Singapore without the OAs permission
- Borrow more than $1,000 without informing the lender that you are a bankrupt
- Participate in the management of a business or acts as the director of a company without the permission of the OA or the High Court.
For more information, please read our article on what a bankrupt can or cannot do in Singapore.
How To File For Bankruptcy
Filing for bankruptcy is a legal process that either reduces, restructures or eliminates your debts. Whether you get that opportunity is up to the bankruptcy court. You can file for bankruptcy on your own, or you can find a bankruptcy lawyer, which most experts regard as the prudent avenue to pursue.
Bankruptcy costs include attorney fees and filing fees. If you file on your own, you will still be responsible for filing fees. If you cant afford to hire an attorney, you may have options for free legal services. If you need help finding a lawyer or locating free legal services, check with the American Bar Association for resources and information.
Before you file, you must educate yourself on what happens when you file for bankruptcy. Its not simply a matter of telling a judge Im broke! and throwing yourself at the mercy of the court. There is a process a sometimes confusing, sometimes complicated process that individuals and businesses must follow.
The steps are:
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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
Can You Keep Your Car If You File For Bankruptcy
Most provincial regulations include an exemption for some or all of the value of your car, especially if it is needed for your occupation. If you are making payments on your car, retaining the car will depend partly on whether you can continue the payments. A Licensed Insolvency Trustee can explain how the regulations will apply to your specific situation.
Provincial exemptions for homes and cars can be confusing, especially when considering mortgages and leases. A Licensed Insolvency Trustee will gladly help you learn how these assets would be affected in a bankruptcy. Your conversation is confidential and you are under no obligation. Contact a Trustee today!
Bankruptcy Exemptions by Province and Territory
CAUTIONS:
- The exemption lists we provide below are simplified summaries of the law
- Even where there is no dollar limit, exemptions are limited to what you and your dependants really need
- The provinces often adjust the exemptions for various reasons, such as inflation
For interpretation of the rules in your case, we strongly recommend that you contact a Licensed Insolvency Trustee to review your situation and determine which of your assets will be exempt if you file for bankruptcy. You should be completely clear on what you can keep if you go bankrupt in Canada, versus what you may lose.
Please choose your province or territory:
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Consequences Of Filing Bankruptcy More Than Once
There are, however, implications and consequences of filing bankruptcy more than one time.
One of the most serious implications of a second bankruptcy is that you will be bankrupt for a longer period of time. The first time you file bankruptcy you are eligible to be automatically discharged from bankruptcy in nine months . In a second bankruptcy the length of bankruptcy increases to a minimum of two years, and increases to three years if you have surplus income.
A second bankruptcy will also have an impact on your credit report. The major credit reporting agencies in Canada generally report a first bankruptcy for six or seven years after the date of discharge. A second bankruptcy can remain on your credit report for up to 14 years, or twice as long as a first bankruptcy. That can negatively impact your ability to borrow in the future.
How often can you file bankruptcy? It is possible to file bankruptcy for a third time, but if you do you will be required to attend a discharge hearing in bankruptcy court. You will be required to explain to the judge why you filed bankruptcy three times, and it will be up to the court to decide if and when you get discharged. The court could impose conditions on your discharge, such as holding your bankruptcy open for an extended period of time, or requiring you to make additional payments. A third bankruptcy is something to avoid.
Who Declares Bankruptcy
Most individuals and business who file for bankruptcy have far more debts than money to cover them and dont see that changing anytime soon. In 2020, bankruptcy filers owed $86 billion and had assets of $56 billion. Most of those assets were real estate holdings, whose value is debatable.
On the other hand, bankruptcy can often be used as a financial planning tool when you do have enough money to repay debts, but need to restructure the terms. This is often in cases when people need to repay mortgage arrears or taxes in a structured repayment plan.
What is surprising is that individuals not businesses are the ones most often filing for bankruptcy. They owe money for a mortgage, credit card debt, auto loan or student loan perhaps all four! and dont have the income to pay for it.
There were 774,940 bankruptcy cases filed in 2019, and 97% of them were filed by individuals. Only 22,780 bankruptcy cases were filed by businesses in 2019.
The other surprise is that most of the people filing bankruptcy were not particularly wealthy. The median income for those who filed Chapter 7, was just $31,284. Chapter 13 filers werent much better with a median income of $41,532.
However, in the end, there is a price to pay and youll pay it for 7-10 years.
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