Bankruptcy

If you live in the (519) area code call 310 John and we can help you sort through your debt issues.

Introduction
Before reaching the decision that personal bankruptcy is right for you, you should seek a FREE CONSULTATION to get details and information specific to your situation. Obtaining such information starts with calling 310-JOHN (310-5646).

Overview
Personal bankruptcy is a legal proceeding administered under and governed by, the Bankruptcy and Insolvency Act ("BIA"). In Canada, only a Trustee in Bankruptcy ("Trustee") can perform/administer a bankruptcy proceeding. Assisting people through the process so they can obtain relief from creditors, and helping people obtain a fresh start is certainly a very rewarding part of what I do as a Trustee.

Ultimately, a person who files bankruptcy wants a discharge from bankruptcy. It is the discharge that eliminates the obligation to repay the debts, and upon becoming discharged from bankruptcy, or released from bankruptcy, a person can apply for credit again and essentially is given a fresh start. Although a Trustee must work for the creditors to ensure they are treated equally and that non-exempt assets are realized upon for a commercially reasonable amount, we also assist the person experiencing financial challenges. It is the Trustee’s role to help you explore the merits of your various financial options and should you choose bankruptcy, to assist you through the bankruptcy process. In essence, a Trustee is often seen as being a person in the middle, having regard for the rights of each side.

A person usually becomes bankrupt by making a voluntary assignment into bankruptcy, (i.e. the person having a financial challenge wants to file bankruptcy to obtain financial relief and the decision to become bankrupt is voluntary). By making a voluntary assignment into bankruptcy, the person having the financial problem will have the opportunity to choose the Trustee that they wish to file bankruptcy with. It is important to note that once you have filed bankruptcy, you will not be able to change trustees or cancel your bankruptcy, so finding a person that you feel comfortable with is very important.

In some situations, creditors may commence a legal proceeding sometimes referred to as a Petition for a Receiving Order, or more recently known as an Application for a Bankruptcy Order. The purpose of this proceeding is to ask the Court to declare the individual bankrupt. Should this happen, the creditor will approach a Trustee who is willing to consent to act as Trustee and an application will be made to the Court requesting that the person be declared bankrupt. If the Court is satisfied that an act of bankruptcy has occurred, an order will be made declaring that the person is bankrupt. The most common act of bankruptcy happens when the person owes more than $1,000 and the person is failing to meet their obligations generally as they fall due.

However, the vast majority of bankruptcies are made voluntarily by an individual choosing to make an assignment into bankruptcy. Upon making an assignment into bankruptcy, all assets, except those exempt by law vest in the Trustee. The purpose of bankruptcy is to allow an honest, but unfortunate debtor to obtain a discharge from his or her debts.

Because no two situations are the same, it is recommended that you seek the advice of a Trustee as a FREE CONSULTATION will provide you with specific details pertaining to your situation.

Types of Personal Bankruptcy - Summary Administration & Ordinary Administration
There are two types of bankruptcy administrations. A Summary Administration is a streamlined process for individuals and is the most common type of bankruptcy for individuals. Ordinary Administration is a process generally used for businesses and individuals with more complex situations or situations where there are significant assets available to creditors. In summary administrations, there is no notice placed in the newspaper, and often creditor meetings are not required. However, in ordinary administration bankruptcies, a creditors' meeting must be called and notice of the meeting must be published in the paper.

Assets
Upon making an assignment into bankruptcy, all unencumbered assets (those with no liens registered against them) vest in the Trustee, subject to certain Federal and Provincial exemptions. Please refer to What Can I Keep.

STEPS IN THE BANKRUPTCY PROCESS
In every personal bankruptcy there are certain steps that happen. In an effort to illustrate what you can expect, I have set out below, a diagram outlining the process, or the steps that apply in each personal bankruptcy. Below the personal bankruptcy diagram is an explanation of the various steps listed on the timeline diagram:

Free Initial consultation
The purpose of the initial consultation is to provide an exchange of information. During the consultation, we will ask you questions about your situation so that we have a clear picture of your financial situation. Once all of the information is obtained, you will be provided with information on your various options and we will endeavor to answer all of your questions, so you can choose what option is best for you.

Signing of Bankruptcy Documents
If bankruptcy is the option chosen, we will prepare all documents necessary for you to make the assignment into bankruptcy. An appointment will be made for you to sign the documents at our office and once the documents have been signed, they will then be filed with the Office of the Superintendent of Bankruptcy ("OSB") and notices of your bankruptcy will be sent to your creditors.

Notice to Creditors
A notice of bankruptcy will be sent to all known creditors within 5 days of "receiving of the Certificate of Appointment". Upon filing the bankruptcy, most legal proceedings that deal with property matters are stayed or stopped, preventing those creditors from continuing their action against you. Similarly, any creditor(s) who are garnishing your wages or who are threatening to do so will be stayed, preventing them from garnisheeing your wages, bank accounts etc. Those annoying telephone calls from creditor or from collection agencies are also stayed and therefore creditors or the agencies must stop calling you. If they don't stop calling you, you let us know and we will deal with the creditor or collection agency. However, there are some debts, such as child or spousal support as an example, that are not stayed.

First Meeting of Creditors
Generally a meeting of creditors is not necessary but there may be instances where such a meeting will be held. Creditors or the Official Receiver may request one or if the Bankruptcy is being administer as an Ordinary administration as explained above. If a meeting of creditors is called you must attend at this meeting. The purpose of the meeting is to affirm the trustee's appointment, and provide directions to the Trustee regarding administration of the estate. Meetings of Creditors are not common in summary administration bankruptcies. If a meeting is required, we acting as Trustee are required to provide a report about your assets and liabilities and creditors may ask you related questions. They may also give directions to the Trustee with reference to the administration of the estate.

Counselling
People often are worried about counselling and what to expect. Our counselling is usually done in our office and we provide this service on an individualized basis. Although the BIA states that we can provide the service in groups of up to 10 people at a time, we respect your desire to keep your situation as private as possible, and therefore we do individual sessions. There are only two sessions, and each session will last between half an hour to an hour depending upon your situation. In order to get a discharge from bankruptcy, you must attend two sessions. Generally, we receive very positive feedback about the information that we provide, and most people find it beneficial.

First Counselling Stage - Consumer and Credit Education
The purpose of the first session is to provide information about:

money management;
spending and shopping habits;
warning signs of financial difficulties; and
obtaining and using credit.

Second Counselling Stage - Identification of Roadblocks to Solvency and Rehabilitation
The second counselling session is to determine the budgetary and/or non-budgetary causes of insolvency or bankruptcy and we generally use this time to provide you with an both the required counselling and provide you with an update on how your bankruptcy is progressing. In the counselling session, we are required to provide you with:

follow up information on the principles presented in the first stage, and therefore we will assist you better understand your strengths and weaknesses with regard to money management and budgeting skills;
provide follow up regarding any non-budgetary causes of insolvency and make appropriate referrals and recommendations regarding problems such as gambling abuse, compulsive behaviour, substance abuse, employment and marital or family difficulties that may have contributed to financial difficulties, and if necessary provide you with referrals to professionals, or resources that can help you with non budgetary causes of financial problems; and
we will assist you to better understand financial management and consumption habits.

Discharge
A bankrupt's eligibility for a discharge is as follows:

A first time bankrupt with no surplus income is eligible for an automatic discharge at (9) nine months;
A first time bankrupt with surplus income is eligible for an automatic discharge at (21) twenty one months;
A second time bankrupt with no surplus income is eligible for an automatic discharge at (24) twenty-four months;
A second time bankrupt with surplus income is eligible for an automatic discharge at (36) thirty-six months.

If the discharge is opposed by a creditor, the Trustee, or the Superintendent of Bankruptcy, a discharge hearing will be scheduled. Just because there is an opposition to a bankrupt’s discharge, it does not necessarily mean that the person who filed bankruptcy will have to attend at Court. In fact, most oppositions result from a bankrupt not doing a complying with the few duties required, such as attending counseling. These matters are often resolved prior to a hearing being held. However, if the matter is not resolved, the Bankrupt person will have to attend at Court. More information about this matter will be discussed in your FREE CONSULTATION.

As mentioned above, an individual will require a discharge to eliminate their debts, which will provide them with the opportunity to obtain a fresh start free of debt.

Bankruptcy is a rehabilitative process, and therefore an individual will need to demonstrate that they have been rehabilitated. It is little things like attending counselling or paying you obligations after bankruptcy that show you are taking steps to be rehabilitated. Accordingly, a Trustee must oppose the bankrupt’s discharge in the event of the following;

If the bankrupt failed to pay the Trustee for its services;
If the bankrupt failed to pay to the required surplus income (see below);
If the bankrupt failed to disclose all assets and earnings to the trustee;
If the bankrupt failed to provide the necessary information to file the pre and post bankruptcy income tax returns;
If the bankrupt failed to attend the first and second counseling sessions;
If the bankrupt has on two previous occasions made an assignment into bankruptcy.

At a hearing for a discharge, the Bankruptcy Court decides whether to postpone (adjourn) the hearing to a later date, suspend the bankrupt’s discharge to a later date, make it conditional upon the bankrupt completing or complying with some outstanding duty, or refuse the discharge (not common). More on each of the following orders:

Absolute Discharge: This official document discharges you from the bankruptcy and relieves you of the debt obligations incurred prior to your assignment into bankruptcy.

Order of Conditional Discharge: The Court may impose certain conditions that must be met before your discharge becomes absolute. For example, the Court may require you to pay an amount to your trustee for distribution to your creditors. Upon complying with the terms set out by the Court the trustee will then proceed back to Court to obtain an Absolute Order of Discharge.

Order of Suspended Discharge: Generally in the case of a second and/or third time bankrupt the Court orders a suspension delaying the discharge so it will not be effective until a later date.

Refused Order of Discharge: Generally in the case of a bankrupt refusing to co-operate with the Trustee, or has committed an offense under The Act, the Court may refuse the discharge of the bankrupt.

Upon receiving a discharge from bankruptcy, you will be relieved of your debt obligations occurring prior to your assignment in bankruptcy. However, the discharge does not relieve you of any debts pursuant to Section 178 of the Act which survive bankruptcy:

Section 178 of the Bankruptcy and Insolvency Act sets out what debts survive bankruptcy. These are;

any fine, penalty, restitution order or other orders similar in nature;
any award of damages by a court in respect of bodily harm intentionally inflicted, or sexual assault, or wrongful death;
any debt or liability for alimony;
any debt or liability for support of a spouse, former spouse, common-law partner or child living apart from the bankrupt;
any debt or liability arising out of fraud;
any debt or liability for obtaining property by false pretenses;
any liability for the dividend that a creditor is entitled to receive on any provable claim not disclosed to the trustee;
any debt in respect of a student loan where the debtor is still a full time or a part time student or the bankruptcy occurs within seven years following the termination of studies;
any interest accrued for student loan debt noted above.

The Trustee Discharge
Upon completing the administration of the bankruptcy, a Trustee must prepare a document known as the Final Statement of Receipts and Disbursements Schedule. This Statement will show the receipts (money collected through realization of assets, tax refunds and monthly payments) and disbursements (money paid for fees, disbursements and dividends to the creditors). It will also include notes outlining the status of all of the assets as well as the status of the individual's discharge. A copy of this document must be filed with the Superintendent of Bankruptcy and will be sent to the individual who filed bankruptcy and all of their proven creditors. Once all of the applicable disbursements have been made and all cheques have cleared the trust account, the Trustee will close the bankruptcy estate's trust account and will seek a discharge from the bankruptcy estate. It's important to note that, if the Trustee obtains a discharge but the individual person who filed bankruptcy, fails to obtain a discharge, the stay of proceedings mentioned above, will cease to exist upon the Trustee's discharge. Accordingly, a creditor will no longer be prevented from pursuing the bankrupt for payment, or garnishing wages etc., so it is therefore crucial that a person who chooses to file bankruptcy, perform the few required duties and obtain a discharge from bankruptcy.

Other information you should know

Surplus Income When becoming bankrupt, the Trustee is required to monitor your income for the duration of the bankruptcy. For this purpose, you will be required to submit monthly income and expense forms throughout your bankruptcy to determine what your obligation if any, for surplus income will be. Set out below is a chart that shows how much net income (take home pay) a person may make per month before they have surplus income:

2011 - Superintendent's Standards (SS)

# of Persons in household	Net Income Threshold ($)
1	1926
2	2398
3	2948
4	3579
5	4059
6	4578
7+	5097

If the family's net income is in excess of the above amounts by more than $200.00, the overage is considered surplus income. The debtor is then required to pay 50% of the surplus income amount to the Trustee. In the event that the debtor's average surplus income payment requirement is $100 or more, the Trustee is required to extend the bankruptcy for a longer period of time. The timeframe is dependent upon whether the person has any previous bankruptcies. For a first time bankrupt with surplus income, the length of the bankruptcy is extended to 21 months. For a second time bankrupt, the length of the bankruptcy is extended to 24 months or 36 months for those bankrupts with surplus income.

Surplus Income example:
A first time bankrupt that is single and has no children, and therefore from the above chart, would be a household of one person, and has a take home pay after her employer deducts CPP, EI and Tax withholdings of $2,300 per month would have surplus income as follows:

Net take home pay:	2300
Threshold Standard for one person	-1926
Difference	374
50% surplus to be paid to bankruptcy estate	x 50%
	187

Therefore, the bankrupt would be obligated to pay $187.00 per month for twenty-one months in a bankruptcy. It is important to note that there are a variety of items that can reduce the amount to be paid such as support payments, child care expenses, business related expenses etc. Accordingly, you should discuss your income situation with us and we can provide you with a detailed calculation specific to your situation.