Is Bankruptcy Right For You?
Adamson & Associates Can Help!
If the thought of personal bankruptcy in Canada scares you, read on to understand how this debt refinancing option can reduce or eliminate your personal debt and how a Licensed Insolvency Trustee can help you start over.
As Licensed Insolvency Trustees, it is our goal to support you through your financial problems and rid you of the fear of not meeting your debt obligations resulting in collection calls or possible wage garnishment. Our first goal is to review your unique financial situation and really listen to what is important to you. Then we look at such OPTIONS as debt consolidation, credit counselling, and Consumer Proposals to get you out of debt before considering if the bankruptcy option is right for you.
What Is Bankruptcy?
Bankruptcy in Canada is a legal proceeding administered under and governed by, the Bankruptcy and Insolvency Act (“BIA”). In Canada, only a Licensed Insolvency Trustee can perform or administer a bankruptcy proceeding. Assisting people through the bankruptcy process so they can obtain relief from creditors, and helping people obtain a fresh start is certainly the most rewarding part of what we do as Trustees.
Filing for Bankruptcy is declaring to the Bankruptcy Court and your creditors that you are insolvent. The bankruptcy process will stop creditor calls, stop interest charges on your eligible debts, and release you from the legal obligation to pay those debts.
Some debts are not covered under the bankruptcy guidelines (Bankruptcy and Insolvency General Rules) and will remain your legal obligation to pay throughout your bankruptcy and after as set out by the bankruptcy rules. These debt obligations include any debts arising from court imposed fines, penalties, and restitution orders, default on a bail bond, alimony, child and spousal support, and student loans if the bankruptcy occurs within seven years of ceasing to be a full or part-time student.
John Adamson, Licensed Insolvency Trustee, and your estate manager will review each and every debt you have so that you fully understand which debts will remain your responsibility and why.
Contact Adamson & Associates at 310-JOHN, through live chat or use the on-line request for your free, no-obligation consultation.
Common Myths About Bankruptcy
All of the following myths about bankruptcy are things that will be fully explained to you by John Adamson or your Estate Manager at Adamson & Associates Inc., Licensed Insolvency Trustee.
If I go bankrupt…
- I will lose my house!
- I will never get credit again!
- My name will appear in the paper so everyone will know!
- I won’t be allowed to control my own money!
- I will be in bankruptcy for seven years!
- My spouse will have to go bankrupt too!
- If I file bankruptcy I will be breaking the law!
- I won’t have to pay child or spousal support anymore!
Before I go bankrupt I should…
- Max out all of my credit cards.
- Spend all my money so that I have nothing for the Trustee to take.
- Sell my assets and pay off all my family and friends.
- Give my belongings to my family and friends.
What Assets Can I Keep If I Go Bankrupt?
It is important to know that when filing for bankruptcy you do not lose all of your assets. Bankruptcy’s purpose is to help you get out of debt, and leave you in a better position financially.
Upon making the assignment into bankruptcy, all unencumbered assets (those with no liens registered against them) vest in the Trustee, meaning the Trustee can sell these assets to increase the payment available to your creditors, subject to certain Federal and Provincial legislation.
Some of the more common assets and how they are dealt with in the bankruptcy are as follows:
Assets exempt from seizure from the Trustee:
- Employer Pension Plans
- RRSPs (if registered with a life insurance company)
- Self-directed RRSP contributed over 12 months ago (if registered with a non-life insurance company or bank)
- Life insurance policies (if named beneficiary is spouse, child, parent, grandchild, common-law opposite-sex spouse, or common-law same-sex-partner)
- Personal effects such as clothing to a maximum exemption amount of $5,650 per family
- Household furniture to a maximum exemption amount of $11,300 per family
- Tools of the trade used to earn income to a maximum exemption amount of $11,300
- Automobile – maximum of one unencumbered vehicle to a maximum value of $5,650
Assets available to your Trustee for seizure:
- RESP’s (government grant portion is not available to the Trustee)
- Stocks and bonds, Canada Savings Bonds, and publicly traded shares
- House equity on your personal residence
- Recreational equipment, including but not limited to boats, trailers, and snowmobiles
- Self-directed RRSP contributions made in the 12-month period prior to bankruptcy
Your Responsibilities in Your Personal Bankruptcy
Once you meet with John Adamson or your Estate Manager at Adamson & Associates, and have reviewed the options of debt counselling, Consumer Proposal and bankruptcy, you will need to decide if filing for bankruptcy is your best option. If so, you will have certain responsibilities during the process.
- Provide your Trustee with a complete picture of your financial situation including a list of all your assets, debts and creditors.
- Sign your bankruptcy documents at our office.
- Turn in all your credit cards to your Trustee.
- Keep our office up to date on all changes to your personal and family status including contact information, address, and employment status.
- Attend two financial counselling sessions at our office. More information on the financial counselling requirement is provided below.
- Make payments to the Trustee as discussed in your initial meetings.
- Submit monthly income and expense reports to the Trustee.
- Assist by providing additional information to the Trustee as required related to assets that may need to be sold during your bankruptcy in order to repay your debt obligations.
Trustee’s Responsibility in Your Bankruptcy
Your Licensed Insolvency Trustee has certain responsibilities during your bankruptcy as well. Adamson & Associates will assist you in completing all necessary bankruptcy forms and file documents with the Office of the Superintendent of Bankruptcy. Additional responsibilities are listed below.
- Act as an intermediary between you and your unsecured creditors.
- Administer and manage disbursement (if any) to your creditors.
- Notify all your creditors of your bankruptcy status.
- Attend any creditors’ meeting or Bankruptcy Court proceedings with you should they apply.
- Provide you with two credit counselling sessions.
- File and forward a Trustee’s Report to all of your creditors regarding your discharge application.
- Provide an Order of Absolute Discharge which is legal notification that you have been released by all the debts covered in your bankruptcy.
Required Counselling Sessions
People are often worried about credit counselling and what to expect. Our two mandatory counselling sessions are usually done at Adamson & Associates on an individualized basis and last half hour to one hour each depending upon your situation. We receive positive feedback about the information we provide, and most people find it very beneficial.
First Counselling Stage – Consumer and Credit Education
The purpose of the first session is to cover the following topics which will assist you in moving forward.
- 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. We also use this time to provide you with an update on how your bankruptcy is progressing.
In this counselling session, we are required to provide you with:
- Follow up information on the principles presented in the first stage which will assist you in better understanding 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 behavior, substance abuse, employment difficulties, 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.
- We will assist you to better understand financial management and consumption habits.
The Ultimate Goal – Discharge
Ultimately, a person who is filing bankruptcy in Ontario 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.
If there are no extenuating circumstances, you are usually eligible for an automatic discharge as follows:
- First time bankrupt with no surplus income after 9 months;
- First time bankrupt with surplus income after 21 months;
- Second time bankrupt with no surplus income after 24 months; and
- Second time bankrupt with surplus income after 36 months.
Bankruptcy is a rehabilitative process, and therefore an individual will need to demonstrate that they have been rehabilitated. It is little things like attending financial counselling or paying your debt obligations after bankruptcy that show you are taking steps to be rehabilitated. Accordingly, a Trustee must oppose the bankrupt’s discharge if the bankrupt failed to:
- pay the Trustee for its services;
- pay the required surplus income (see below);
- disclose all assets and earnings to the Trustee;
- provide the necessary information to file the pre-bankruptcy income tax return and post-bankruptcy income tax return; or
- attend the first and second counseling sessions.
The Bankruptcy Court will decide upon your discharge in one of the following ways:
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 Bankruptcy and Insolvency Act, the Court may refuse the discharge of the bankrupt.
Adamson & Associates Inc. have helped many people throughout Ontario declare bankruptcy or explore bankruptcy alternatives such as Consumer Proposals, credit counselling and debt consolidation. We provide guidance to people seeking personal bankruptcy and we know how to help alleviate your debt stress and can get you through your personal financial crisis.