Common Personal Bankruptcy Questions
Rules in the Bankruptcy and Insolvency Act impose a stay of proceedings that will stop creditors from continuing any action against a person who is bankrupt, including garnishments and creditor calls.
There is a set fee schedule that all Trustees must follow outlined in the Bankruptcy and Insolvency Act. The basic fee for a first-time bankrupt is $1,800. If you are a repeat bankrupt, the basic fee is $2,000.
There are situations where the cost may be higher than the base fee. One situation may be if your monthly income is higher than what the government feels is necessary for the size of your family. This is called surplus income. A portion of your surplus income must be paid to the Trustee on top of the base fee, which is then paid to your creditors.
Another situation may be if you have assets such as property that needs to be sold in your bankruptcy. The profit on selling the property would be paid to the Trustee for payment to the creditors. In most cases, your fee can be paid in monthly payments over the term of your bankruptcy.
In some situations, where a person has an income over the guidelines set forth in the Bankruptcy and Insolvency Act, a person will be required to pay 50% of the excess income to the Trustee which will be paid out to the creditors. The income you earn over the guideline is called surplus income. This is explained in more detail under the Bankruptcy section of our website.
Usually bankruptcy does not affect employment. However, there are some careers where you are required to have completed and be fully discharged from your bankruptcy in order to be bonded again, and in those situations a proposal may be a better option.
There are no restrictions on leaving the country during your bankruptcy.
Purely from a technical point of view, the 407 ETR debts will be forgiven when you file bankruptcy. However, some debts are best paid for practical reasons. A person will have problems renewing their license if this debt is not paid, therefore, it may be wise to pay it, depending on how large the debt is.
The Trustee will complete your income tax returns for the year that you file bankruptcy, and for any prior years that have not been filed by your date of bankruptcy. Any refunds from these tax returns will be sent to the Trustee who will divide the refunds amongst your creditors.
Bankruptcy, like anything else, affects your credit rating. The credit rating score at Equifax is a rating scale with R1 being the best score and R9 being the worst. A bankruptcy will be reported as an R9 which is the same as a wage garnishment. It is important to note that proposals are an R7 which is slightly better than a bankruptcy.
Provided your mortgage payments and property taxes are up to date and you have valid insurance on the property, a mortgage company is not allowed to force the sale of your house just because you filed bankruptcy.
If you decide that you do not want to keep your house and there is equity in the house, the Trustee will sell the house and the equity will be paid to your creditors. If there is no equity in your house, the mortgage holder will sell the house under a legal proceeding called Power of Sale. The mortgage holder cannot come after a bankrupt for any amount of the mortgage not covered by the sale of the home.
If you have a co-signer, that person will be responsible for the entire amount of the debt that they co-signed, if you don’t pay the debt.
A bankruptcy will not change your obligation to make support payments.
Most personal bankruptcies are not advertised, but all corporate bankruptcies are.
Under the rules of Bankruptcy, you are required to turn over all your credit cards to the Trustee. It is an offence to have a credit card while in bankruptcy.
Provided your lease payments are up to date, a leasing company is not allowed to repossess your vehicle just because you filed bankruptcy.
If there are not extenuating circumstances, you are usually eligible for a 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.
Generally speaking you will not lose your assets. The rules of bankruptcy usually allow you to keep your vehicle, if it is under a specified value, certain life insurance policies and registered pension plans, tools necessary for your job, household furniture and appliances as well as your personal effects.
No. Once you have filed for bankruptcy, your Trustee will contact your creditors. The purpose is both to advise them of your bankruptcy and to let them know that any further contact regarding your debts should be made directly with the Trustee, not with you. If creditors contact you between filing for bankruptcy and the time they are notified of the bankruptcy, you should refer them to the Trustee.
Unfortunately, bankruptcy does not get rid of all debts but it does eliminate most debts. The debts you are still responsible to pay after you are discharged from bankruptcy include any debts arising from legal action such as court imposed fines, penalties, and restitution orders, default on a bail bond, alimony, child and spousal support, and under certain conditions student loans may remain after your bankruptcy.
If a bankruptcy is filed seven or more years after the date on which the bankrupt ceased to be a full or part-time student, the bankrupt’s student loan debt is included in the bankruptcy and discharged. However if it has been less than seven years, the debt will not be included in the bankruptcy and will not be discharged. You will be responsible to pay this debt. The number of years starts on the last day of the month that the program ended, not the last day you attended school.