Frequently Asked Questions

Your initial free, confidential consultation with a Licensed Insolvency Trustee is intended to allow the trustee to obtain information on your financial affairs to ensure that you are fully informed of the options available to you for your particular financial situation. It does not commit you to filing for a proposal or bankruptcy. After this session, you will be well-informed of your options and able to take action to deal with your debt problems. There is a great sense of relief in knowing that you are one step closer to re-establishing your financial health.

The earlier you act on your debt problems, the more options you may have. It is important that you meet with a professional to ensure that you understand the various options and whether a particular option is a viable alternative for your particular financial situation. You may be able to consolidate your debts through a bank or credit counselling firm, settle with your creditors through an informal arrangement or file a formal proposal under the Bankruptcy and Insolvency Act. The important thing is to start the process.

The Bankruptcy and Insolvency Act prescribes the amount of the fees and disbursements for a Licensed Insolvency Trustee and provides that they are paid from the realization of the bankrupt’s assets in priority to the ordinary creditors. There is generally sufficient realization in most bankruptcies to meet some or all of the trustee fees and costs. However, if you have no assets, then your trustee will discuss other alternatives that may consist of a third party retainer, monthly payments over the period of your bankruptcy or, in certain cases, an agreement may be made with your trustee to accept payment for a period not to exceed one year following your discharge from bankruptcy. We will tailor the fee arrangements to your particular circumstances.

f your wages are being garnisheed, there is an immediate stay of proceedings against most creditors on the date of filing your bankruptcy or proposal. Unfortunately, there is an exception for alimony/child support payments. You should seek help immediately if you have received notice of a garnishee and provide your trustee with all documents relating to the garnishee.

If a creditor is suing you, there is an immediate stay of proceedings against most creditors taking legal action immediately on the date of filing your bankruptcy or proposal. There are certain exceptions for criminal, fraud and matrimonial actions or other court-ordered debts. You should provide your trustee with the legal documents you have received to obtain further information.

For assets that are secured by a lease, loan, mortgage or other security arrangement, your creditor may allow you to continue payments on these assets while you are bankrupt or in a proposal. You should provide the loan documents and discuss the options available to you.

Your spouse, family or any other third person are not responsible for your legal obligations unless it is a joint debt that they borrowed with you or a debt they have personally guaranteed. In the event that someone has a joint debt with you, or guaranteed one of your debts, they may be legally responsible for the full amount of the debt. You may wish to advise them of the steps you are taking and the fact that you will no longer be able to make payments.

Likewise, the assets of your spouse or children do not form part of your bankruptcy. Only your interest in assets or rights that you hold form part of your bankruptcy.

However, during the bankruptcy, you are responsible for preparing monthly income and expense reports for your family unit (includes your spouse and may include others in the same household). Depending upon the financial arrangements in your particular household, one or more family members may have to assist you with the collection of the necessary financial information for the completion of these reports.

You are encouraged to bring your spouse or any other third party along to your appointment. This will ensure that family members are fully informed of your responsibilities upon filing your assignment in bankruptcy.

The length of a consumer proposal is dependent upon the terms of the proposal you file but must not exceed five years. The merits and consequences of the terms of the proposal you choose should be discussed with a Licensed Insolvency Trustee.

Generally, income tax, GST and other tax debts owed prior to your assignment are discharged by bankruptcy. However, if CRA has registered security against your assets or personal residence, they may have a priority over these assets. You should advise your trustee of any actions taken by CRA and provide copies of the applicable documentation. You remain responsible for any income tax or GST debts incurred for income earned after you file for bankruptcy.

If your bankruptcy or proposal occurs within 7 years of your last date of attendance at school, as defined in the applicable legislation, your loan will not be discharged. However, there is generally some relief for undischarged loans during your bankruptcy or proposal as the government may release you from payment or legal action until your discharge.

Any student loan obtained more than 7 years after you attended school will be discharged (with the exception of individuals that filed bankruptcy prior to July 7th, 2008 and remain undischarged as they are subject to the applicable legislation at the time of the bankruptcy).

Your bankruptcy or proposal is a legal action subject to public record. Therefore, anyone who wants to conduct a formal search of public records can discover it. The Office of the Superintendent of Bankruptcy, the credit bureaus and, in certain instances, the provincial courts maintain a record of bankruptcies, proposals and other debt management plans. Notice is sent to all your creditors, the Superintendent of Bankruptcy and Canada Revenue Agency of the filing or your proposal. In addition, for those few individuals who must file the more formal ordinary administration bankruptcy, a notice is filed in the local newspaper.

The Superintendent of Bankruptcy issues annual standards for determining the portion of total net income of a bankrupt which is to be paid to the trustee for the benefit of your creditors. The trustee will advise you of the estimated amount payable, defined as surplus income, at your initial appointment. When your income fluctuates significantly, your payments will vary based on the monthly income and expense reports that you must file. Most bankrupts do not find the surplus income payment to the trustee too onerous as your payments to your creditors cease at the date of the bankruptcy. A copy of the current Directive on surplus income is available on our resources webpage.

If a bankrupt disputes the amount to be paid calculated by the trustee, a mediation process is available. Mediation may be initiated by the trustee, bankrupt or any creditor.

There is generally no impact on your bank accounts upon filing an assignment in bankruptcy. However, where you owe money to your existing bank, you may wish to obtain a new bank account at another institution to avoid your bank offsetting any deposits you hold against debt you may have with them. Once you have filed for bankruptcy, any payments your bank seizes must be returned, however this process may take some time, so prevention may be the best action.

Cash deposits or other monetary investments are not an exempt asset and must therefore be turned over to the trustee, excluding any essential funds you may require to meet your current living expenses.

During the calendar year in which you file bankruptcy, there are two income tax returns prepared, the pre-bankruptcy return for the period from January 1st until the day immediately prior to bankruptcy and the post-bankruptcy return for the period from the date of bankruptcy to December 31st. You will not receive income tax refunds for either of these periods as they form part of your bankruptcy.

If you owe a balance on your pre-bankruptcy return, it will be included in the bankruptcy. However, you are responsible for any balance owing on your post-bankruptcy return as this is a debt incurred after the date of bankruptcy.All income tax refunds for calendar years after the year you filed bankruptcy belong to you.

GST refunds in British Columbia consist of two components: GST federal and the BCLICATC. The federal portion of GST is an exempt asset that does not form part of the estate except in certain prescribed circumstances. The BCLICATC is NOT an exempt asset in British Columbia and must be realized by the trustee for the general benefit of your unsecured creditors.

All non-exempt property (see Do I lose everything if I file bankruptcy?) that you have at the date of your bankruptcy or may acquire prior to your discharge must be turned over to the trustee for the general benefit of your unsecured creditor. This includes any right to lottery winnings or inheritances that you acquire prior to or during your bankruptcy even if the funds are not received until a later date.

Your creditors will be entitled to the proceeds, subject to a maximum amount for payment of your outstanding debt plus prescribed interest from the date of bankruptcy until payment is made by the trustee.