A bankruptcy is a legal process in Canada legislated under the Bankruptcy and Insolvency Act (BIA) that is designed to eliminate most, if not all your debts. A bankruptcy in Canada can only be filed with a Licensed Insolvency Trustee (LIT). This role was previously known as a “Bankruptcy Trustee.”
Bankruptcy law Canada stipulates that there are two types of personal bankruptcy under the Bankruptcy and Insolvency Act:
A summary administration applies to individuals or consumer bankruptcies when the realizable assets (the value of assets when sold) will not exceed $15,000. If you are wondering “which bankruptcy should I file,” know that an ordinary administration bankruptcy applies to both consumers or corporations. If an individual has assets that will exceed the projected realization of $15,000, they will be required to file an ordinary administration bankruptcy. Note that the term “bankruptcy chapter 11” is an American term, not a Canadian one. The rough equivalent to bankruptcy chapter 11 would be a Division 1 Proposal or a CCAA (Companies’ Creditors Arrangement Act) filing.
Pursuant to section 136 of the Bankruptcy and Insolvency Act, proceeds from the sale of assets are distributed to repay creditors in the following order:
One of the most common questions that Licensed Insolvency Trustees are asked is “in a bankruptcy who pays?” This makes sense as you will want to know what your costs will be. The cost of personal bankruptcy in Canada will vary for each individual as it’s based on your monthly income, non-discretionary expenses, the size of your family unit and assets.
Its best to book a free initial consultation with a Licensed Insolvency Trustee to go over your options and the costs involved. Some believe that a bankruptcy lawyer can assist in these situations, but in Canada, you will need to speak with a Licensed Insolvency Trustee. They can help you understand the bankruptcy meaning, the process involved, and compare a consumer proposal vs bankruptcy.
People are often fearful that filing a bankruptcy or a consumer proposal will affect their spouse or common-law partner. When you file a bankruptcy, your debts are only your debts. In other words, your spouse or common-law partner is not responsible for them. However, if you have co-signed any loan agreements with your spouse or anyone else, for that matter, that person will then assume full responsibility for repaying the debt if you file for bankruptcy.
Bankruptcy divorce debt, such as outstanding alimony or child support payments, is not discharged through the insolvency process.
One thing that many people want to know about bankruptcy is when to file for it. As you can see from the bankruptcy definition, the process is designed for those who are unable to repay their existing debts. Is this you? Are you borrowing money to make it from pay cheque to pay cheque?
Do you find yourself taking cash advances from credit cards or only paying the minimum payments? Are you being constantly harassed by collection agencies or creditors for payment? Are your creditors threatening legal action, or worse, garnishing your wages? If you are struggling with your debt, these are some of the questions you need to ask yourself when considering when to file a bankruptcy.
A common question that people ask often is related to bankruptcy in Canada and how it works.
According to bankruptcy law Canada, there are certain duties and responsibilities on both you and the Licensed Insolvency Trustee upon filing bankruptcy.
Keep in mind that only a Licensed Insolvency Trustee (LIT) can help you with filing a bankruptcy in Canada. The process is not handled by a bankruptcy lawyer in this country. If you are struggling with debt and looking for help, a Licensed Insolvency Trustee can conduct a free consultation with you.
During this meeting, they will review your situation and provide you with information on consumer proposals, bankruptcies and other debt relief options. They will also answer whatever questions you have, such as explaining the details of a consumer proposal vs bankruptcy.
Upon filing a bankruptcy, a stay of proceedings is automatic. This means your unsecured creditors have no legal recourse against you. Your unsecured creditors cannot commence or continue with any legal proceeding, wage garnishment or contact you for payment.
The bankruptcy meaning is not to punish you and leave you with nothing. Therefore, each province and territory has its own exemptions to the bankruptcy law that outline which of your assets, and how much equity, you are allowed to retain.
In a bankruptcy, assets are important. Losing a car is a common concern for those considering filing a bankruptcy in Canada. All provinces have laws that exempt one vehicle up to a certain dollar amount from seizure by the Licensed Insolvency Trustee. For example, in Ontario, you can own a vehicle up to the value of $6,600 or less and its considered exempt. If, however, the vehicle exceeds the exemption amount, you may still be able to keep the vehicle. You could opt to buy back the non-exempt portion from the Licensed Insolvency Trustee during the period of bankruptcy. For example, if you owned a car with a value of $8,000, the non-exempt portion of the vehicle would be $1,400 (being the difference between the fair market value and the exemption amount). You could make monthly payments to them during the bankruptcy to keep the vehicle. If you lease or finance a vehicle and file a bankruptcy, you can keep your vehicle if you are current and remain current on your car loan or lease payments. The leasing or financing company can, however, repossess your vehicle if you default on the agreed terms per the leasing or financing agreement.
For most people, this is their number one concern. Filing a bankruptcy doesn’t necessarily mean you will lose your home. There are many factors in determining how a home is handled in a bankruptcy. In general, if your home has little or no equity and your mortgage payments are up to date, you can keep your home. Many bankruptcy filing Canada cases result in people keeping their homes. As with other assets, there are rules on what you can keep and these rules vary by province. For instance, in Ontario, if the equity available in your home does not exceed $10,000 and you have kept up with your mortgage payments you can keep your home when you file a bankruptcy. If your home exceeds the provincial exemption, you may still be able to keep your home.
You would need to make payment arrangements with the Licensed Insolvency Trustee to repay the equity in your home. You may also want to consider filing a consumer proposal or selling your home depending on your household budget and the equity that is available. There are several options, but the best approach would be to speak to a Licensed Insolvency Trustee to determine what’s best for you.
Depending on your financial situation, filing for bankruptcy may make sense for you. However, for many people, bankruptcy is not the only option. By meeting with a Licensed Insolvency Trustee, you can understand all of the options that are available to you and make an informed choice for your unique situation. Contact Farber today to book a free debt relief consultation. This can help you become debt free and give you a chance to rebuild your financial life.
Before you can start a Bankruptcy, we have to investigate at all the available options for debt relief. In order to do this, please schedule a free consultation. The initial consultation is free of charge. During this consultation, you will sit down with one of our debt professionals. He or she will review your financial situation with you, and provide you with information on all debt relief options available to you.
We offer a powerful debt-relief solution that can significantly reduce your debt without the drawbacks of declaring bankruptcy.
Book a free, confidential, no-obligation consultation and together, we can make a plan to help regain control of your money.
Although debt can be overwhelming, there are ways to start fresh and improve your relationship with money.