How Bankruptcy Can Help You Have a Fresh Start
Why Declare Bankruptcy?
Bankruptcy primarily serves to give you a fresh start. It cancels most of your debts (even tax debts) and you no longer have to pay your creditors. It protects you against many of the procedures that could be taken against you by your creditors, such as lawsuits or seizures. In addition, it protects you from having your utilities cut off and allows you to keep your furniture (and in some cases, your home and your car).
When you declare bankruptcy (or when you make a consumer proposal) creditors immediately cease all tracking and all forms of harassment against you.
What debts are not released through bankruptcy?
The main non-dischargeable debts are:
- Child support arrears
- Penal fines (eg. traffic tickets)
- Debts or liabilities arising out of fraud, misrepresentation, etc.
What about student loans?
If the student loan is guaranteed by the government, or if the debtor declares bankruptcy while still a student or within seven years after graduating, the Order of Discharge does not release the bankrupt from student loan debt.
Are my RRSPs seizable?
In almost all situations, RRSPs are exempt from seizure. In some cases, the contributions made to your RRSP during the 12 months preceding your bankruptcy are seizable.
- Essential goods (furniture, clothing, dishes)
- Goods needed for a business (the tools of a mechanic or an electrician)
- Amounts of money received as compensation for physical injury (eg. CSST)
- A large portion of the funds from the employer/employee pension where the amount was transferred to a locked-in RRSP;
- Tax benefits for children
- Some RRSPs held with insurance companies or trusts
- The portion of salary that is essential to provide for family needs
- Money or property received by a will that includes a provision for exemption from seizure
- Money or property received by a will that has no provision for exemption from seizure
- Life insurance policies (depending beneficiaries)
- Some RRSPs
- Surplus personal property such as sports equipment, art, recreational vehicles, and vehicles that are not necessary for the work of the bankrupt
- Concerning buildings, the trustee must obtain an assessment of the building and evaluate whether there is any equity for the benefit of the creditors. If there is equity, the trustee will try to sell the building and can come to an agreement with the bankrupt regarding how much time will be given before the bankrupt must vacate the residence
- If there is no equity, the trustee must notify creditors holding mortgages on the property that the trustee is not interested in the asset and that the creditors can repossess it or have it sold;
- The portion of salary in excess of the needs of the family as established by the grid of the Superintendent of Bankruptcy must be delivered to the trustee on a monthly basis throughout the bankruptcy process.
Duties of the Bankrupt
The bankrupt is subject to the obligations listed in section 158 BIA, which can be summarized as follows:
- Reveal and deliver all the property to the trustee
- Deliver all credit cards to the trustee
- Attend the creditors’ meeting and other meetings that the official receiver or trustee may determine
- Provide a statement of affairs to the trustee showing all assets and liabilities to the best of the bankrupt’s knowledge
- Inform the trustee of any changes in address, telephone, etc.
- Provide the trustee with a list of all creditors, their addresses, the nature of the debt, the amount due and all the evidence relating to the debts
- Stop paying creditors during the bankruptcy
Personal bankruptcy is a process you cannot do alone. Let us help you see more clearly into this situation! Call us now.