Is It Difficult To Declare Bankruptcy?

2015-11-09   minute read

Randy Kobbert

The short answer is no. However, there are a few things you should know before you consider bankruptcy as a debt management resource.

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  1. Bankruptcy is a legal way for an honest individual who has fallen to unfortunate circumstances, to relieve themselves from unmanageable debt, receive financial rehabilitation and make a fresh financial start.
  2. The Federal Government of Canada has established the guidelines for making an assignment into bankruptcy under legislation called the Bankruptcy and Insolvency Act of Canada (BIA, or “the Act”). This Act applies to all Territories and Provinces in Canada.
  3. Bankruptcies in Canada are administered by Trustees in Bankruptcy who are licensed by the Federal Government and regulated by the Office of the Superintendent of Bankruptcy.
  4. In order to be a candidate for bankruptcy, you must be an “insolvent person” which means:
  • You have unsecured debts of $1,000.00 or more,
  • You cannot pay your bills as they generally fall due or
  • You have insufficient assets to pay your outstanding debt.

The first step towards filing for bankruptcy, is to call and make an appointment with a licensed Trustee.  During this appointment, you will be asked to provide information at this appointment which will allow your Trustee to make an assessment of your personal financial situation and advise you of all the options available to manage your debt problems.

Your Trustee will be able to inform you as to potential alternatives to bankruptcy which may include a debt consolidation loan, an informal settlement with your creditors, a referral to Provincial Non-profit agencies which manage Orderly Repayment of Debt programs or a Consumer Proposal, which allows for a formal payment plan to your creditors. If it is deemed appropriate, your Trustee can also file for an Assignment in Bankruptcy on your behalf.  

Should you decide to move forward with a bankruptcy, you will be asked to fill out an application form. This information is required to meet the disclosure requirements of the Act and will be used by your Trustee to prepare all of the documentation you will have to sign in order to file the Assignment. You will be required to swear or affirm a Statement of Affairs which must be filed with every Assignment. This document discloses your asset base (what you own), a list of your creditors (along with what you owe), personal information such as your birth date, address, family and employment information, disclosure regarding disposition of assets, reasons for financial difficulties, income and expense statements. Since you are bound by duties under the Act, your Trustee will review these with you and provide you with blank statements of household income and expenses which must be completed and filed with the Trustee each month. While this can all sound very daunting, it’s far less overwhelming than living in an overwhelming cycle of debt and your Trustee will be there to provide assistance every step of the way.

The Trustee will then file your Assignment and Statement of Affairs with the Official Receiver, who is a representative of the Superintendent of Bankruptcy. This filing immediately stops all legal action against you, which means no creditor may sue you, continue to call you or make demands upon you to repay your debt. 

Clearly, the decision to file a bankruptcy is a crucial one because you do assign all your property and affairs to the Trustee, subject to your right to property exemptions (the right to keep certain assets) for the Province in which you live. You are also bound by duties which you must complete in order to receive a discharge from bankruptcy. The duration and cost of your bankruptcy will be determined by your net income for a specified time period after your bankruptcy Assignment and the value of your non-exempt assets. Should you not receive a bankruptcy discharge for failure to complete your duties, creditors’ rights are reinstated and legal action may then commence against you as if you had never filed your assignment. 

Bankruptcy legislation is designed to provide an honest yet unfortunate debtor the ability to productively contribute to society, unfettered by the past burden of their debts. Once you receive your discharge, your unsecured debts will be legally forgiven, subject to a few exceptions. For further information regarding Bankruptcy as a debt management solution, contact an MNP Trustee at an office near you.

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