The Top 5 Most Asked Questions About Bankruptcy

1. How does bankruptcy affect my income?

During a bankruptcy, you will continue to receive your own paycheque and decide how your money is spent, subject to the requirements of the Bankruptcy and Insolvency Act. While you are in bankruptcy, you are required to make payments to your estate based on your household income level. The government has established standards for determining surplus income for the number of people in a household, taking into consideration your personal and financial situation.  Basically, how much you earn determines how much you will have to contribute into your bankruptcy.

2.  How does bankruptcy affect my assets?

Contrary to popular belief, you do not lose all of your assets when you file for bankruptcy. One of the purposes of the Bankruptcy and Insolvency Act is to provide the honest and unfortunate debtor a fresh start. When filing for bankruptcy, you must disclose all of your assets (property) to the trustee.

Certain assets are exempted by provincial and federal laws and are therefore protected. These are the ‘exemptions’ that the government has determined you need to survive – for example, household belongings or tools used to earn a living. As each province has different exemptions, you should consult a Trustee in Bankruptcy to discuss what assets are protected in your province.

3.  How much will bankruptcy cost me?

There is a cost to filing for bankruptcy, which is referred to as Trustee fees. The minimum charge is usually $1,800, however, this can vary depending on the complexities of your financial situation. The government does not pay Trustees to file your bankruptcy. Trustee fees are regulated under the Bankruptcy and Insolvency Act and are referred to as a Tariff.

4. How long will my bankruptcy last?

Under the Bankruptcy and Insolvency Act, the length of your bankruptcy is determined by whether you have been previously bankrupt and the level of your income.

1st Time Bankrupt – 9 months to 21 months
2nd Time Bankrupt – 24 months to 36 months
3rd Time Bankrupt – No legislated time

5.  How does bankruptcy affect my credit rating?

A bankruptcy is on your credit record for a period of six years from the date of completion of your bankruptcy. If you have more than one bankruptcy, your credit record will show each bankruptcy discharge date for a period of 14 years. All debt accounts included in a bankruptcy remain on your credit record indicating "included in bankruptcy" and will be purged from your credit record 6 years from the date of last activity.