Bankruptcy Book PDF

Filing Personal Bankruptcy in Canada: What You Need to Know Before You File
Bankruptcy in Canada is a complicated process: Be Informed Read This Special Report Prepared by the Editors of www.bankruptcy-canada.ca Canadas largest personal bankruptcy information website
Table of Contents
Am I Alone? How Many People Went Bankrupt in Canada Last Year?........................... 1 Chapter 1 How to Avoid Bankruptcy ................................................................................ 2 Chapter 2 Consumer Proposals Canadas Best Kept Secret for Avoiding Bankruptcy... 10 Chapter 3 Bankruptcy: The Process from Start to Finish ................................................ 20 Chapter 4 What Debts are Included and Excluded When I Go Bankrupt?...................... 35 Chapter 5 What Assets Do I Get to Keep When I Go Bankrupt?..................................... 42 Chapter 6 Bankruptcy Trustees: Friend or Foe? .............................................................. 49 Chapter 7 Answers to the 30 Most Common Questions about Bankruptcy in Canada ... 57 Chapter 8 After Bankruptcy: Will I Ever Be Able to Borrow Again?............................ 102 Appendix A Bankruptcy Application Form................................................................... 109 Appendix B Surplus Income Worksheet........................................................................ 118 Appendix C Surplus Income Examples ......................................................................... 119 Appendix D Bankruptcy Documents: What You Will Be Signing ............................... 129 Appendix E List of Canadian Bankruptcy Trustees Offering Free Consultations......... 138 Appendix F Report of Trustee on Bankrupts Application for Discharge..................... 147 Appendix G Exempt Assets across Canada by Province and Territory......................... 151 Appendix H: Bankruptcy Reform: What is Bill C-55 and how will it affect me?.......... 163
Am I Alone? How Many People Went Bankrupt in Canada Last Year?

Every year in Canada approximately 100,000 individuals either file for personal bankruptcy, or file a consumer proposal. In 2007 79,796 individual Canadians filed personal bankruptcy, and a further 19,486 filed a consumer proposal, for a total of 99,282 Canadians.
Canadian Personal Bankruptcies and Proposals Filed
90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 2003 2004 2005 2006 2007 15,400 15,551 16,554 17,619
84,251
84,426
84,638 79,218 79,796
19,486
Bankruptcies
Proposals
The number of Canadians going bankrupt in 2008 will most likely increase significantly, primarily due to the high levels of debt many Canadians now carry. We tend to increase our level of debt as life improves, but then when we have a life altering event, such as a job loss, marriage separation, or medical problem that prevents us from working, we rely on credit to replace our reduced income. Unless the income can be replaced quickly, the debt levels increase until they are no longer serviceable, resulting in the large number of bankruptcy filings in Canada each year. Our message: if you have debt problems, you are not alone.
Bankruptcy in Canada What You Need to Know
Chapter 1 How to Avoid Bankruptcy

This book is about bankruptcy in Canada, and even though you are reading this book, it is probably true that you, like most other Canadians, dont want to go bankrupt. For most people, bankruptcy is a last resort or the final option for dealing with an unmanageable level of debt. However, if you could find a reasonable way to avoid bankruptcy, you would. There are four obvious ways to avoid bankruptcy, and we suggest you review these options. If any of them can work for you, you may be able to avoid bankruptcy. To avoid bankruptcy, try these steps, which are detailed in this chapter: A. B. C. D. Repay your debts on your own page 3 Get a debt consolidation loan page 5 Go through credit counselling to make a debt management plan page 6 File a consumer proposal page 8
A. Repay your debts on your own

The most obvious way to avoid bankruptcy is to repay your debts on your own. To do this, you must start by making a personal budget, so you know how much money you can afford to devote to repaying your debts. (A sample family budget is included on page Error! Bookmark not defined.) What is a personal budget? Essentially, a budget is a projection of how you are going to spend your money. Budgets are usually based on monthly income and expenses. Some people track weekly, some daily, but unfortunately, most of us simply do not budget at all. A budget works when at the end of the month, we have spent only the amount of money that we have earned, or better yet, when there is an amount of money left over. So, how do you create a personal budget? Create a personal budget Creating your personal budget and sticking to it can help you pay back your debt. It is also a great way to see your whole financial picture to get an understanding about what you are spending money on and how much money you need every month in order to stay afloat. Step 1: List your fixed expenses The first step is to list every monthly expense that is unavoidable, or fixed expenses that we experience that is, even if you had no money coming in, the expense would still be incurred. Examples include rent or mortgage payments, gasoline to get to and from work, and utility payments. Do not include groceries because, even though we have to buy groceries, we have some control over how much we spend. This is not true of our rent or mortgage. Step 2: Subtract your monthly fixed expenses from your monthly income Next, subtract the unavoidable expenses from your total regular monthly income. It is important to make sure that you are making your calculations using your base income only it is not a good practice to include overtime or extra income that you may earn by doing odd jobs for example. Why? Its pretty simple your budget then becomes dependent on your having to do odd jobs and work overtime to make your budget work. What happens then if there is no overtime to work, or no odd jobs to do? You guessed it your budget wont work, and youll end up in the red at the end of the month. Step 3: Budget money for your other expenses Subtracting your fixed expenses from your real monthly income leaves you with the amount of money that is remaining to pay for all of the expenses over which you have some degree of control. Examples include groceries, snacks, restaurants and clothing. With the leftover money from you fixed expenses, budget money for each of these expenses, estimating how much you need to spend, while keeping in mind what you can afford to spend.
Step 4: Figure out how much money you can afford to apply to your debt If after subtracting all of your expenses, including your fixed expenses and those that you have more control over, you have money left over, there are few things you can do with the excess. The first consideration, if you are overwhelmed by debt, is to make payments to bring your debt load down. Secondly, you should save money. Some suggest saving 10% of your income in order to be prepared for unexpected events, like job loss, sickness, or if your car were to break down, or even for big purchases, like a house or a new car. After these considerations, if you still have money left over, you have money available for items such as more features on your cell phone or saving for a trip to Bermuda. Step 5: Sticking to your budget A personal budget is essentially a plan of how you are going to spend your money each month. The only way the plan will work, however, is to stick to it, which is a tough thing to do for a lot of us. Why is a budget hard to stick to? Well, the answer is pretty simple: we want more than we can afford. This is the reason why many of us end up carrying balances on our credit cards. If we want more too often, the minimum payments can exceed our budgets, and soon we end up struggling to make our payments. So, the trick is to ensure that we try our best to live within our budgets.
The Biggest Budget Mistake

Some budgets work and some dont. Why is that? Most often it is because the budget did not take into account all of the expenses that you are likely to incur. If your budget is not working, take a look at the expenses you are including are there any others that you may have forgotten? For example, Frieda went to talk to a bankruptcy trustee about her budget, to find out why it wasnt working. She had followed the steps above and made a personal budget, but she was finding she was coming up short each month, and was making up for it by using her credit cards. After reviewing her budget, the trustee and Frieda found the problem: She had failed to plan for the following expenses: Birthday/Christmas gifts Dental expenses Prescription expenses Oil changes, licence, and plate expenses Daily coffee trip Total amount not accounted for: $50/month ($600/year) $10/month ($120/year) $10/month ($120/year) $20/month ($240/year) $40/month ($10/week) $130/month ($1560/year)
As you can see, forgetting to include expenses causes your budget to fail. Frieda had made an honest mistake, as she had recently separated from her husband, who used to cover most of these expenses with his benefits package from work, and by giving her extra money when she needed it. Now Frieda is a wizard at budgeting and her family comes to her for advice! You too can make a successful budget dont forget to include every expense, even if they dont seem important. Even a daily cup of coffee can add up over time and throw your budget off. *Name has been changed.
B. Get a debt consolidation loan

A debt consolidation loan is a personal loan that allows you to consolidate many other debts into one. For example, if you have three credit cards, you may be able to eliminate your credit card debt (see details below) by getting a debt consolidation loan to pay off the credit cards, so that you only have one payment each month instead of three. What are the advantages of a debt consolidation loan? The first advantage of a debt consolidation loan is that your loan may be able to negotiate a lower interest rate than the rate you are paying on your credit cards, so the loan should reduce your interest payments and help you eliminate your debt faster, since a greater portion of your payment is going to principal, and less to interest. With the lower interest rates and/or extended terms a debt consolidation and refinance loan may offer, you may be able to reduce your total monthly payments. The second advantage of a debt consolidation loan is that since you are replacing many payments each month with only one payment, it will be easier to keep track of all of your monthly payments. It is difficult to remember when the payments are due on numerous credit cards; with one payment, its easy to remember when the payment is due. Finally, qualifying for a debt consolidation loan and paying it off may improve your credit rating, which makes it easier to borrow in the future. Do I qualify for a Debt Consolidation loan? To qualify for a Debt Consolidation loan you must be working, or have some other source of income allowing you to repay the loan. Banks calculate your ability to service a debt based on your income, so bring with you to the bank your most recent pay stubs, and last year's tax return, when you apply for a debt consolidation loan. The bank may require a copy of your monthly budget to determine if you can meet your loan payments. You can use our budget worksheet on page Error! Bookmark not defined.. If you have poor credit, or missed or late payments, it may be difficult to qualify for a loan. You may need a co-signor or collateral, such as a car or a house, in order to get the loan. What do I do if the Bank says No? If you are rejected for a loan, ask the bank why you were declined. It may be that you are close to qualifying, so if you can reduce your debt or increase your income you may be able to re-apply again in six months or a year. If you are unable to get a debt consolidation loan, please see the next page for another option: credit counselling.
C. Credit counselling Making a debt management plan

Credit counselling is provided by not-for-profit organizations instituted to help you get out of your financial trouble. Credit counsellors work with you to figure out your situation and make a plan to deal with your debts, by working out a personal budget to help you manage your money better, or by creating a debt management plan, which makes a deal with your creditors to pay back your debts over a set amount of time until you are debt free. What are the advantages of credit and debt counselling? Credit counselling is one of your options when you are in financial trouble to help you get out of debt and back to living a healthy financial life. There are many advantages to choosing this service. Credit and debt counselling helps you make a plan If you find yourself in financial trouble, the best thing to do is to make a plan to deal with your debt and get back on track. The biggest advantage of credit and debt counselling is that they do just that counsellors will help you figure out a plan to deal with your debt and ensure you have a healthy financial future. This might be working out a personal budget to give you a clearer sense of your situation or coming up with a debt management plan, where you make a deal with your creditors to pay back all of your debt. Either way, youre taking the first step to a happy financial future making a plan. Credit and debt counselling teaches you how to manage your money In making a personal budget and coming up with a debt management plan, credit counsellors will teach you how to manage your money properly. You will learn how to budget, what the true costs of credit are, how to read your credit card statements, and how to avoid future financial trouble. Credit and debt counselling gives you a healthy financial future By choosing credit counselling, you are making a plan to deal with your debts. When you have finished paying off your debts, you will be able to start rebuilding your credit, using the tools and resources given to you by your credit counsellor. You will also have learned how to prevent financial trouble from happening again. What is a debt management plan? A debt management plan is a payment plan that will help you pay off all of your debt over a set amount of time. How do I make a debt management plan? To make a debt management plan, you will meet with a credit counsellor who will help you figure out if you are eligible or not. Your credit counsellor will ask you how much money you owe, who you owe money to, what your expenses are, and how much money you make.
If you are eligible for a debt management plan, your credit counsellor will work out a plan for you to pay back your debts in no more than 5 years, with one manageable payment a month. For example, if you owe $60,000 and you have enough money to pay $1000 a month, after 5 years you will have your debt paid back. They will then take the plan to your creditors, or the people you owe money to, to see if they will accept or reject the plan. What happens after my debt management plan has been approved? If your debt management plan has been accepted by your creditors, you will make one monthly payment to the credit counsellors, who will then forward the money onto your creditors, or the people you owe money to. While you are paying back your debts, there will be no more interest put on your debt and all of your payments will go directly to the money you owe, not interest, helping you get back on track faster than if you were paying back the debts on your own.
D. File a consumer proposal

A consumer proposal is a deal you make with your creditors to pay back a portion of your debts over a set amount of time. It is a good alternative to bankruptcy, because it deals with all of your debts, it is a legal process so it can stop wage garnishments, and when it is finished, you will be debt free, ready to start over again. To find out how to file a consumer proposal and what is involved in the process, read Chapter 2 Canadas best kept secret for avoiding bankruptcy Filing a consumer proposal beginning on page 10.
Special Feature: Can a Collection Agent Take Me To Court? Will I Go To Jail For Not Paying My Debts?
Most collection agents get paid a commission or a performance bonus based on the amount of debts they collect. They will often try numerous different collection tactics to get you to pay your debts, so they can earn their commission or bonus. But, can a collection agency take you to court? The answer is yes - it is possible for a collection agency to start a court action against you. Typically, the collection agent representing your creditor will first call you and send you numerous threatening letters. However, they will only take you to court if they believe you have the ability to pay, and they have been unsuccessful in collecting from you without going to court. In case the collection agency does take you to court, the purpose of the court hearing will be to determine whether or not you owe the creditor. In most cases the fact that you do owe the money is not in dispute. You know you owe the money, and the creditor has proof that you owe it, so in most cases the court hearing is a very quick event. The judge signs a piece of paper, called a judgment, stating that you owe the money. The next possible step for the creditor is to apply to the court to enforce the judgment, which generally means they apply to seize your bank account or other assets, or garnishee your wages; but, in most cases there is no point in a creditor freezing your bank account, since once your bank account is frozen you will never deposit any money into that account again. In addition, most people dont have any assets that can be confiscated. Therefore, the creditor is most likely to attempt to garnishee your wages. If they know where you work, garnisheeing is possible. If they dont know where you work, they cannot send a garnishment notice to your employer until they determine where you work. Many people worry that if they dont pay their debts they will go to jail, but that is not the case. Jail terms are the result of a criminal trial. Creditors are taking action in a civil trial, which as described above leads to a judgment or a garnishment order, but not jail. To go to jail you must be convicted of a criminal offence, and you must be charged with a crime by the police. If you rob a bank, you will go to jail. If you commit fraud and are convicted, you can go to jail. Not paying your credit card is not a criminal offence. Even though debts do not lead to jail, it is very stressful having collection agents threatening you, and having your wages garnisheed creates an obvious financial burden. If you are worried about creditors and collection agencies taking you to court, contact a licensed trustee to determine whether a consumer proposal (see page 10) or bankruptcy is necessary to stop garnishments and get you back on track.
Chapter 2 Consumer Proposals Canadas Best Kept Secret for Avoiding Bankruptcy
Are you experiencing financial difficulties? bankruptcy, but you really dont want to? Have you been thinking about filing
A consumer proposal may just be what youre looking for. A consumer proposal is a legal procedure available to people living in Canada that are experiencing financial difficulties, but can still afford to repay a portion of their debts. You might be asking yourself, A portion of your debts? Not all of them? Sounds too good to be true! Although it is true, you need to remember that a consumer proposal is an alternative to filing bankruptcy, which means not just anyone can use a consumer proposal to get rid of their debts. In order to file a consumer proposal you have to prove that you are insolvent, or are unable to keep up with your payments. If you are not insolvent you are not eligible to file a consumer proposal. What is a consumer proposal? Essentially a consumer proposal is an offer to repay part of what you owe. It is called a proposal because you are proposing a deal to your creditors. Your creditors have to agree to your proposal in order for it work. A consumer proposal is a sub-class of something called a Proposal to Creditors. The subclass was created to allow individuals to negotiate repayment plans with their creditors in the same way that large businesses can. Its a legal procedure, so there are specific rules that must be followed to ensure that both the person that is filing the consumer proposal and their creditors are treated fairly. Dont be surprised if youve never heard of consumer proposals before. Historically, for every 7 bankruptcies that are filed in Canada, only 1 consumer proposal has been filed, but those numbers are changing. More people are becoming aware of this option and deciding that it makes sense for them. It is unlikely the day will come when people no longer file personal bankruptcy, but consumer proposals provide a useful alternative to many people experiencing financial difficulties.
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How do I file a consumer proposal? There are many steps involved in the filing of a consumer proposal. They are included in this book for your reference and are discussed in detail. The steps are: 1. Assessing your financial situation page 12 2. Determining your eligibility page 13 3. Preparing the documents you need to file page 14 4. Deciding the terms of your proposal page 15 5. Mailing your proposal and waiting for the answer page 16 6. Living with your consumer proposal page 17 7. Finishing your proposal: Now what? page 18
We have also included a bonus section, Consumer Proposals and Your Credit, on page 19
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Step one: Assessing your financial situation

In order to file a consumer proposal you need to see a licensed trustee in bankruptcy, who will complete what is called an assessment. The purpose of the assessment is to review your situation to determine if filing a consumer proposal is right for you. Your trustee will ask you to provide information about the people you owe (your liabilities), the things that you own (your assets), your family situation, your household income, and your household expenses (your budget). Depending on your answers, your trustee may review a number of different options with you before allowing you to proceed with a consumer proposal. Your trustee will want to discuss: Changes to your spending and payment patterns maybe you can find your own way out of trouble A consolidation loan A procedure called credit counselling Consumer proposals Personal bankruptcy
It is only after you have considered each of these alternatives that you can make an informed decision that a consumer proposal is the right choice for you.
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Step two: Determining your eligibility

If youve decided that filing a consumer proposal is the right solution for you, you must determine whether or not you are eligible to file a consumer proposal. We mentioned at the beginning of Chapter 2 that a person must be insolvent in order for them to file a consumer proposal, but there is actually more to it than that. In order to be eligible to file a consumer proposal you: Must be a person (businesses may not file consumer proposals) Must be insolvent Must have total debts (excluding the mortgage on their principle residence) of less than $75,000
In addition, if you have previously filed either a Notice of Intention or a Proposal to Creditors you may not file a consumer proposal until the trustee that was handling your previous filing has been discharged And finally, if you have previously filed a consumer proposal and it was annulled or deemed to be annulled you may not file another consumer proposal until all of the claims filed in your prior proposal have been paid in full or extinguished by operation of Section 178 of the Bankruptcy and Insolvency Act. It is possible for more than one person to file a consumer proposal together this is called a joint filing. In order to file a proposal together you must meet the following criteria: All or substantially all of the debts from all the individuals must be similar When two people file together, a husband and wife for example, the total debts must be less than $150,000 (excluding the mortgage on their principle residence) instead of the $75,000 limit for a single person
If you have been deemed eligible to file a consumer proposal, either alone or together with someone, you and your trustee will begin to put together all the documentation needed to file.
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Step three: Preparing the documents you need to file

The assessment is done and you have decided to file a consumer proposal in order to obtain relief from your financial difficulties. Your trustee has requested, and you have provided them with, information about your liabilities, your assets, and your budget. With this information your trustee will prepare all of the documents you will need in order to file a consumer proposal. Some of these documents are: The Statement of Affairs A Statement of Income and Expense The Assessment Certificate Payment terms and conditions Consumer Proposal
Each of these forms and any others that your trustee may ask you to sign serve a specific purpose. Some are required by law and are designed to provide your creditors with enough information about your situation to enable them to decide whether or not to agree to your consumer proposal. Others are used by your trustee to ensure that all of your duties and responsibilities during the proposal have been clearly explained to you. When you file a consumer proposal you are commencing a legal procedure and it is important that you read carefully and understand all of the documents that your trustee asks you to sign. Filing a consumer proposal is supposed to help you solve your financial problems if you dont fully understand what you are signing please take the time to ask questions. Generally speaking, only the people that dont understand the procedure run into trouble during this process.
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Step four: Deciding the terms of your proposal

So, youve reviewed your situation with a trustee (step one), youve determined that you are eligible to file (step two), and youve provided your trustee with all of the information to prepare the paperwork required to file (step three). Thats great, but how do you figure out what portion of your debt to offer your creditors in your consumer proposal? Consumer proposals a creative solution Consumer proposals can have different terms to suit your needs, but there are a few basic rules that must be followed, regardless of the proposal you make. These include: You must offer your creditors more money, or a greater benefit, than they would receive if you went bankrupt. This makes sense why would your creditors accept your deal if it is for less money than a bankruptcy? You must be able to make the payments you are proposing. Again, this is pretty straightforward there is no point in offering your creditors a payment plan you know you cant maintain (i.e. if you offer $500 a month, but can only afford $400 a month, your proposal will fail).
The good news is that your trustee will work with you to ensure that these rules are kept its part of the service trustees provide when you file a consumer proposal. The bad news is that just because youve kept these rules, it doesnt mean your creditors will accept your consumer proposal. Each creditor has their own set of rules for accepting (or rejecting) a consumer proposal. Trustees that handle a large number of proposals will have a good idea of what those rules are your trustee should be able to warn you if any of your creditors require unusual terms or if your trustee thinks a particular creditor (or creditors) may ask you for more than you have offered. What kinds of terms can I propose? A consumer proposal is a plan to pay back a portion of your debts over a set amount of time. There are three different ways the payments can be made, and therefore three different proposals you can offer you creditors: 1. Monthly payments made over a course of no more than 5 years or 60 months. If you proposed to pay back $60,000, you could do it in monthly instalments of $1000 over a five year period. 2. A lump sum payment. If you proposed to pay back $60,000, you could do it in one lump sum payment and your proposal would be over. 3. A combination of both a lump sum payment with monthly payments to cover the rest. If you proposed to pay back $60,000, you could do it with a one-time lump sum payment, and paying off the rest over a period of time in monthly instalments. No matter how you design your proposal, it is still up to your creditors to accept your consumer proposal. That being said, your trustee will assist you to draft a consumer proposal that your trustee believes is likely to be accepted. If you proposed a deal that wouldnt be accepted, it would be a waste of everyones time and resources. Bankruptcy in Canada What You Need to Know 15
Step five: Mailing your proposal and waiting for an answer

Once your trustee has assembled all of the documents required to file (step three), including your consumer proposal, your trustee is required to file the forms with an Official Receiver and then mail a Notice to Creditors to all of the companies and individuals that appear on your list of liabilities. Your trustee has five business days from the time that your consumer proposal is filed with the Official Receiver to send this mailing out. The purpose of the mailing is to make all of your creditors aware of your consumer proposal. Your creditors have 45 days from the date that your proposal was filed with an Official Receiver to vote on your proposal. Your creditors may do one of the following: Vote for the acceptance of your proposal Vote to reject your consumer proposal Vote to accept your consumer proposal if you agree to alternate terms which they will provide Submit a claim, but not bother to vote for or against your consumer proposal They may choose to do nothing at all, not even submit a proof of claim
Your trustee is allowed to contact your creditors to remind them to submit a proof of claim and to ask them to vote, but your trustee may not solicit votes on your behalf. At the end of the 45 day period if a majority of the votes received are for the acceptance of your consumer proposal it may go forward. If 25% or more of the votes received (by dollar value) have voted to reject or to alter the terms of your proposal your trustee is required to schedule something called the First Meeting of Creditors. The purpose of this meeting is to see if an agreement can be reached with a majority of your creditors that have voted on your consumer proposal. At this point, your consumer proposal can only go one of two ways either it is accepted by your creditors (which is what happens in most of the proposals that are filed) or it will be rejected by your creditors and it ends right there.
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Step six: Living with your consumer proposal

Congratulations your proposal has been accepted by your creditors. You should be well on your way to resolving your financial problems. One of the reasons that people choose consumer proposals is to make their debt repayment more manageable. In the majority of the consumer proposals that are filed, individuals opt to make a regular monthly payment towards their debt. What happens if you cant make a payment? The law states that you can miss a maximum of two payments with no consequences. If you miss a third payment, though, on the day that your third payment is due, you proposal will be deemed annulled. In other words, miss three payments and your proposal will be automatically cancelled. Before this happens to you, essentially after you have missed two payments, you should meet with your trustee to review your options. Obviously, something is not right the payments you originally agreed to arent working for you. Your options at this point include: Leave the proposal as is and make sure you dont miss any future payments Make changes to your proposal terms (called an Amendment) Deliberately miss a third payment to cause your proposal to be automatically annulled File an assignment in bankruptcy
The option that you pick will depend on what has happened to cause you to miss two payments. If it is something minor, like an unexpected car repair, then perhaps you can work out a plan with your trustee to make up the missed payments over the next 6 months or a year. If it is something more serious, like a lay-off, then an amendment might be required. If its something catastrophic, like the plant where you work is moving to China, you may have to consider bankruptcy. A consumer proposal is a binding contract, but if you find that you cant keep up the payments and that your situation has changed, you may need to sit down with your trustee to assess whether or not your solution needs to change too.
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Step seven: Finishing your proposal: Now what?

Well, it may have taken a while to get here, but youve made your last payment and now your proposal is complete. Thats great news. Your trustee is going to send you a Certificate of Full Performance thats your proof that you satisfied all of the terms of your consumer proposal. You will also receive, although perhaps not right away, a Statement of Receipts and Disbursements, a Notice of Taxation of the Administrators Accounts, and the Discharge of the Administrator. These are the final documents that your trustee will send to you when they close your consumer proposal. These final documents are sent to you, your creditors, and the Official Receiver. It is the government agency that employs the Official Receiver that actually notifies the credit bureaus, not your trustee. All of this takes time sometimes a couple of months depending on the back log in the system. From this point forward, you may begin to rebuild your credit. Whatever the original causes of your financial problem, you have now them behind you and dealt with the debt. Hopefully, youve come through this a little wiser, a little more financially aware, and therefore better able to deal with your finances in the future. Remember how you felt when you started? Hopefully youll never have to feel that way again. If you recognize the same warning signs in your family or friends you might want to share your newfound wisdom and get them pointed in the right direction. Congratulations on your fresh start!
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Bonus Section: Consumer proposals and your credit Special Feature: What Happens to My Credit Report If I File a Consumer Proposal?
From the editors of www.bankrutpcy-canada.ca If you have filed for a consumer proposal or are considering a consumer proposal, you are probably concerned about the effect it will have on your credit report and your borrowing power. Will you be able to buy a car, a house, get a credit card, or a loan? The answer is yes, you will. When you file a consumer proposal a note goes on your credit report stating as much. Your credit report is a document that contains all of your credit history, including any action you decide to take with your debt. This can include things like debt management plans, bankruptcies, and of course, consumer proposals. This note will stay on your credit report for 3 years after the payments you have agreed to in the consumer proposal are finished. For example, if you had agreed to a 5 year plan to repay your debts, the note would be removed from your credit report after 8 years. So, why is a consumer proposal better than a bankruptcy, where the note stays on your credit report for only 6 years after you have filed? Consumer proposals are more flexible. You might have agreed to a 2 year repayment plan, meaning after 5 years the note disappears. And consumer proposals also allow you pay more than what is stipulated in the agreement. Even if you had agreed on a five-year payment plan, you could shorten it by making extra payments, thereby getting the note removed from your credit report that much faster. Once the note is removed from your credit report, borrowing money will be easier. Remember, though, that borrowing is not impossible with a note on your credit history. Things such as whether or not youre paying your bills on time, how much of a down payment you have saved, and if you have a co-signer are also considered when you apply for a loan.
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Chapter 3 Bankruptcy: The Process from Start to Finish

If personal bankruptcy is necessary to deal with your debts, it is important that you understand the process from start to finish. Your trustee will explain the process to you; if they dont, be sure to ask lots of questions, or find another trustee. Many of the concepts discussed here may seem confusing; if there is anything you dont fully understand, make a note of it and ask your trustee. A good trustee is essential to help the bankruptcy process proceed as smoothly as possible; a list of recommended trustees is presented on page 138.
The steps in your bankruptcy

How does personal bankruptcy in Canada work? The basic steps are as follows: 1. First, you must recognize that you are having financial problems, and you dont believe you can work them out on your own. 2. Next, you contact a licensed trustee to review your situation. They will explore the alternatives to bankruptcy, and only proceed with the bankruptcy if that is your most logical option. 3. If you and your trustee determine that personal bankruptcy is the correct option, your trustee will give you an information form to complete. The trustee needs your personal information (name, address, birth date), a list of your creditors (who you owe money to), and a list of your assets (what you own). 4. Once your application form is completed, the trustee will prepare the necessary bankruptcy paperwork. 5. Once the paperwork is prepared, you will meet with the trustee to sign the paperwork. Thats the day the bankruptcy starts. From this point on your unsecured creditors cannot ask you for money; they must deal with your trustee. 6. Within five days of the bankruptcy starting your trustee will send a copy of your bankruptcy paperwork to each of your creditors, so that they can file a claim with the trustee. 7. The trustee will file your taxes up to the date of bankruptcy. Any money you owe to Canada Revenue Agency will be included in your bankruptcy. Any tax refund or GST credits received during the bankruptcy will go to the trustee for your creditors. 8. Each month during the bankruptcy you will send the trustee proof of your income. In a bankruptcy the more you earn, the more you are required to contribute to your estate for the benefit of your creditors.
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9. Within 60 days you will have your first credit counselling session. These sessions are designed to teach you budgeting and good money management so that you are less likely to have financial problems in the future. 10. Within 210 days you will have your second credit counselling session, which will address the financial trouble you have experienced specifically, helping you to avoid the same trouble later. 11. If requested by your creditors, you may be required to attend a meeting of your creditors, although this only happens in unusual circumstances. 12. If you have never before been bankrupt, and if you have no surplus income, you are eligible to be automatically discharged or released from your debts and bankruptcy in nine months. If you have been bankrupt before, or if you have surplus income, or if you have not fulfilled your duties, your bankruptcy discharge will be delayed. 13. A note about your bankruptcy will remain on your credit report for a minimum of six years after the date of discharge.
Your duties
During your bankruptcy, you will have things that you need to complete. Your trustee will explain your duties in detail, to ensure that you complete your bankruptcy as quickly as possible. Your duties will be different at each stage of your bankruptcy. Your duties at the start of your bankruptcy Initial information gathering The bankruptcy process begins with you providing to your trustee the information that will be required to prepare your bankruptcy paperwork. A sample of a typical trustees information package can be found in Appendix A on page 109. The trustee needs to know your full legal name, so you will be required to provide a copy of your birth certificate or citizenship documents. Other personal information provided will include your address, phone number, and a list of your family members living with you. The trustee also requires a list of your assets (what you own), and your liabilities (what you owe), and other information about taxes and other matters. This information is necessary to prepare your bankruptcy paperwork, but it is also necessary to allow the trustee to review your situation and advise you on the implications of bankruptcy. The trustee also uses this information to assess your situation, as discussed below. Assessment by the trustee By law, you cannot file a consumer proposal or go bankrupt unless you have been personally assessed by a trustee. You can read more about this on the governments web site (http://strategis.gc.ca/epic/site/bsf-osb.nsf/en/br01096e.html). We have reproduced, in italics, information from the governments web site discussing the assessment.
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During the assessment the trustee, or the trustees representative, will inquire about the debtor's property and financial affairs and shall: a. prepare, on the basis of information obtained from the debtor, a complete statement of the debtor's financial affairs setting forth the details of: a. the debtor's assets; b. the debtor's liabilities; c. a detailed current monthly income and expense statement, including all income, gross and net; and all expenses, including special needs expenses, alimony, support or maintenance payments, transportation costs, medical and prescription expenses; and d. conveyances, preferences and settlements of real or personal property of the debtor; b. discuss with the debtor his/her views respecting the debtor's immediate problems, evaluate the extent and nature of the problems facing the debtor, review approaches for dealing with those problems; c. identify and discuss generally the options available to debtors for resolving financial difficulties, including a discussion of the rights and responsibilities of debtors and creditors under each of the following options: a. non-legislative debt settlement arrangements; b. an Orderly Payment of Debts under Part X of the Act, or similar option under provincial legislation, where applicable; c. a consumer proposal under Division II of Part III of the Act; d. a proposal under Division 1 of Part III of the Act; and e. an assignment in bankruptcy under section 49 of the Act; d. explain the general meaning of the following credit and insolvency matters where pertinent to the circumstances: a. b. c. d. e. f. g. h. i. garnishment; co-signers; credit rating; assets; legal action; payments; windfalls; tax returns; tax credits; 22
j. mediation; k. the discharge process and types of discharge order. 2. Where the above tasks were delegated and the debtor considers a solution under the Act (excluding Part X), the trustee or, in the case of a consumer proposal, the administrator shall, in person, complete the assessment with the debtor. 3. To assist in choosing the appropriate option pursuant to the Act, the trustee or administrator shall discuss and review with the debtor: a. the debtor's views of the situation; b. the merits and consequences of the pertinent options; c. the rights and responsibilities of the debtor in a bankruptcy or a proposal; d. the specific effect of relevant credit and insolvency matters, as they relate to the debtor's circumstances (e.g.: wage garnishments, co-signing, credit rating, taxes, fees); e. the possible outcome of the discharge process as it may relate to the debtor's circumstances including the trustee's statutory responsibility to report on any fact, matter or circumstances which may, if an opposition is filed, justify the Court's refusal to grant an absolute order of discharge.; f. the responsibility of a bankrupt to contribute surplus income to the estate, where appropriate; and g. the type and nature of counselling adapted to the debtor's needs that will be offered to assist in the rehabilitation. 4. If at any time during the course of the above process, the debtor chooses an option to which the Act does not apply, the process, as described herein, ceases and an Assessment Certificate will not be required. Viable Proposals 5. For the purpose of paragraph 170.1(2)(c) of the Act, the trustee shall determine whether or not the debtor has the potential to file a viable proposal by considering the following factors: a. the debtor i. has sufficient property available to make a "lump sum payment" proposal, or ii. has surplus income in accordance with the Directive on Surplus Income, and also has the capacity at the time of assessment to sustain continued payments to a proposal for a period of time;
b. the family or personal situation of the debtor; 23
c. the financial situation of the debtor; d. the number and type of creditors of the debtor, both secured and unsecured; e. the likelihood of acceptance of a proposal by the creditors, and; f. whether the return to creditors from a potential proposal would be greater than the returns from a bankruptcy. 6. Where the trustee determines the debtor has the potential to file a viable proposal, the trustee shall inform the debtor of the trustee's duty pursuant to paragraph 16 of this Directive. 7. Where the trustee determines the debtor has the potential to file a proposal, but where it is unlikely that a proposal would be viable because of other circumstances, the trustee shall describe those circumstances in the section 170 report. 8. Where the trustee determines the debtor has the potential to file a viable proposal, and the debtor chooses to file an assignment in bankruptcy rather than a proposal, the trustee shall comment in the section 170 report that a viable proposal could have been filed, and recommend that the bankrupt be discharged with conditions. As you can see, the Assessment is a very detailed process. It is designed to allow the trustee to fully evaluate your situation, and to describe to you, in detail, all of your options. At the end of the Assessment you should understand your options, and if you choose to file bankruptcy, you should understand the bankruptcy process. Once the Assessment is completed the trustee will sign an Assessment Certificate, and this certificate will be included as part of the bankruptcy paperwork that are filed with the Office of the Superintendent of Bankruptcy. A copy of the Assessment Certificate is reproduced on page 137. Preparing the bankruptcy documents Once the trustee received as reviews your bankruptcy application (see page 109), the trustee prepares your bankruptcy documents. In emergency situations, such as if your wages are being garnisheed, it may be possible for the trustee to prepare your documents in 24 hours or less. In most cases the process takes two or three days. Signing the documents: The day you officially go bankrupt
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Once the documents are prepared, you will meet with the trustee or their representative to sign the documents. An example of what the documents look like can be found on page 129. The documents include: Your statement of affairs, which includes a list of your assets, a list of your debts, and your personal information (name, address, birth date, marital status, and employment information); Your monthly income and expense statement, showing a typical months income and expenses for you and your family; An Assessment Certificate, indicating that a licensed trustee has assessed your financial situation; and Your Assignment in Bankruptcy, the document that officially starts the bankruptcy process.

Most trustees also have a number of other documents you sign to ensure you understand the process. Once the documents are signed, the trustee will then electronically file them with the Office of the Superintendent of Bankruptcy, and you are officially bankrupt. The trustee will then receive electronically, usually in a matter of a few seconds, from the Office of the Superintendent of Bankruptcy a Certificate of Appointment, indicating that the trustee has been officially appointed to administer your bankruptcy estate. The Certificate of Appointment contains your Estate Number which is used to track your bankruptcy. Notifying your creditors Once the trustee receives the Certificate of Appointment they are required to notify all of your creditors. By law, the trustee must notify all known creditors within five days of the date of your Assignment in Bankruptcy. The trustee will prepare a Creditors Package, which contains all required documents. These documents include: A Notice to Creditors, indicating the date of your bankruptcy, and, if you have never filed bankruptcy before, the date that you are eligible to receive an automatic discharge; A Proof of Claim form that the creditor will complete and return to the trustee, indicating how much you owe. The creditor must attach proof of the amount owing (generally a statement of your account), and a list of all transactions completed over the past three months; Instructions for Completing the Proof of Claim to assist creditors who may not be familiar with the procedure; Statement of Affairs; and Monthly Income and Expense Statement. 25

Generally this initial mailing to creditors is done by mail, but it is often sent by fax to the large common creditors, such as the banks. Either way, within about a week of your filing your creditors will be notified that you have gone bankrupt. Your duties while you are bankrupt Now that you bankruptcy has started, you have a number of duties to perform. Reporting your income to the trustee each month You are required to report your income to your trustee each month. Each trustee may have a different method for doing this, but the standard approach is to require you to complete a family income and expense statement each month. Your trustee will provide you with a set of nine blank income statement worksheets, similar to what you filled out for the trustee prior to going bankrupt (see page Error! Bookmark not defined.). During the month you will keep track of what you earn and what you spend. At the end of the month you will send this report to the trustee. In most cases the trustee will also require copies of your pay stubs and proof of any other income, so that they can calculate your surplus income payments (see next section). In addition to providing proof of your income, these monthly statements fulfill another important purpose: they force you to keep track of where you spend money, and thats a good habit to acquire. Many people get into financial trouble because they dont know where they spend their money. By forcing you to keep track of where you spend your money, you will be able to see quite clearly any bad spending habits you may have, and you can take steps to correct them. We recommend that you keep copies of each budget that you send to the trustee, so that at the end of your bankruptcy you have a complete history of your spending patterns. For most people, its a real eye opener! Making your monthly surplus income payments Under the Bankruptcy and Insolvency Act, the federal legislation that governs the bankruptcy process in Canada, you are required to make a surplus income payment each month based on your income. The concept behind this rule is simple. The more you earn, the more you are required to contribute. Its only fair that a high income earner, such as a doctor, who goes bankrupt (perhaps because of bad investments), should be required to pay more than someone who has less income. Heres how it works: The Office of the Superintendent of Bankruptcy sets limits for what a family is allowed to earn. The larger your family, the more you are allowed to keep. The thresholds are increased each year.
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As an example, a single person in 2007 is allowed to have take-home pay each month (income after taxes) of $1,797. (Go to page 138 to contact a local trustee to find out the current limits for your family size). For every dollar their income exceeds this limit in a month they are required to make a contribution of half of the amount they are over in form of a surplus income payment. If that person earned $1,997 in a month, they are $200 over the limit, so they would be required to contribute an extra $100 to their bankruptcy estate for the current month. (If you are more than $1,000 over the limit, the penalty increases to 75% of the amount you are over). Each month during the bankruptcy process the bankrupt submits copies of their pay stubs and proof of other income to the trustee, and the trustee calculates their surplus income, and the bankrupt contributes the required portion. How does this work? To explain surplus income calculation, lets work through a couple of examples. John lives alone and earns $18/hour for a 40 hour work week. He gets paid bi-weekly (every two weeks). His take-home is $1,050. Johns surplus income calculation looks like this: Total household income (2 X $1,050): Less the government threshold: Income over the threshold: Surplus income rate (50%): Surplus income to pay: x $2,100 - 1,797 303 0.5 $1,51.50
John would be required to pay an additional $151.50 to his trustee this month. At least twice a year John will receive 3 pay cheques (instead of his normal 2). In those months his surplus income calculation looks like this: Total household income (3 X $1,050): Less the government threshold: Income over the threshold: Surplus income rate (50% of $1,000): (75% over $1,000): Surplus income to pay: $3,150 - 1,797 1,353 500 264 $764.75
In cases like the example above, the surplus income calculation is fairly straightforward. It can become more complicated if there are many people in the household with varying amounts of income. We have included a number of different examples for you to review in the hope that one will be similar to your own situation in Appendix C: Bankruptcy in Canada What You Need to Know 27
One person in the household paying support for children Two people in the household, only one has filed bankruptcy Two people in the household and both have filed bankruptcy separately Two people in the household and they have filed bankruptcy jointly Two people in the household, only one has filed bankruptcy and they have a payroll deduction for RRSPs Four people in the household, only one has filed bankruptcy
Page 120 Page 121 Page 122 Page 123 Page 124 Page 125
Four people in the household, only one has filed bankruptcy and they are paying support for children Page 126 One person in the household that is self-employed Page 127
It is very important that you understand how surplus income is calculated, since paying a portion of your surplus income is one of your duties during your bankruptcy. Payments to the trustee In addition to requiring a surplus income payment, most trustees will require a base contribution during your bankruptcy. During your bankruptcy your trustee incurs various costs, and this base contribution is designed to cover those trustee costs. You can contact a trustee (see list on page 138) to find out the minimum payment you may be required to make during your bankruptcy. Surrendering assets The concept behind personal bankruptcy is relatively simple: your assets are turned into cash, and those proceeds are distributed to your creditors. In practice, its a bit more complicated. First, many assets are exempt, meaning that the trustee wont seize them. (You can find a list starting on page 151). The rules are different in each province, but in general you are allowed to keep your basic personal belongings, such as your clothing and household furniture. When you first meet with your trustee it is imperative that you tell your trustee about everything you own, so that you can determine whether or not your assets will be seized if you go bankrupt. (If you have assets that are not exempt, you may want to avoid bankruptcy and instead file a proposal. Information on proposals can be found starting on page 10). Second, in some cases your trustee may agree to allow you, or a family member, to purchase the asset from the estate, so that the trustee does not actually seize it. For example, if you own an RRSP worth $1,000 that is not exempt, the trustee may agree to accept payment from you of $1,000 so that you can keep your RRSP. Bankruptcy in Canada What You Need to Know 28
Either way, it is your responsibility to fully disclose all assets, and to co-operate with the trustee in surrendering all non-exempt assets. Credit counselling In all personal bankruptcies and consumer proposals you are required to attend two credit counselling sessions. Directive 1R2 issued by the Office of the Superintendent of Bankruptcy describes the credit counselling process. (You can read the full Directive here: http://strategis.gc.ca/epic/site/bsf-osb.nsf/en/br01091e.html). Credit counselling is designed to help you learn good financial management, including budgeting and the prudent use of credit. Credit counselling also helps you develop successful strategies for achieving your financial goals, and learning how to overcome financial set backs. You are required to attend two counselling sessions in order to be discharged from your bankruptcy. The first session must be completed between 10 and 60 days of the start of your bankruptcy, and the second session will be held no earlier than 30 days after your first session, and no later than 210 days after the start of your bankruptcy. The sessions can be conducted one-on-one with a credit counsellor, or in a group. If you want a personal counselling session, be sure to mention that to your trustee before you sign your paperwork, otherwise your trustee may include you in a group session. (The editors of bankruptcy-canada.ca strongly believe that, where possible, private sessions provide the best opportunity for a bankrupt to ask questions without fear of embarrassment, and therefore to get personalized advice). Directive 1R2 describes the First Counselling Stage, which is focussed on Consumer Credit and Education: In the first stage, the qualified counsellor shall present information to provide the bankrupt and/or relative, or a consumer debtor, with consumer advice in the areas of: money management; spending and shopping habits; warning signs of financial difficulties; and obtaining and using credit.
The Second Counselling Stage helps you identify road blocks to solvency, and focuses on rehabilitation, which means getting you back on track once your bankruptcy is over. Quoting again from Directive 1R2: The second stage is to determine the budgetary and/or non-budgetary causes of insolvency or bankruptcy and requires that the qualified counsellor: a) follow-up on the application by the debtor of the principles presented in the first stage to assist the bankrupt and/or relative, or the consumer debtor, to better Bankruptcy in Canada What You Need to Know 29
understand his/her strengths and weaknesses with regards to money management and budgeting skills; b) assist, where appropriate, the bankrupt and/or relative, or a consumer debtor: a. to identify the non-budgetary causes (such as gambling abuse, compulsive behaviour, substance abuse, employment and marital or family difficulties) that may have contributed to his/her financial difficulties; b. to better understand his/her behaviour in financial management and consumption habits; and, c. to make him/her aware of the existence of resources that will help him/her achieve and maintain economic stability; and c) cooperatively with the bankrupt and/or relative, or a consumer debtor, develop recommendations and alternatives for a financial plan of action which, if appropriate, may include referral for specialised counselling to deal with nonbudgetary causes of insolvency. At the end of each counselling session you will sign a Counselling Certificate indicating that you have completed the required counselling. A copy of the Counselling Certificate is reproduced on the next page.
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The Counselling Certificate looks like this: Counselling Certificate First Stage (or Second Stage)
File number _________ To: Superintendent of Bankruptcy From: ______________________________________________ Name of qualified counsellor Re: ______________________________________________ Name of bankrupt or consumer debtor Date: ______________________________________________ Date of counselling I, the undersigned, hereby certify that I have complied with the terms of Section 7 of the Counselling Directive: Dated at this day of , . ____________________________________________ Signature of qualified counsellor
Acknowledgement
I, the undersigned, have attended an individual or group (cross out word that does not apply) session presented by the above-mentioned qualified counsellor and understand the information which was presented to me. Dated at this day of , .
___________________________________________ Signature of bankrupt or consumer debtor
Tax returns In all personal bankruptcies the trustee is required to complete various tax returns. As a bankrupt you are required to provide the trustee with the information necessary to complete the tax returns. There are four possible types of tax returns that the trustee may prepare: Prior Years Tax Return(s) If you have not yet completed your tax return for last year, the trustee will complete it. The trustee may also complete tax returns for other prior years if required. For example, if you go bankrupt on January 31, 2008, you have probably not yet filed your tax return for 2007. You will give your trustee your T-4 slips, and all other slips and receipts and information necessary to file your tax return, and they will file your tax return. 31
If you owe money on your Prior tax return, the balance owing will be included in your bankruptcy. You are not required to pay it. If you are eligible for a refund, you will not receive it; Canada Revenue Agency will forward your tax refund directly to your trustee. Your refund becomes part of your bankruptcy estate. Any funds in your estate at the end of your bankruptcy, after all trustee fees and expenses are paid, are distributed to your creditors. Pre-Bankruptcy Tax Return In all cases your trustee is required to file a tax return for the period from January 1 to the day before you filed bankruptcy. For example, if you go bankrupt on March 31, your trustee will file a pre-bankruptcy tax return for the period January 1 to March 30. As with your Prior Year Tax Return, if you owe money on your Pre-Bankruptcy tax return, the balance owing will be included in your bankruptcy. You are not required to pay it. If you are eligible for a refund, you will not receive it; Canada Revenue Agency will forward your tax refund directly to your trustee. Your refund becomes part of your bankruptcy estate. Any funds in your estate at the end of your bankruptcy, after all trustee fees and expenses are paid, are distributed to your creditors. Post-Bankruptcy Tax Return In most cases your trustee will also file a post-bankruptcy tax return. For example, if you go bankrupt on March 31, your trustee will file a pre-bankruptcy tax return for the period from March 31 to December 31. Unlike with your Prior Year Tax Return and Pre-Bankruptcy Tax Return, if you owe money on your Post-Bankruptcy tax return, you are required to pay it, because it is a debt that arose after the start of your bankruptcy. If your trustee files your postbankruptcy tax return, your trustee will receive your tax refund, and your refund becomes part of your bankruptcy estate. Any funds in your estate at the end of your bankruptcy, after all trustee fees and expenses are paid, are distributed to your creditors. It should be noted that while a trustee is legally required to file a Prior Year tax return (if it has not already been filed) and a Pre-Bankruptcy Tax Return, a trustee is NOT legally required to file a Post-Bankruptcy Tax Return. Some trustees will automatically file your Post-Bankruptcy Tax Return; some trustees dont. Still other trustees will only file a Post-Bankruptcy Tax Return if your bankruptcy occurs towards the end of the calendar year (say in November and December). When you first meet with your trustee it is a good idea to ask your trustee whether or not they will be filing your Post-Bankruptcy Tax Return. In-Bankruptcy Tax Return There is one final type of tax return that your trustee may file, although this type is not very common: its called an In-Bankruptcy Tax Return, or a Trust Return. The most common reason for filing this type of return would be to allow the trustee to calculate and remit the tax owing on an asset the trustee has seized and sold. 32
For example, if the trustee seizes your $5,000 RRSP, the trustee is required to remit the taxes owing. If you are in the 40% tax bracket, your trustee must remit $2,000 in taxes to the government. In this case the trustee would complete an In-Bankruptcy Tax Return showing only the $5,000 in income (from the RRSP) and no deductions. The trustee is then responsible to pay the $2,000 owing in tax, leaving $3,000 in net proceeds to be distributed to the creditors. Regardless of the type of tax return being prepared, as a bankrupt you are required to provide the trustee with all information necessary to complete your tax returns. If you are unable to provide the required information (because for example you have lost your pay stubs), then you are required to assist the trustee in obtaining the required information.
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Your duties at the end of your bankruptcy

During your bankruptcy there may be other information or assistance that the trustee requires. The trustee may require your assistance in reviewing proofs of claim submitted by the creditors, or answering other questions. You are required to assist the trustee to the best of your ability. The 170 Report A normal first time bankruptcy ends after nine months. Prior to the end of the eighth month your trustee will prepare a Report of Trustee on Bankrupts Application for Discharge. Because section 170 of the Bankruptcy & Insolvency Act describes the discharge process, this report is commonly known as the 170 Report. The order of discharge youre done! What does bankruptcy discharge mean? Discharge means to satisfy a debt obligation. In simple terms the bankrupt is no longer responsible for the unsecured debt. By filing for bankruptcy, you are asking to be released from your unsecured debt. Once you have complied with your responsibilities in your bankruptcy, and no one has objected to your discharge, you are eligible for a discharge. In some cases this discharge is automatic after your 9-month bankruptcy period, but if there are circumstances preventing the discharge from happening, it wont be automatic. For instance, if you have filed for bankruptcy before, or did not complete the required duties, discharge is not automatic and may become a matter for bankruptcy court. It is very important to complete all of your duties while you are bankrupt. If you have filed for bankruptcy but did not comply with the duties set out, the trustee will make an application to have you discharged. Once this happens, you are still bankrupt, but because you have not received your discharge, you lose the protection of the bankruptcy and are once again responsible for your debt. Make sure you understand exactly what is expected of you at every step so that you can ensure your debts are discharged and that your bankruptcy is a success.
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Chapter 4 What Debts are Included and Excluded When I Go Bankrupt?

When you file for bankruptcy, you are filing to have all of your unsecured debts forgiven. At the end of your bankruptcy, you will be discharged, meaning your debts will go away and you can work on rebuilding your credit and living a healthy financial life. What debts are included? Most unsecured debts are discharged in your bankruptcy. discharged if you file for bankruptcy in Canada: credit cards; unsecured lines of credit; unsecured bank loans; unsecured finance company loans; income tax debts; and payday loans. The following debts are
Special Feature: What Happens to My Tax Debts if I go Bankrupt?

From the editors of www.bankrutpcy-canada.ca Tax debts owed to Canada Revenue Agency can be discharged in a bankruptcy. However, the first step is to understand why you owe money to Revenue Canada, so you dont have the problem again in the future. If you owe taxes because you cashed in the last of your RRSPs to pay your debts, you wont have those tax obligations in the future, because your RRSPs are gone. If you are self-employed and dont have taxes taken off each paycheque, and as a result at the end of the year you owe money to Revenue Canada, you have a more fundamental problem. A personal bankruptcy will discharge your tax debts, but next year you will owe money again. We recommend that if you are self employed you estimate how much you will owe for taxes, and then send one twelfth of that amount to Canada Revenue Agency each month. That way, at the end of the year when you file your taxes, you will have paid all of your taxes. There are some special rules that deal with taxes in a bankruptcy situation, so we recommend you contact a trustee to review your situation and confirm that your tax liability will be discharged if you go bankrupt. Bankruptcy in Canada What You Need to Know 35
What debts are excluded? Although your bankruptcy takes into account all of your debts, it does not discharge all of your debts. There are some debts which do not get released when the bankrupt is discharged. Secured Debts Secured debts are not discharged in a bankruptcy. A secured debt is any loan attached to, or secured by, an asset. Common examples would include a car loan (a loan secured by a car), or a mortgage (a loan secured by a house). If you have a car loan, when you go bankrupt you will still have a car loan. In order to keep your car, you would be required to continue making payments on your car loan or lease. Please note that whether or not you can keep your car, and keep paying your car loan, if you go bankrupt will be decided by both your trustee and the car loan lender. Most lenders will allow you to keep your car if you file for bankruptcy. However, some lenders have a rule that if you go bankrupt, they will automatically seize your car. If you have a car loan and if you want to keep your car if you go bankrupt, we strongly recommend that you discuss your car loan with your trustee before you decide to file bankruptcy. (A list of trustees offering a free consultation can be found starting on page 138). House mortgages are the same; if the mortgage lender agrees to allow you to continue making payments, you may keep your house.
WARNING: If the lender agrees, you can keep making payments and keep your car or house. However, if there is equity in your car or house, it is possible that the trustee will require you to pay that equity into your bankruptcy estate in order for you to keep your car. In other words, the lender may allow you to keep your car or house, but the trustee may not. Equity is the difference between the value of the asset and the amount owing on it. If your house is worth $200,000, and the mortgage is $190,000, there is $10,000 in equity in your house (ignoring real estate commissions, penalties to break mortgages, and other selling costs). Be sure to discuss this with your trustee before you decide to file bankruptcy.
There are other debts that are not discharged in a bankruptcy, but first, please see the next page for our special feature on mortgages and bankruptcy.
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Special Feature: What Happens to My Mortgage if I go Bankrupt?

From the editors of www.bankrutpcy-canada.ca A woman came into my office recently, overwhelmed by debt and the payments that are required to service her debt. She needed a solution and was considering bankruptcy, but was really worried about her house and her mortgage would she lose it all? Or would she be able to hang onto her house and her mortgage? I explained to her what I think a lot of people forget your mortgage company doesnt want your house. They want your payments. If there is a chance that you can keep the house, your mortgage company will make that happen before deciding to foreclose and take back your house. There are a few things, though, to keep in mind when declaring bankruptcy when you have a mortgage. First, your mortgage company will only continue to do business with you if you keep up the payments. If you have been missing payments, you will already be in trouble with the mortgage company, and they may foreclose. If you have been able to keep up with your payments prior to your bankruptcy, chances are your mortgage company will let you continue to make payments while you are bankrupt and after your bankruptcy has ended. Second, when considering bankruptcy, you need to think about how much equity you have in your house. If you have equity, youll need to either pay the trustee the amount, or your house will be sold in order to get that amount. The calculation for equity is more complicated than comparing how much you owe with how much your house is worth. You can come into the office for a free consultation, and Ill help you figure out this number. Finally, your ability to renew your mortgage will be intact after your bankruptcy. Your current mortgage-holder will generally renew automatically with no questions asked. Theyre not concerned with the fact that youve been bankrupt theyre concerned about your ability to make the payments. If you can keep them up, there usually is no trouble. If you try to shop around, though, your potential lenders will definitely be looking at your bankruptcy, so stick with the mortgage company that youve got. If for some reason your mortgage company refuses to renew, dont panic. I can refer you to a mortgage broker that will help you find someone to renew with. When youre considering bankruptcy, your mortgage will be taken into consideration, but if youve been on-time with your payments, and you want to keep your house, we can help you figure out a way to do so.
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There are other debts that are not discharged in a bankruptcy, as discussed below. Alimony and Child Support This is the most common type of debt that is not discharged in a bankruptcy. If the court has ordered you to pay alimony or child support, those obligations continue. You cannot eliminate your support obligations by filing bankruptcy. Fraud, embezzlement, misappropriation, defalcation In simple terms, if you were to rob a bank, you would still be required to pay the bank back, even if you did go bankrupt. A more common example of fraud would be the use of credit cards or other borrowings in the period immediately preceding your bankruptcy filing. For example, if you charged a new TV on your credit card on Monday, and then filed for bankruptcy on Friday, it is likely that the credit card company would accuse you of committing fraud, and require you to repay the amount you borrowed immediately preceding the bankruptcy. A creditor is required to report to the trustee all transactions you have made in the three months before the bankruptcy, so if you use a credit card and then go bankrupt, both the creditor and your trustee will be aware of it. It could be considered fraud, and you may be required to repay the amount owing. If you have used your credit cards in the past three months, you should discuss this with your trustee before filing for bankruptcy. See the next page for our Special Feature report on using credit cards before bankruptcy.
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Special Feature: Using Credit Cards Before Bankruptcy: Fine or Fraud?

From the editors of www.bankrutpcy-canada.ca A lot of people I see in my office have serious credit card debt, and rely heavily on them for household expenses, like groceries or gas. Some of these people even continue using their credit cards right up to the first meeting in my office. When is this practice fine and when is it fraud? If you use your credit cards the week before you declare bankruptcy, you need to understand that your credit card company is not seeing the fact that you need help with your bills, but the fact that you are in fact taking money away from them and then stating, a week later, that you cant afford to pay them back. In essence, youre stealing from the credit card company, and this is where the situation gets tricky. When people come into my office for their first meeting and they have recently used their credit cards, I check to see what they have used them for. Was it for groceries? For gas? For household supplies? If this is the case, then its not a problem. This is probably how you got into trouble in the first place you have lost your job, or youre sick and you cant afford to work, or youre going through a separation and you are adjusting to a oneincome lifestyle, or youre having trouble managing your money. Youre using your credit cards to fill in the shortfall between the money you make and your expenses, and the week leading up to you declaring bankruptcy is no different. But if you purchased a 54-inch plasma TV, or went on an all-expenses-paid vacation to Greece the week before declaring bankruptcy, then theres a problem. If you cant afford to pay off your credit card and other unsecured debt, you cant afford the television and you really shouldnt be flying off to enjoy exotic vacations. This is where you have committed something fairly close to fraud you purchased items that you couldnt afford with money that was not yours without any intention of paying it back. You very well may end up having to pay back the credit card company for those specific purchases, or at the very least return the items in order to give the credit card company back their money. At our first meeting, I will tell you not to use your credit cards anymore, even for basic expenses at this point you wont be responsible for any more bills incurred by your debt, meaning you should have money available to buy the things that you need now. If you continue to use your credit cards, it isnt fair or ethical, considering you know that you cant pay any of the money back.
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Heres the rest of the list of debts that are not discharged in a bankruptcy: Any fine, penalty or restitution order In simple terms, if a court orders you to pay money as a result of a criminal conviction, or a traffic conviction, you are required to repay the money. A bankruptcy will not discharge the debt. Any award for damages by a court in civil proceedings in respect or bodily harm, sexual assault or wrongful death As with the above, if the court orders you to pay as a result of causing bodily harm, the bankruptcy will not discharge the debt. Liability for a dividend that a creditor would have been entitled to if they had notice of the bankruptcy, but the debt was not disclosed to the trustee This category of debts that are not discharge is extremely rare. To avoid this problem, be sure to disclose all debts you owe to your trustee. Student loans that are less than 10 years old from when the bankrupt ceased to be a student This is a common situation in a bankruptcy. If you get a government guaranteed student loan and then file for bankruptcy within ten years of leaving school, your student loan will not be automatically discharged in your bankruptcy. This means that upon the completion of your bankruptcy, your student loan lender may still pursue your for payment. In most cases, at the end of your bankruptcy you contact the lender and work out repayment arrangements. Since your other debts were discharged in your bankruptcy, you will probably be in a better position to repay your student loan.
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Special Feature: Bankruptcy and Car Loans: Do They Mix?

From the editors of www.bankrutpcy-canada.ca, responding to a readers e-mail: I bought a car last year, but I couldnt afford it outright. I had to get a loan to cover the cost of the car and used the car as security for the loan. If I default, theyll take my car away. What will happen, though, if I declare bankruptcy? Are the rules the same? Will I lose my car? The answer to this very common question is it depends how is your relationship with the creditor who holds your car loan? Your car company, who loaned you the money, would rather you make your payments than take your car. This is true with every secured loan, where there is something pledged in security for the loan. So, if youve made your payments and have been a good customer, youll usually be able to keep your car and the loan while being bankrupt, as long as you keep making the payments on time. If you havent been paying your car loan though, the car company will probably take your car back. This could very well happen to you if youre having trouble paying your off your debts, theres a good chance that youre behind in other bills as well. If this is the case with your car payments, your creditor will have no choice but take back the car. The only time where it doesnt depend solely on the relationship you have with your car company is if the contract you signed states you cant be bankrupt. Certain companies have a policy that stipulates if you go bankrupt they will automatically repossess your vehicle. The companies that have this policy change on a regular basis, so if youre concerned about your car loan, contact my office for a free consultation and we can review your loan agreement together. If youre considering bankruptcy, regardless of what your contract says, though, make sure you contact your car company beforehand to discuss your options. Let them know of your situation, that youve been a good customer, and that youd like to continue to be a good customer. By talking to them, you will ensure that there are no surprises when you do file for bankruptcy. Your car company will be forthcoming in telling you exactly what their policies are and youll know where you stand with your car loan.
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Chapter 5 What Assets Do I Get to Keep When I Go Bankrupt?

When you file for bankruptcy, you have to give up some of your assets, or possessions, but you also are allowed to keep some of them. The assets you are allowed to keep are called exempt assets. These assets are generally things that are necessary for living and supporting the fresh start that you will get from your bankruptcy. In Canada, the federal Bankruptcy and Insolvency Act defines three kinds of exemptions: Property you hold in trust for other persons. GST credit payments and prescribed payments relating to your familys essential needs. Other exempt property defined by the province or territory where you live.
The provinces and territories generally define other exempt property to include the following: Food and heating fuel needed by you and your dependants Clothing needed by you and your dependants Household furnishings and appliances One motor vehicle (sometimes only if needed to earn your living) Health (medical, dental, etc.) aids needed by you and your dependants The tools of your trade: tools, equipment, and books needed to earn money from your non-farming occupation Farm property: Farmland where your principal residence is located, and required operating equipment, livestock, and other property Your principal residence (house or mobile home) Some land Sentimental items, including pets Pensions or retirement savings Miscellaneous categories in some provinces
Although exempt items are protected by law from seizure, there are also limits and conditions on the exempt items. For example, you can keep your car, but only if its value, or how much it is worth, is under the limit set out by federal and provincial law. Exactly what you can keep depends on your personal circumstances and the province or territory where you live. Bankruptcy exemption rules are complicated, and change from time to time. Professional advice is essential.
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Weve discussed different assets in terms of whether or not they are exempt and the limits placed on them by law. Read further in this chapter about how these items are treated in the law and the criteria used to determine whether or not you are allowed to keep them or not. Bank Account Car House RRSP page 44 page 46 page 47 page 48
To find out about how exempt items are dealt with in your province or territory, see Appendix G, starting on page 151.
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Bank account
Your rights at the bank are set out very clearly in the Bank Act and the Bankruptcy and Insolvency Act. According to these pieces of legislation you have the following rights: You have a right to open an account at any bank in Canada, whether or not you are bankrupt, unless the bank has other reasons (not your bankruptcy) to refuse you an account. You can keep your bank account while bankrupt in Canada. If your account is in good standing, and if you have not used your bank account to engage in illegal activity, you can keep your bank account. You also have a right not to have creditors harass you or take money from you after you start a bankruptcy or consumer proposal. When you do this, all creditors are stayed, meaning that they no longer have permission to debit your account.
Even though you have these rights, most bankruptcy trustees in Canada would strongly advise you to open a new bank account before going bankrupt or filing a consumer proposal, at a bank where you have never done business or had a credit card. You should also arrange to have any regular deposits, such as your pay, changed to the new account before the bankruptcy starts. Move your money to the new account promptly, when your bankruptcy starts. If you keep your old bank account in bankruptcy, your creditors could take money from you. You need to make sure that they cant put through debits from your bank account after your bankruptcy starts. Although creditors are bound by law to respect your rights in regards to your bank account, and they are probably law-abiding people, they can make mistakes which the banking system may not catch in time or may not be able to respond to in time. By switching bank accounts you are safeguarding yourself from being the victim of human error, like someone forgetting to stop debiting your account. And there may not have been enough time to notify your creditors about your bankruptcy before the next payment is due and debited from your account. If you bank and have a credit card with the same bank, it is very easy for the credit card company to debit your account if you dont make your payment on time, even if you havent given them permission to. When you first apply for a loan or credit card, most lending agreements give the lender the right to take money out of your bank account if you are in default because it increases their chances of getting paid. Your trustee will promptly notify your creditors about your bankruptcy, but it may not be in enough time to stop the debit from occurring. If a non-permitted transaction does happen, your trustee can apply to court to get the money back, but the process may take days or even weeks. To ensure you still have enough money for things like rent or groceries, and to avoid the hassle of tracking down your money after the fact, switching your banking to a new bank account is a sure solution.
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Although opening a new account may be a nuisance because you have many items automated for your convenience, like your paycheque deposit and many of your household bills, switching over all the items in your old account to your new account will let you keep better control of your money.
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Car
If you own a car, you may or may not be allowed to keep it if you go bankrupt. Lets examine three different cases. I own my car there are no car loans owing If you own your car, you may be permitted to keep your car. In most provinces you are allowed to keep one motor vehicle, worth up to a certain value. If your car exceeds that value, you may be required to surrender your car to the trustee, or pay the equivalent value to the trustee to retain your car. To determine what value of motor vehicle you can keep in your province, consult our exemptions list beginning on page 151. I own my car but there is a loan owing If you own your car, but still owe money against it, it will be up to the car loan lender to decide whether or not you may keep the car if you go bankrupt. In some cases they will allow you to continue to make payments, and keep the car. In other cases they will seize the car if you go bankrupt. Further information on secured creditors and car loans can be found in our article on secured debts on page 36, and our Special Feature on Bankruptcy and Car Loans on page 41. Leased cars Your leasing company is obviously a secured creditor; the car is the asset that they are holding as security, which means if you dont pay them, they can seize the vehicle, whether you are bankrupt or not. Legally, you can keep a leased vehicle if you go bankrupt provided you continue making your lease payments, and assuming the leasing company agrees. Most leases contain a clause that says that in the event of insolvency, the leasing company can terminate the lease, and repossess the vehicle. In most cases they wont do that, because they would prefer to continue getting lease payments for the life of the lease instead of the car, but legally in many cases they can repossess the vehicle. Therefore, if you plan to go bankrupt, it is wise to review your lease agreement and discuss it with your leasing company to confirm that they will not take your vehicle if you go bankrupt. You should also consider whether or not keeping the car is a good idea. If you are experiencing financial problems, it may be because your expenses are too high each month. Giving up the car may reduce your monthly expenses, because you are no longer making lease and insurance payments, and paying for gas, repairs, and maintenance. If you can survive without the car, perhaps by taking public transit, giving up the car may be a good option. If you need a car, it may still make sense to surrender the leased car, and purchase an inexpensive used car to reduce your monthly costs. Bankruptcy in Canada What You Need to Know 46
House
We all dream of home ownership. But what happens when the Canadian dream of owning your own home does not work out as well as expected? It costs a lot of money to own a home. You have mortgage payments and property taxes. Your gas and electricity bill will be higher than when you lived in an apartment, because your house is bigger. Of course everyone wants furniture for their bigger house, and that costs money. Unfortunately many Canadians buy a new home and then go to a furniture store that offers a buy now, pay later deal. It sounds like a great idea get the furniture today and dont pay for a whole year! The trouble is, though, its only great until next year comes, and now youre faced with a huge bill for furniture that you cant afford. If when the furniture bill comes in you have also lost your job, or perhaps had your hours cut at work, you now have a problem. For many people the only solution may be a bankruptcy. What happens to your house if you go bankrupt in Canada? While the laws are slightly different in each province, the basic concept is the same. You cant keep a house with lots of equity when you go bankrupt, because it wouldnt be fair to your creditors that you keep that money while your debts are being forgiven. To find out how much equity you have in your house, subtract the mortgage and property taxes owing from the value of your house. If your house has little or no equity, you can usually make an arrangement with the mortgage company to keep paying your mortgage so that you can keep you house. If your house has substantial equity, your trustee will either seize your house and sell it, or make arrangements with you to repay your equity, perhaps by you borrowing from friends or family, or getting a second mortgage to re-purchase the equity from the trustee. For more information, please read our article on secured creditors on page 36, and our Special Feature on What Happens to My Mortgage if I go Bankrupt on page 37.
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RRSP
In case of a bankruptcy, an RRSP is, as an asset, liquidated and the funds are distributed to creditors. There are, however, some exceptions to this rule. First, if your RRSP is locked-in as a result of your previous employment, the trustee cannot seize the RRSP. The most common example of a locked-in RRSP is an employee who works for a company with a pension plan. The employee leaves the company before retirement, so the employees accumulated pension entitlement is converted to a lockedin RRSP. Locked-in here means the employee cannot cash in the RRSP, or take money out of the RRSP, until they retire. If the employee cannot get the money, in most cases a trustee in bankruptcy is also unable to access the money in the RRSP. Confusion is often created by the term locked-in. Many Canadians contribute to an RRSP at their bank, and the funds inside their RRSP are invested in a locked-in investment, such as a guaranteed investment certificate (GIC). The reason it is lockedin for a period of, say, five years, is so that the investor can earn a higher interest rate, not so you dont touch it until you retire. If you own a five year GIC, in most cases you can cash it in early; by doing so you lose the interest you have earned. If you were to file for bankruptcy, the trustee would cash in your five year GIC and distribute the funds to your creditors. In this case, you would lose your RRSP in bankruptcy. The other type of RRSP that is usually exempt in a bankruptcy is an RRSP that has a life insurance element. This is a more complicated area of the law, and a trustees advice should be sought to determine if your RRSP through a life insurance company is exempt in a bankruptcy. Finally, Bill C-55, passed in November 2005, proposed that most RRSPs would be exempt in a bankruptcy. However, as we write this, Bill C-55 has not been proclaimed into law. Again, the advice of a trustee is necessary to determine the current state of the laws in Canada relating to RRSPs and bankruptcy. To determine whether or not your RRSP is locked in, or whether or not you would lose your RRSP in bankruptcy, you should gather all of the paperwork related to the RRSP, and contact a licensed bankruptcy trustee for a free consultation. They will review your documentation and determine whether or not the RRSP is exempt.
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Chapter 6 Bankruptcy Trustees: Friend or Foe?

All bankruptcies in Canada are administered by a licensed trustee in bankruptcy. Most trustees have an accounting background; all trustees have many years of practical experience. To obtain a trustees license you must complete five courses; the average trustee takes four years to complete these five courses. Each course contains over 100 hours of reading and study material, and is followed by a written examination. After completing the required courses candidates attend a one week intensive training session with all other trustee candidates from across Canada. After the completion of this course the candidates must pass a final written examination. Candidates who pass the final written exam are invited to sit the oral boards, which is a fancy name for a two hour oral examination. The examiners include a trustee, a lawyer, and two representatives from the Office of the Superintendent of Bankruptcy. They can ask questions about anything they want, and the candidate must answer the questions fully, without notes or reference material. Obviously anyone who can survive this five year ordeal is well qualified to administer your bankruptcy. Now that you know how to become a trustee, weve put bankruptcy trustees under the microscope so that you can better understand their roles in your bankruptcy and how they could help your financial future. Read the detailed answers to these common questions: What is a bankruptcy trustee? Page 50 Why should I trust a bankruptcy trustee? Page 51 How do I choose a good bankruptcy trustee? Page 52 What questions should I ask my bankruptcy trustee? Page 53 How do I know Im getting good advice from my bankruptcy trustee? Page 54 Does the trustee work for me, or the creditors? Page 55 Who Pays the Trustee? Page 56
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What is a bankruptcy trustee?

The website of the Superintendent of Bankruptcy describes trustees in bankruptcy as follows: A trustee in bankruptcy is a person licensed by the Superintendent of Bankruptcy to administer proposals and bankruptcies and manage assets held in trust. The trustee can give a debtor information and advice about both the proposal and bankruptcy processes and make sure that both the debtor's rights and the creditor's rights are respected. When you file an assignment in bankruptcy, a trustee is automatically appointed, because by law, a person must use a trustee if they go bankrupt. During your bankruptcy, your bankruptcy trustee has one main job: to ensure that everything is done fairly, that the rights of you and your creditors are protected, and that both you and your creditors follow all bankruptcy laws and rules. However, trustees are not just for filing bankruptcy they are also Professional Debt Consultants, which means that you can call on a bankruptcy trustee for financial and debt advice if you feel your situation getting out of control or overwhelming. Bankruptcy trustees are able to: Provide debt counselling Help you make a proposal to your creditors to avoid bankruptcy Make arrangements with your creditors on your behalf Negotiate settlement agreements
If a trustee feels you need the protection of independent legal advice, the trustee will also refer you to an insolvency lawyer. In some cases the trustee will be able to advise you of a solution that will cost you nothing and have you avoid bankruptcy.
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Why should I trust a trustee?

You might wonder how you know you can trust a bankruptcy trustee since you have to deal with one by law if you are considering a consumer proposal or bankruptcy. The truth is that there are many reasons why you can trust your bankruptcy trustee to not only make sure you are picking the right solution, but that your rights will be defended during the entire process, whatever that may be. Reasons to trust your trustee include: 1. Trustees are the most highly trained and educated Debt Consultants in Canada. Almost all trustees have both an accounting designation and a university degree. In addition, all must complete and pass a rigorous three-year bankruptcy and law course and be investigated by the RCMP before being granted a trustee license. And as part of their designation as a bankruptcy trustee, ongoing professional development is mandatory. 2. When dealing with a trustee, you are protected by the federal government who regulates trustees, by the stringent code of ethics to which all trustees have to follow, and by the mechanism in place to mediate any dispute you may have with your trustee. 3. In most cases, it will cost you less to use a trustee than other Debt Consultants since trustees have their fees regulated by the government. 4. A trustee does not work for your creditors or for you they are there as an objective third party, much like a referee in a hockey game. At the beginning of your bankruptcy, your trustee will make sure both you and your creditors understand the rules and your duties that you must complete during your bankruptcy. During your bankruptcy, your trustee will make sure that both you and your creditors follow all the rules. Essentially, you know you can rely on a bankruptcy trustee because they are there to make sure that your rights are being protected, that you complete all your duties in detail, and that your bankruptcy is completed as quickly as possible.
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How do I choose a good bankruptcy trustee?

Choosing a bankruptcy might seem like an overwhelming task, on top of the overwhelming financial trouble you find yourself in, but finding a good bankruptcy trustee is easier than you may think. Start by contacting a licensed trustee in your area (a complete list of trustees can be found on page 138). There is no risk to you, as your first consultation will be free of charge. Use that first meeting to: Ensure that you are comfortable with the people you will be dealing with. Ask questions about the bankruptcy process and rules and the trustee. Learn about the possible solutions for your own financial problems.
If you are uncomfortable with the trustee or dissatisfied with the answers you receive at your first meeting, you have the option to contact another trustee, before you sign any paperwork. Take the time to find someone you are comfortable with because you will be working with your trustee for as long as you are bankrupt.
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What questions should I ask my bankruptcy trustee?

You will likely have a lot of bankruptcy questions to ask your Canada bankruptcy trustee, and you should make sure that your questions are the right ones. What are the most important questions to ask? There are a few questions that you should absolutely ask your bankruptcy trustee, and make sure that you understand the answers and what they mean for you and your bankruptcy. What are the rules? This is the most vital thing to learn about bankruptcy. Be sure to get your trustee to explain the rules, even if they seem clear from your research. What will I be required to do in my bankruptcy? It is crucial that your trustee outlines and that you understand all of the duties that you will have while you are bankrupt. Other important questions Other questions that we hear a lot and that are important to ask are the following: What will I lose if I go bankrupt? What do I get to keep if I go bankrupt? Can my student loans be erased by a bankruptcy? Write down your questions We recommend that you write down as many questions as possible before you go to your first meeting with your trustee. As you think about them, make sure you write them down somewhere so you dont forget when youre face to face with your trustee. Make sure you ask and understand! Your situation is unique and any question that might pertain to your situation specifically is a good question to ask. Consider things like support payments, your mortgage, your car lease or loan, your familys situation, and who you owe money to (i.e. family? friends?). The questions you ask can make a big difference in helping the trustee to fully understand your situation. Do not sign any bankruptcy paperwork until all of your questions have been answered, and you understand how the bankruptcy process will affect you. At the end of the meeting, if you are not satisfied with the answers, it is your right to contact another trustee.
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How do I know Im getting good advice from my bankruptcy trustee?

You might wonder if the advice youre getting from your trustee is good or not. Not having been as rigorously trained in bankruptcy law, as your trustee has, puts you at a disadvantage, but there are few things that you can do in order to ensure the advice that you are getting is the best advice. 1. Do some research before you go to your first meeting with a trustee. The very fact that you are reading this book demonstrates that you are on the right track. Having some general knowledge about bankruptcy will give you a head start before you even step into a trustees office. You can also read about bankruptcy online at www.bankruptcy-canada.ca, which includes a blog section where bankruptcy trustees from across Canada answer questions. The more you are informed, the better you can decide if the advice youre getting is good or bad. 2. Get advice from anyone who has gone bankrupt. Any of your friends, family members, or co-workers may have gone bankrupt. Get them to tell you what they liked and didnt like about the bankruptcy process. Make sure to ask questions like, what you should expect from a good bankruptcy trustee, and what questions you should ask before starting the process. Learning from their experiences can help make your own as comfortable as possible. 3. Write down your questions, before your meeting with a trustee. Many people are slightly uneasy or nervous when they first meet a trustee. They often forget what questions they want to ask. If you write your questions down and bring them with you, you can make sure that all of your questions will be answered.
4.
Think about what the trustee says. Does it make sense? Are you receiving clear answers to your bankruptcy questions? Does the trustee seem interested in your situation, or is he or she more interested in speeding through the meeting? Take as much time as necessary with the trustee in order to fully understand your situation and the solutions being suggested.
Remember that all trustees in bankruptcy in Canada are licensed by the federal government, follow a strict code of ethics, and only receive their license after many years of study and personal experience. You can expect the following things from your trustee: Administer the bankruptcy process fairly and follow all the rules Give you good, unbiased, professional advice
Let your judgment be your guide when deciding which trustee is going to be a good bankruptcy trustee for you. If you are not comfortable with the person you see, or you dont believe you are getting good advice from a trustee, get a second opinion. There are many trustees in most cities in Canada, so you can talk to other ones until you find one that will be a good bankruptcy trustee for you.
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Does the Trustee Work For Me, or the Creditors?

A bankruptcy trustee is a private business person, licensed by the Federal Government of Canada. As a business person, they are working for themselves, like every other person in business. However, a trustee has a responsibility to you, the bankrupt person, the creditors, and the bankruptcy court. Generally it is the person who needs to go bankrupt in Canada who finds the trustee, and "hires" them to administer their bankruptcy. For that reason the trustee wants to give you good advice, so you understand your options, and so that your bankruptcy proceeds without unnecessary problems. In that respect the trustee works for you. During the bankruptcy, the funds collected by the trustee, after paying for the trustee's fees and expenses, are distributed to the creditors. In that respect the trustee is working for the creditors. However, once the bankruptcy officially begins, the trustee is, in effect, appointed by the court, and is therefore working for all parties. Think of it like this: A trustee is like the referee in a hockey game. The referee isn't working for Team A or Team B; he is working to ensure that all teams follow the rules. In essence, that's the role of a trustee: to ensure that all parties are fulfilling their responsibilities and following the rules. Does the trustee have your best interests at heart? Thats a question you will have to answer for yourself. We recommend that you contact a licensed trustee (see page 138 for a complete list) and then meet with them and ask them lots of questions (see some examples of questions on page 53), because only you can decide whether or not you have found the right trustee for you.
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Who Pays the Trustee?

This is another question that creates some confusion. All trustees are licensed by the Federal Government, and as a result of that license they are permitted to draw a fee from the bankruptcy estate. The bankruptcy estate is a fancy phrase that means all the money that the trustee collects. During the bankruptcy the trustee will collect a basic monthly contribution from the bankrupt (to cover the costs of administering the estate). They will also collect your surplus income (see page 26 for more details), and realize on any assets you may own that are not exempt (see page 151 for a list of exempt assets). As a result, at the end of your bankruptcy there will be money in the trustees trust account for your bankruptcy estate. The trustee is permitted to draw a certain percentage of those funds as their fee. In the average personal bankruptcy in Canada the trustee draws between $1,000 and $2,000 in fees. The trustee is also required to pay a filing fee to the Office of the Superintendent of Bankruptcy for every bankruptcy they file. After the trustees fees and expenses have been paid, all remaining funds are distributed to the creditors. If you have non-exempt assets when you go bankrupt (such as equity in a house, or an RRSP), some of the trustees fee will be paid from those assets. In most cases the trustees fee is paid from the basic monthly contribution you make during your bankruptcy. So, who pays the trustees fees? In simple terms, the bankrupt is paying the trustees fees, although the trustee also make take fees from the proceeds from the bankrupts assets, and therefore the creditors are also contributing to the trustees fees, through reduced distributions to the creditors.
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Chapter 7 Answers to the 30 Most Common Questions about Bankruptcy in Canada

On www.bankruptcy-canada.ca , we get a lot of questions from people just like you who are looking for answers about bankruptcy, consumer proposals, and their personal financial situations. We publish the answers to one or two new questions every day, and so now our bankruptcy Canada Blog contains answers to over 2,000 questions, making it the largest free source of personal bankruptcy information in Canada. You can read the blog at this link: hwww.bankruptcy-canada.ca/blog.htm. The following is a list of the top 30 questions asked and answered on the Bankruptcy Canada Blog. Read further in the chapter to find out the answers to these very common questions.
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The Top 30 Personal Bankruptcy Questions and Answers

As compiled by the editors of www.bankrutpcy-canada.ca: 1. What is bankruptcy? Page 59 2. What are the advantages and disadvantages of going bankrupt? Page 60 3. What causes bankruptcy? Page 62 4. Should I feel guilty if I go bankrupt? Page 63 5. Whats the difference between a consumer proposal and a DMP? Page 64 6. If I declare bankruptcy, will I be fired? Page 65 7. Can I save money while Im bankrupt? Page 66 8. How long will I be bankrupt for? Page 67 9. What is the difference between a secured and an unsecured debt? Page 68 10. Why is it important to prepare a personal budget before I go bankrupt? Page 69 11. How much will it cost to go bankrupt? Page 70 12. Can I include my tax debts in bankruptcy? Page 71 13. Does filing for bankruptcy affect my spouse? Page 73 14. What is surplus income? Page 74 15. What happens to my debts when I go bankrupt in Canada? Page 75 16. What will I have to do during my bankruptcy? Page 76 17. What happens to student loans if I go bankrupt? Page 78 18. What power does a collection agency have? Page 80 19. How can I stop collection agency calls and wage garnishments? Page 83 20. What is Chapter 7? What is Chapter 13? Page 85 21. How does bankruptcy in the United States compare to Canada? Page 86 22. Can I file for a U.S. bankruptcy if I live in Canada? Page 87 23. How many people go bankrupt? Page 88 24. What bankruptcy records are kept in Canada? Page 90 25. Who will know about my bankruptcy? Page 91 26. How can I check if someone has been bankrupt? Page 93 27. What is the Bankruptcy and Insolvency Act and how does it affect me? Page 94 28. What are the laws for bankruptcy in Canada? Page 96 29. What happens if I use my credit cards immediately before going bankrupt? Page 99 30. What are my options to avoid bankruptcy? Page 100
Bonus Questions: What Happens After Bankruptcy?

What happens after my bankruptcy? What comes next? How long does a bankruptcy stay on my credit report? Will I ever be able to borrow money again? How do I rebuild my credit after bankruptcy? What about my mortgage? Can I get a renewal after declaring bankruptcy? How do I get a mortgage after a bankruptcy? Page 103 Page 104 Page 105 Page 106 Page 107 Page 108
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1. What is bankruptcy?
Bankruptcy is one of the many debt solutions available in Canada. If youre feeling overwhelmed by bill payments, collectors calls, wage garnishments, and bad credit, bankruptcy might be the right solution for you. What does it mean to file bankruptcy? The concept behind bankruptcy in Canada is this: you assign or surrender everything you own to a trustee in bankruptcy in exchange for the elimination of your debts. Through bankruptcy, a person hopelessly burdened with debt gets a chance to start fresh. And because bankruptcy is a legal process designed to permit an honest but unfortunate debtor to obtain relief from their debts, while treating creditors equally and fairly, the phone calls and wage garnishments will stop, and your worry over your debt will also diminish. What are the criteria for going bankrupt? To go into bankruptcy in Canada, a person must live or do business in Canada, and must be insolvent, meaning that they owe at least $1,000 and are not able to meet their debts as they are due to be paid. What is required of me when I go bankrupt? You will have specific duties to complete during your bankruptcy, including disclosing all necessary information, submitting a monthly budget during your bankruptcy, filing all of your tax returns, and attending two counselling sessions, where you will learn about money management. If you fail to complete any of the above duties, then you will not receive an automatic discharge from your bankruptcy and may have to go to court in order to get your debts forgiven. Is bankruptcy the only answer? No, there are many options available to you if you find yourself in financial trouble. Some of these include: Making a budget and lowering expenses or raising your income Asking for help from your family or friends Getting a debt consolidation loan Attending credit counselling and making a debt management plan Filing a consumer proposal
If you find yourself in financial trouble you should speak to a licensed bankruptcy trustee about your options to see if bankruptcy will work for you, or if there is another solution that will fit your unique situation.
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2. What are the advantages and disadvantages of going bankrupt?

Bankruptcy is a solution to debt and money trouble. It is also the most damaging option for your credit rating. As with every big decision, there are advantages and disadvantages to consider. So, what are the advantages and disadvantages to filing for bankruptcy? Advantages of bankruptcy Bankruptcy is often described in a very negative way, and there are lots of reasons why this is. There are, however, many advantages to declaring bankruptcy and reasons why it may be the best solution for some situations. Advantages of bankruptcy include: Protects from collection action, legal action, and wage garnishees Eliminates a persons unsecured debts Is a relatively quick solution Can be inexpensive compared to other options Gives you peace of mind that your debts are taken care of
Disadvantages of bankruptcy Bankruptcy may help you solve your debt and money problems, but it is your last resort you only choose bankruptcy if there is no other option. The reason for this, is that there are serious consequences and disadvantages to filing for bankruptcy. Disadvantages of bankruptcy include: Is very hard on your credit history, which makes it harder for you borrow money May require you to surrender some of your possessions to your trustee Requires you to keep detailed records of your income and expenses while you are bankrupt Forces you to give up your credit cards
Is bankruptcy for you? Although there are advantages to going bankrupt, you should consider other options first to see if any other solution could fit your situation. You also shouldnt let the disadvantages of bankruptcy deter you from seeking help to deal with your financial trouble. Even the effect on your credit history will be minimal if you declare bankruptcy if youre declaring bankruptcy, your credit is already in trouble. Consider all of your options before you choose which solution is best. The best decision you can make is one that will give you your fresh start. Bankruptcy just may be the right solution for you.
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Bonus Question: Once I file a bankruptcy or a proposal, when will creditors stop calling?
There should be no collection activity after filing a bankruptcy or consumer proposal. Creditors will stop calling once they are notified that you have filed a consumer proposal or bankruptcy in Canada. Within five days of your filing, your trustee will notify your creditors of your bankruptcy or proposal. Most trustees will mail the notice of bankruptcy to your creditors, so if it takes the trustee a week to mail the package, and it takes another week in the mail to reach the creditor, it may be two weeks before they are aware of your bankruptcy. Many trustees are now faxing or even e-mailing bankruptcy notices to creditors, so the times noted above may be reduced. Of course just because the creditor has received the notice from the trustee, it doesn't necessarily mean that they have entered the bankruptcy into their system, so calls may continue until they do. A further complication occurs when a creditor, such as a bank or credit card company, has turned your account over to a collection agency. The bank or credit card company may be notified of your bankruptcy, but if they are slow to notify the collection agency, the calls will continue. That being said, you really have nothing to worry about. Creditors can undertake no collection activity after filing a bankruptcy or a consumer proposal. In fact, you are not allowed to pay an unsecured creditor after you go bankrupt, and knowing this the creditors will stop calling you simply because behaving differently makes no sense. Our advice for when either creditors or collection agents call is to simply advise them that you have filed bankruptcy (or a proposal) and give them the name and phone number of your trustee. Your trustee will then communicate directly with them, and forward on to them the necessary paperwork. For more information regarding collection activity after filing bankruptcy and bankruptcy in general, contact a personal bankruptcy trustee in your area.
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3. What causes bankruptcy?

There are a lot of misconceptions about the causes of bankruptcy. Many people believe that those that file for bankruptcy are completely to blame for their financial situation, including the people that file for bankruptcy. This is not completely true. In fact, in most situations the people who file for bankruptcy are good people that ran into unfortunate circumstances, causing serious financial trouble. Financial mismanagement Almost half of all people who declare bankruptcy cite financial mismanagement, or poor money handling as the source of their financial trouble. But for most of the people that claim they have mismanaged their finances, there are other underlying issues or situations that perpetuate or escalate the trouble. Job loss Job loss, or any reduction in income, is a huge contributing factor for financial crisis. If your current lifestyle is dependent on the income you make, any interruption to that income, including job loss, hour reduction, layoff, or sudden depletion of available overtime, will cause financial upset, and often credit will be used to fill the gap, making a bad situation worse. Separation and divorce About a third of the people who file for bankruptcy are either separated or divorced, or are in the process of becoming so, which is not surprising. The relationship between separation and divorce and bankruptcy is clear: the debt you incur with two incomes is not the debt you can afford to maintain when reduced to one income. When a couple separates, they have to adjust their lifestyles accordingly, but their debt will not change, making it hard to keep up with the payments that used to be so easy to make. And the problem worsens with the use of credit to make up for the shortcomings of a one-income lifestyle, piling on even more debt to an already troublesome situation. Medical problems Although we have universal healthcare in Canada, almost 20% of people who file for bankruptcy state that their financial trouble stems from a medical problem or injuries. Although medical bills arent an issue, missing work or experiencing reduced income for an extended period of time because of medical problems can cause financial trouble. Protect yourself Bankruptcies often happen because of unexpected life events, not solely irresponsibility or financial mismanagement. If you find yourself in a situation that may lead to financial trouble, try to reduce your expenses and change your lifestyle. If thats not possible, talk to a licensed trustee to come up with a plan that can help you get back into control of your financial situation.
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4. Should I feel guilty if I go bankrupt?

The vast majority of people who file for personal bankruptcy in Canada never dreamed they would have to go bankrupt. Most bankrupts had good jobs and were able to borrow, but then something happened. For many people financial problems start with job loss, or a marriage break-up, or even medical problems that prevent them from working. They use credit to pay their bills, but then find themselves so far behind that they have no choice but to go bankrupt. This creates something of a moral dilemma for many people. They know they owe the money, and they want to pay it, and they feel guilty about going bankrupt. They are afraid they are taking the easy way out. Should you feel guilty when you go bankrupt? For a few people, the answer is a definite yes. If you have committed fraud, you should feel guilty. Fraud in this case means you had no intention of ever repaying your credit cards, but you ran them up anyway, and then went bankrupt. Someone who buys a $10,000 stereo system one day, and then goes bankrupt the next day, has obviously committed fraud. They knew they would never repay the credit card, but they used it anyway for a luxury item. However, the vast majority of people who go bankrupt do not commit fraud. They incurred debt for normal living expenses and then, when their circumstances changed, they were not able to repay their debts. Ask yourself this question: When I used my credit cards, or borrowed from the bank, did I plan to repay them? If the answer is yes, you have probably not committed fraud. You are a victim of unfortunate circumstances. But I owe my creditors money that I used. Shouldnt I feel guilty for that? Dont worry about your creditors. Although, no honest person wants banks or lenders to lose money, they have built in security against bankruptcy. Creditors charge high interest rates for a reason they know that some people will not be able to repay their debts, so everyone pays more while they are borrowing. If you have carried a balance on your credit cards for the last few years, you have probably paid more in interest than you originally borrowed. This means if you go bankrupt, the creditor hasnt lost any of their money, just the interest they would have earned. The point is this: Most people dont want to file for personal bankruptcy, and they feel guilty about doing it, but if your debts are overwhelming, bankruptcy may be the option. It is better to go bankrupt than have your wages garnisheed for many years and it is more important to feed your family and pay your rent than to service a wage garnishment. Other options There are, of course, other options besides going bankrupt. Talk to a licensed trustee to review all of the options available to you, including consumer proposals. No matter what you decide, though, remember: you deserve a fresh start. Find out how to get yours today. Bankruptcy in Canada What You Need to Know 63
5. Whats the difference between a consumer proposal and a debt management plan?
Debt management plans and consumer proposals are very similar: They both involve you making payments to your creditors over a period of time. They both combine your unsecured creditors so you only make one payment each month, instead of multiple, overwhelming payments. They both have an equal impact on your credit report.
Despite these similarities, there are some differences between the two solutions. The first major difference is that a debt management plan is administered by a credit counsellor while a consumer proposal is handled by an Administrator, typically a licensed trustee in bankruptcy. Second, in a debt management plan you are required to repay all of your debts in full and all future interest is forgiven. In a consumer proposal you may not necessarily repay your debts in full, but instead you will make payments based on what you can afford. Third, unlike a debt management plan, a consumer proposal is a legal process, which means that wage garnishments and other collection actions must stop. In a debt management plan, because it is not legally binding, garnishments only stop if the creditor agrees to stop them voluntarily. Fourth, it is much more difficult to include tax debt into a debt management plan, than it is to include it in a consumer proposal, because the Canada Revenue Agencys rules are so strict. To decide if either of these options are for you, contact a licensed trustee who can help ou figure out your best course of action for your unique situation.
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6. If I declare bankruptcy, will I be fired?

A lot of people worry about the effects of filing bankruptcy. They ask questions about their credit report, their house, their car, and their chances at getting another loan. Another of their biggest concerns is about their job could they lose their job if they go bankrupt? The short answer is no. The average person cant be fired from their job because they have declared bankruptcy. Bankruptcy deals with your unsecured debts, not with your employment. The longer answer, however, is more complicated. Some professions do have rules stating that you cant be employed in certain jobs if you are bankrupt. Usually these professions have something to do with trust and money. For example, if you are a lawyer who is self-employed and handles their own trust accounts, you may not administer your own trust accounts while you are bankrupt. Other jobs have similar rules. Certain accounting jobs will not allow bankrupt people to perform them, and in some places, like casinos, you must disclose immediately if you have gone bankrupt. There are, of course, too many professions and jobs to list all of the exceptions when it comes to bankruptcy. If you are considering bankruptcy, you should investigate whether or not your job will be affected. If you are in school, you should also check to see if the job you are training for may be affected. If your current job or the job you want to have has restrictions due to bankruptcy, dont panic. There are other solutions available for you. Contact a licensed bankruptcy trustee to go over all of your options so you can make the best and most informed decision about your financial and professional future.
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7. Can I save money while Im bankrupt?

When someone is filing for bankruptcy, they often wonder about what will happen to their possessions and especially the money that they make while they are bankrupt. Will it all be taken? If so, what about saving for emergencies? Or having extra cash on hand in case something happens, like the car breaks down? Bankruptcy is not designed to take away all of your money and leave you needing to borrow money to survive. After experiencing financial hardship because of debt, the last thing you want and the government wants is to have you relying on credit again. Bankruptcy is a process whereby you assign or surrender everything you own to a trustee in bankruptcy in exchange for your debts being discharged, or forgiven, which does include your income. But remember, while you are bankrupt, all of your money will not be taken away and any money that you are able to save will not be touched. The amount of money that bankrupts have to pay is based on their family income and size. Your bankruptcy trustee will be able to discuss this amount with you and the responsibilities that you will have during this time. If after you have paid this monthly fee and your living expenses you have money left over and you want to save it, then that is fine. Being bankrupt does not stop you from earning a living and saving money.
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8. How long will I be bankrupt for?

How long does a bankruptcy last for? Usually a person is bankrupt for 9 months from the time that theyve filed for bankruptcy, but the amount of time that you are bankrupt depends on certain factors. These include whether or not you have been bankrupt before, and whether or not you completed the conditions of your bankruptcy. When you declare bankruptcy you are required to do certain things. You have to submit a monthly report of your income and what you spend it on, attend counselling sessions to talk about money management, and you have to pay money every month to your creditors, depending on the number of people in your family and your family income. If this bankruptcy is not your first, or you fail to complete any of the conditions of your bankruptcy or your bankruptcy is opposed, you will not automatically be discharged, or released from bankruptcy after 9 months. Instead, your trustee will make an application to court to set up a discharge hearing date, where you will appear before a judge who will decide when you will no longer be bankrupt. Once you are not bankrupt, you wont have to make any more payments, attend any more counselling sessions, or send in any more monthly reports. And your debts will be forgiven, meaning your fresh start can finally begin.
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9. What is the difference between a secured and an unsecured debt?

All debt falls into one of two categories: secured and unsecured debt. Secured debt A secured debt is a debt secured by an asset. For example, a mortgage on your home is a secured debt, because the debt is secured by a charge or lien or encumbrance on your home. In simple terms, if you sell the house, the mortgage gets paid before you get any money. Another example of a secured debt would be a car loan. When you finance a car through a car dealer, they put a lien on your car. If you sell the car, the lien must be paid. Unsecured debt All other debts are unsecured debts. An example of an unsecured debt would be a bank or department store credit card. There are no liens registered on each item that you purchase with your credit card. This confuses many people, because they assume that if they go bankrupt, the credit card company can take back whatever they purchased with the credit card. Typically that is not the case. The only situation where this is applicable would be if you made a large purchase using your credit card the day before you went bankrupt. At this point, the credit card company would assume youve committed fraud by buying something that you had no intention of purchasing, and then they would demand payment in full for the purchase. Even in this instance, though, the debt is still considered unsecured. Which debts are included in a bankruptcy? Only unsecured debts are included and discharged in a bankruptcy. This means you can include debts like tax debts, credit card debts, bank loans, and payday loans in your bankruptcy. Secured debts are not automatically released in a bankruptcy if you default on the payments, they will just take the item that is associated with the loan away from you. For example, if you go bankrupt, debts like your car loan and your mortgage do not go away. If youre confused as to which debts can be included in your bankruptcy, talk to a licensed trustee. They can help you sort out your situation so that you have a clear picture of how to handle each debt.
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10. Why is it important to prepare a personal budget before I go bankrupt?

As part of your first consultation with your trustee, you will be asked to provide a personal budget, which is a list of what you earn in a month and what you spend your money on. It will include your pay cheque and other income that you receive, including child support, pensions, unemployment insurance, and child tax credits. You would also include common expenses, such as rent or mortgage payments, groceries and food, hydro and gas for your home, and car expenses such as car payments, gas, insurance, and repairs and maintenance. Having a budget is important to have in your meeting with your trustee for the following reasons: 1. You need to know where your money goes to decide if bankruptcy is even necessary. You are considering personal bankruptcy because of your debts. Perhaps by making a budget and determining where you can cut expenses, you may be able to repay your debts on your own, without needing to go bankrupt. 2. Your budget may show you that you can afford a consumer proposal, and therefore a bankruptcy may not be necessary. In a typical consumer proposal you make one payment each month that is distributed to your creditors. Your budget will show you whether or not you can afford a consumer proposal. 3. If you do decide on bankruptcy, you will be required to make a payment to your creditors based on your surplus income. The higher your earnings, the more you are required to pay. Your budget will help your trustee determine the cost of your bankruptcy. 4. Regardless of the solution you pick, whether it is paying off your debt on your own, a consumer proposal, or bankruptcy, you will need a budget when your debt is gone to help you manage your money to avoid financial problems in the future. A personal budget is a necessary step in deciding how you will handle your debt trouble. The act alone of creating a budget will give you a clearer picture of your financial health and will help your trustee advise you on the best solution for your life and situation.
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11. How much will it cost to go bankrupt?

The answer depends on how much you own and earn, and your family size. What do you own? You will lose all your money and possessions, except for the assets that are exempt in your province. For a list of exempt assets, read Chapter 5: What Assets Do I Get to Keep When I Go Bankrupt? How much do you earn? How big is your family? You will lose part of any earnings which are considered surplus income that is, anything over a limit set by law. The limit depends on your earnings level and your family size, according to a complex formula. When you see your trustee, bring your latest pay stubs so they can estimate how much you must pay based on surplus income. Will I have to pay any other money? Bankruptcy involves administrative costs, including court fees, mailing costs, and government-set fees for filing. You will probably be required by your trustee to pay these costs. Are there any other costs? Taxes work differently in a bankruptcy your trustee will give you any details that apply to you. For example, any GST credits or tax refunds that would normally come to you while bankrupt will be lost to your bankrupt estate. You will also lose any windfalls you receive or become entitled to while bankrupt, which include amounts of money you get by luck, such as lottery winnings, or situations where you are receive inheritance.
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12. Can I include my tax debts in bankruptcy?

Bankruptcy discharges you from all of your unsecured debts, including your tax debts, although there are special rules for discharging tax debt. If you have overwhelming tax debt, make sure you speak to a licensed trustee. How are tax debts different from other debts? Nobody likes to pay taxes and therefore Canada Revenue Agency (CRA) has strong powers to make sure they collect what people owe. They are legally allowed to do the following: Charge penalties and interest on all overdue taxes Withhold child tax credits and GST credits until your debt is paid Take money from your bank account or your pay, through a garnishee Whats more, CRA will not willingly accept less than full payment. They have millions of taxpayers and cant afford to set a precedent that would force them to accept less from everyone else. Tax debt must be treated seriously and dealt with promptly. If you put it off, itll get bigger, and CRA may take steps that really disrupt your life. What can I do to deal with tax debt? There are a few simple steps you can do before you meet with a trustee to deal with tax debt. Find out how much you owe Verify exactly how much you owe to the government, so you can figure out the best solution for your situation. Can you afford to pay it off? Do you need relief from the debt? Is it too overwhelming to deal with on your own? These are questions you should ask yourself. Submit all of your outstanding tax returns Make sure your taxes are all filed and up-to-date. CRA will insist on this before they deal with you and by doing it before they ask shows that you are acting in good faith. Review all your returns for the past several years Take a look at returns filed for the past several years to make sure you are taking full advantage of all the possibilities to reduce how much you owe the government. Professional help from an accountant or tax preparation service could be a good investment, unless your situation is really simple and you can handle the review on your own. Apply to the Fair Practices Commission The CRA has a Fair Practices Commission that was created to help individuals who cant handle their tax debt load, and need help because of a serious event beyond their control. This commission can have your interest and penalties cancelled. Causes that CRA will consider include natural disasters, serious illness, CRA actions, and loss of employment. Bankruptcy in Canada What You Need to Know 71
Consider possible solutions Talk to a licensed trustee about your situation to learn about the choices you have for income tax debts. You will want to find the least drastic solution which will work for your unique situation. Professional advice is best in this case because your trustee can help you make the right decision and not overlook any possibility for relief. Work on preventing tax debt in the future Tax debt can be overwhelming and stressful the government has more power than a regular creditor and can take action without warning on outstanding taxes. Make sure you protect yourself. If you owe taxes because you cashed the last of your RRSPs to pay your debts, your problem probably wont happen again your RRSPs are now gone. Try to manage your money more carefully or cut back on your expenses to ensure you dont have to rely on RRSPs in the future. If you are self-employed and dont take taxes off of your pay each pay cheque, you have a problem that could easily repeat itself. Your tax debts will be discharged in a bankruptcy, but next year you will owe money once again. To avoid tax debt in the future, estimate how much money you will owe for taxes, and send the CRA one-twelfth of that amount monthly. At the end of the year, you wont have a huge tax debt to pay and you can spread out the payments over the course of the year instead of being stuck with a huge lump sum to pay. Get professional guidance If you have serious tax debt, talk to a trustee about your situation. They are highly-trained individuals who can help you with your tricky situation and offer you a solution that will fit your needs.
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13. Does filing for bankruptcy affect my spouse?

Filing for bankruptcy in Canada does not directly affect your spouse. Your debts are your debts and only you are responsible for them. If you as an individual go bankrupt, only your debts are discharged and your spouse is not responsible for your debts. Many people believe that because you are married, your debt must be connected as well. This is not true. And even though collection agents often threaten to take money from your spouse if you dont pay off your debt, this is not legally possible: collection agencies can only go after you for your debts. The only exception to this is if your spouse has co-signed or guaranteed your debt. For example, if you took out a loan and your spouse co-signed for it, it is also legally their loan. If you both have a credit card on the same account, the credit card debt legally belongs to both of you. Remember, though, your spouse is only liable for the debt because they have signed for the debt, not because they are your spouse. This means that any debt where someone has co-signed or shared the account is a shared debt, which you and the other party are responsible for. If all of your debts are in your name, your bankruptcy will not affect your spouse's credit rating. However, the bankrupt spouse may not qualify as a co-signer in the future due to the bankruptcy, so one spouse's bankruptcy may have an indirect impact on the other spouse. If you are considering bankruptcy, contact a licensed trustee to discuss your debt situation to determine if your bankruptcy will affect your spouse in any way and to what extent.
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14. What is surplus income?

Under the Bankruptcy & Insolvency Act, the federal legislation that governs the bankruptcy process in Canada, you are required to make a surplus income payment, a contribution to your estate, each month based on your income. The rule is simple the more you earn, the more you are required to contribute. Basically, the Office of the Superintendent of Bankruptcy sets limits for what a family is allowed to earn. The larger your family, the more you are allowed to keep. As the cost of living rises each year, the thresholds on the amount of income you are allowed to keep are also increased each year. As an example, a single person in 2006 is allowed to have take-home pay each month (income after taxes) of $1,755. For every dollar their income exceeds this limit in a month they are required to make a contribution of half of the amount they are over in form of a surplus income payment. If that person earned $1,955 in a month, they are $200 over the limit, so they would be required to contribute an extra $100 to their bankruptcy estate for the current month. (If you are more than $1,000 over the limit, the penalty increases to 75% of the amount you are over). Each month during the bankruptcy process the bankrupt submits copies of their pay stubs and proof of other income to the trustee, and the trustee calculates their surplus income, and the bankrupt contributes the required portion. For a more detailed explanation on surplus income, see page 26. To read about more complicated surplus income payments, read Appendix C starting on page 120. And remember that calculating surplus income can get tricky, so talk to a licensed bankruptcy trustee to find out exactly how much it will cost you to go bankrupt.
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15. What happens to my debts when I go bankrupt in Canada?

The concept behind a personal bankruptcy in Canada is relatively simple. When you file for bankruptcy, you surrender your assets in return for the discharge of your debts. Just as there are some bankruptcy exemptions from losing all your assets, there are some exceptions to the discharge of all your debts. Unsecured debts In general, bankruptcy will discharge all of your unsecured debts, including the following: Credit card balances Lines of credit (if unsecured) Personal loans (if unsecured) Arrears of income taxes and municipal house taxes Unpaid utility bills Retail store accounts Insurance premiums past due Medical bills Payday loans
Although bankruptcy is designed to take care of all of your unsecured debts, the law makes exceptions for these debts that will not be discharged: Student loans less than 10 years old Child and spousal support Fines and most court ordered restitution payments Court awarded damages for sexual assault or intentionally inflicting bodily harm Debts that arose as a result of fraud or theft Certain government overpayments
Overpayments are a complicated area, so if you have received overpayments from the government, you should discuss this with your Canada bankruptcy trustee. Secured debts Generally, secured debts are not discharged, but your assets attached to those debts, like your house or your car, may be affected by your bankruptcy. Talk to a licensed trustee for more information.
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16. What will I have to do during my bankruptcy?

There are a number of duties you must complete while you are bankrupt. Give up your credit cards and non-exempt assets As soon as your bankruptcy begins, you must surrender your credit cards and any nonexempt assets to your bankruptcy trustee. Attend a creditors meeting You must attend the meeting of creditors, if one is held. At this meeting, your creditors will have the opportunity to ask questions about your bankruptcy. However, in most personal bankruptcies, no creditors meeting is held. A meeting of creditors is held if requested by the Superintendent of Bankruptcy or by creditors with an aggregate of at least 25% of the proven claims. These meetings are usually held at the office of the trustee. File all of your income tax returns You must give the trustee your T-4 slips and any other information necessary to complete any outstanding tax returns to the date of bankruptcy. When you file for bankruptcy, the day you file is treated like the end of your tax year so that in the year you file bankruptcy you actually have to file two different tax returns. Any income tax debt will be included in your bankruptcy, although you may be required to pay it separately. Any refund to which you are entitled will be an asset that will come to your trustee for your creditors. Report your financial activity every month Each month, you must report your household income and living expenses and any change in your family situation to your trustee, along with copies of your pay stubs. Your trustee will give you appropriate forms to fill out in order to provide them with this information. From your income and expenses, your trustee determines if your net income was higher than the limit allowed by law for you to live. If you have any surplus income, you will be required to make a payment each month to the trustee. In a bankruptcy the more you earn, the more you are required to contribute to your estate for the benefit of your creditors. For most people it is the monthly income reporting that requires the most homework. However, the monthly income and expense reporting throughout bankruptcy is usually very helpful for most people, as they now keep track of the money coming into the household and how they spend it and when. Go to credit counselling To be eligible for an automatic nine month discharge, you must take two credit counselling sessions. The counselling can be one-on-one, with yourself and your trustee, or if you prefer, it can be in a group consisting of other bankrupts and your trustee. The first counselling session must be held between 10 and 60 days following the start of bankruptcy; the second counselling session must be held no later than 210 days following the date of bankruptcy. The cost for each individual counselling session is $85, plus GST. Bankruptcy in Canada What You Need to Know 76
This credit counselling is designed to teach you budgeting and good money management so that you are less likely to have financial problems in the future. Each session is about an hour long and discusses budgeting and the causes of your financial difficulties. Experience shows that the credit counselling reinforces your income and expense reporting and gives you better control of your finances. Keep your trustee informed and be co-operative You must keep the trustee informed as to where you are living, respond to the trustee's requests, assist them as required, and provide whatever information is requested. Keep your potential creditors informed If you borrow more than $500 while you are bankrupt, you must tell the lender that you are bankrupt. Remove and keep yourself from a directorship You may not be a director of a company during your bankruptcy. Complete all of your duties in a timely fashion It is essential you complete these duties in a timely manner, so that your bankruptcy can be completed as soon as possible. For example, if you miss a payment to your trustee, your discharge date will be postponed. The earlier you obtain your discharge, the earlier you will be able to rebuild your credit and live life normally again.
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17. What happens to student loans if I go bankrupt?

If the burden of your student loan debts is causing you to consider bankruptcy, it is essential to learn about the special laws that apply to discharge of student loans, and how they affect your options. Your predicament You may be one of the large and increasing number of Canadians who felt forced to incur large student loan debts just to get through university or college. Why did this happen? For decades, education costs have risen much faster than the inflation rate. Enormous debts forced governments to cut costs, and one casualty was grants for higher education. Universities and colleges were forced to raise fees, and students made up the difference by taking out loans. Consequently, many people suffer from some of the following problems: Ability to get credit is severely affected Cant afford to move out of parents home Cant get a car loan Cant make a living and get on with life Collection agency calling frequently Pay being threatened by or under a garnishee
If you are experiencing one or more of these problems because of your student loans, you are not alone. There are solutions for people with overwhelming student loans, so dont lose hope. Your options If you have student loan debt, the law is very clear: you can only have student loan debts discharged in a bankruptcy if they are at least 10 years old; any loans that have been there for a shorter amount of time will not be discharged. But dont be disheartened there are other options. Make different arrangements You could try calling your student loan holder and ask them if you can change your payment schedule so that it is easier to handle with your income and other commitments. Contact a credit counsellor You could contact a credit counselling service for help with the negotiations with your creditors for your student loans. A credit counsellor can help you make a deal that you may otherwise have trouble making on your own. File a consumer proposal If your student loans are not 10 years old, but are over five years old, then you have a good chance at filing a consumer proposal, which would let you make a deal with all of
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your creditors, including your student loan holders, so that youre only responsible for a portion of your debt, paid out in one manageable payment a month. Contact a bankruptcy trustee Even if your student loans are under 10 years old, talking to a professional will help you figure out all of your options. You could file for bankruptcy even just to have the money to handle paying back your student loans. A licensed trustee can walk you through your situation and offer you solutions to your debt problem. Hope in future laws And dont lose hope completely over your student loan debts various moves have been made in Parliament to reduce the 10-year waiting period, but it is not known when a reduction will actually happen. In November 2003, the Senate Committee on Banking, Trade and Commerce recommended that the 10-year period be reduced to five years. You can download a copy of the complete report here: http://www.parl.gc.ca/37/2/parlbus/commbus/senate/come/bank-e/rep-e/bankruptcy-e.pdf . On April 13, 2005, a private members bill to amend the Bankruptcy & Insolvency Act to reduce the discharge period for student loans from 10 years to two years was defeated in the House of Commons by a vote of 168 to 105. In November 2005, Bill C-55 (http://www.bankruptcy-canada.ca/bankruptcy/bankruptcyreform.htm ) was passed, including these provisions for student loans: Reduction of the above waiting period from 10 years to seven years Possibility for a bankrupt with student loans over five years old to apply for the court to discharge the debt if the bankrupt has acted in good faith regarding these loans and will still be unable to repay them
However, immediately afterward a new government was elected and the bill has not been proclaimed into law because this change is not a priority of the current minority government. On December 14, 2007, Bill C-12 was passed, which contains further amendments to the Bankruptcy & Insolvency Act, was passed. However, as of today this legislation has not yet been proclaimed into force. Until the new law is put into practice, there is still hope for your student loan debts. Contact a licensed trustee to review your situation and figure out a solution that fits your trouble. To find out whether or not the laws have changed, consult http://www.student-loanbankruptcy.ca .
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18. What power does a collection agency have?

Collection agencies call you, threaten you, harass you and your family, and demand payment immediately. And their agents are paid commission or receive a performance on the amount of debts they can collect. But how much power does a collection agent and their agency really have? Can they take me to court? The answer is yes - it is possible for a collection agency to start a court action against you. Typically, the collection agent representing your creditor will first call you and send you numerous threatening letters, followed by the threat of a court action. They will only take you to court, however, if they believe you have the ability to pay, and they have been unsuccessful in collecting from you. Going to court is their last resort in this instance. What happens in court? In case the collection agency does take you to court, the purpose of the court hearing will be to determine whether or not you owe the creditor. In most cases the fact that you do owe the money is not in dispute you know you owe the money, and the creditor has proof that you owe it, so in most cases the court hearing is a very quick event. The judge signs a piece of paper, called a judgment, stating that you owe the money. The next possible step for the creditor is to apply to the court to enforce the judgment, which generally means they apply to seize your bank account or other assets, or garnishee your wages; but, in most cases there is no point in a creditor freezing your bank account, since once your bank account is frozen you will never deposit any money into that account again. In addition, most people dont have any assets that can be confiscated. Therefore, the creditor is most likely to attempt to garnishee your wages. If they know where you work, garnisheeing is possible. If they dont know where you work, they cannot send a garnishment notice to your employer until they determine where you work. Can they send me to jail? Many people worry that if they dont pay their debts they will go to jail, but that is not the case. Jail terms are the result of a criminal trial. If your creditors and their collection agency take you to court, it is in a civil trial, leading to a judgement or a garnishment order, but not jail. To go to jail you must be convicted of a criminal offence, and you must be charged with a crime by the police. If you rob a bank, you will go to jail. If you commit fraud and are convicted, you can go to jail. Not paying your credit card is not a criminal offence. Can they take my furniture? In most cases, the answer is no. Creditors dont usually seize your property for several obvious reasons: Bankruptcy in Canada What You Need to Know 80
It would cost too much money. In order to repossess your household items, like furniture, they would need to hire people to do the repossessing. Your items are not worth the hassle and cost a $300 couch purchased ten years ago is not worth more than $25. The cost to repossess your couch would be way more than $25, considering they would need to get a court order with the help from a lawyer, and hire a truck and people to repossess your furniture. By law, basic household goods are exempt from seizure. In most provinces basic household goods are exempt from seizure, meaning they cannot be taken. For detailed information on what is exempt in your province, contact a bankruptcy trustee. They need a court order or you need to agree to it. If they were really intent on seizing your property, they would need a court order stating that they are allowed to take your property. This usually doesnt happen because the hassle and cost of getting a court order is often not worth the items that the collection agency would end up seizing. If they dont have a court order, they need your permission to place a lien on your goods that you signed at the time of borrowing money from the lender. If you purchased a table using your credit card, the only document you probably signed was the credit card slip, which means you didnt sign a lien document. Basically, the creditor or collection agency doesnt want to take your furniture, and probably doesnt have the legal authority to seize your goods; they will, however, threaten to do so if you havent paid your bills. Take their threats as an indication that your situation is probably out of control and you need help, instead of actual actions that they will take. Handling their threatening phone calls and letters If you havent paid the money that you owe, collection agencies will work very hard to get you to pay. This includes threatening phone calls and letters, which will progressively get more serious. Dealing with their phone calls and letters is often stressful for you and other members of your family. Dont wait until legal action is being threatened and your wage is being garnisheed. Talk to a licensed trustee today to get your life back on track and stop the threats.
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Special Feature: Dealing with collection Agents: The process

If you have not paid what you owe, collection agencies will do what they can to induce you to pay. The normal process when dealing with collection agents is as follows: First, if you are behind on payments, you will receive a letter from the collection agent requesting payment. The letter is usually worded in a marginally friendly manner, such as to maintain your good credit rating, please forward payment as soon as possible. If you dont pay, you will receive a more threatening letter, such as your account is now in arrears; immediate payment is required to prevent further collection action. If you ignore that letter, the next letter will say something like we will be commencing legal action in ten days if you have not made payment arrangements. Please contact us immediately to avoid legal action. About ten days later you may receive a letter that says this is your final warning. In five days we will be commencing legal action. It is not unusual to get another final warning letter that says unless we hear from you within 24 hours your account will be forwarded to our legal department for further action; you will be responsible for all court costs. It is usually one of these final letters that causes someone to contact a bankruptcy trustee for advice. Often during this process you will also be receiving numerous phone calls from collectors, also threatening legal action. If you still do not pay, the collector must then decide whether or not legal action is worth it for them. If they believe they have a chance of collecting, collection agents can initiate legal action. They are required to serve you with notice of the legal action (although if they dont have your current address, you may not receive notice). In most parts of Canada at least 21 days notice is required. On the appointed day, a court hearing is held. In most cases, if you owe the money, the judge will determine that you owe the money, and will sign a Judgment - a legal document saying you owe the money. With a judgment it is now possible for the creditor to commence garnishment proceedings, and begin taking a portion of your paycheque. Once a garnishment is started, it will only stop if you get a court order to stop it (which is unlikely, since the court started it in the first place), or if you pay it in full, or if you file a consumer proposal or declare bankruptcy. If you believe a creditor will be taking you to court, or has already obtained a judgment, we strongly recommend that you contact a trustee for a free consultation. He/she will review your options and advise you how to deal with collection agents.
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19. How can I stop collection agency calls and wage garnishments?
Collection agents are calling, your wage is getting garnished, and you are overwhelmed by too much debt and unpaid bills. How do you get the calls to stop and get control over your own wage again? Stopping the calls If a collection agency is calling its because you owe money and you havent paid it. Dealing with collection agencies can be frustrating and stressful, but there are ways to stop the calls. Change your number Collection agents calling? Change your number. Its a simple solution and the agents arent calling anymore, but it doesnt fix the underlying problem you still owe money. Work out a deal Collection agencies are usually accepting of a deal of sorts for the money you owe. Come up with arrangements to take care of the debt over a set time with the collection agent. The calls will stop and youll be paying back your debt. Get a debt consolidation loan If you have lots of debt with a bunch of different creditors, working out a deal with one collection agent isnt going to fix your overall problem. A debt consolidation loan will, though. Essentially, the bank will loan you enough money to pay off all of your debt, reducing your payments to one a month, and, in most cases, youll be paying a lower interest rate. Arrange a debt management plan A debt management plan is a deal you negotiate with your creditors to pay back all of your debt over a set amount of time. The payments will be manageable and interest will stop accumulating. You need to see a credit counsellor for a debt management plan. File a consumer proposal A licensed bankruptcy trustee helps you strike a deal with your creditors which will be legally binding and will only require you to pay back a portion of your debt. File for bankruptcy Of course, bankruptcy is an option. Essentially, your debts get discharged at the end of your bankruptcy period after you have completed the necessary steps. You must meet with a bankruptcy trustee in order to file for bankruptcy. Stopping the wage garnishment A wage garnishment is legal action against you you havent paid the money you owe, so your creditor went to court to get approval to garnish your wages. There are three ways to stop a wage garnishment. Pay off your debt 83
This solution is simple and straightforward if you pay your debt, they cant take away your money anymore because you dont owe them any. The trouble is, youre probably in a situation where youre not able to pay off the whole debt, which is how you got into this trouble in the first place. File a consumer proposal A consumer proposal is a legally binding settlement between you and your creditors. Once you and your creditors agree on the agreement, it becomes a contract, which neither party can get out of. This will effectively halt any and all legal action against you because it in turn is a legal action. File for bankruptcy Bankruptcy is the second and final legal action you can take against your creditors when they have gone to court to get the right to garnish your wages. Your bankruptcy will stop the garnishment and will discharge you of all your debts. Take legal action The only way to stop a wage garnishment, if you cant pay your debts off, is to take legal action. A wage garnishment either came from the government or a court of law either way it is a legally binding process. In order to combat it you in turn must take legal action yourself. Contact a licensed bankruptcy trustee to help you take control of your money again and get a fresh financial start.
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20. What is Chapter 7? What is Chapter 13?

Chapter 7 and Chapter 13 are sections of the U.S. Bankruptcy Code, the federal law governing bankruptcy in America. A Chapter 7 bankruptcy is the American solution to personal debt problems that is most similar to a Canadian bankruptcy. A Chapter 13 bankruptcy is the American solution to personal debt problems that is most similar to a Canadian consumer proposal. Both of the American types of bankruptcy have these features:

The debtor is discharged from unsecured debts. As soon as the bankruptcy is filed, there is a stay of all collection efforts by creditors. A meeting of creditors is held soon after the filing, which the debtor must attend to answer questions about his or her case.
Chapter 7 and Chapter 13 bankruptcies have these differences:

Chapter 7 is the solution of last resort, in which the individual cannot repay a significant portion of his debts. Chapter 13 is the solution in which the individual intends to repay all or a large part of his unsecured debts, but needs an extended period (three to five years) to do so. With Chapter 7, the debtor loses all assets beyond those considered necessary for basic living, which are called bankruptcy exemptions. Under Chapter 13, the debtor keeps all assets.
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21. How does bankruptcy in the U.S. compare to Canada?

American personal bankruptcy differs from Canadian bankruptcy and consumer proposals in these ways:
There are personal income regulations which determine whether a person is legally permitted to file for Chapter 7 bankruptcy. In Canada, anyone can file for personal bankruptcy; however, if your income is above the surplus income guidelines, you are required to make additional payments while bankrupt. See page 26 for an explanation of surplus income. Any American bankruptcy requires a petition to a bankruptcy court, where the judge examines such issues as whether the individual qualifies for Chapter 7, or has a viable repayment plan for Chapter 13. In Canada, not all bankruptcies and consumer proposals require court hearings. Any American bankruptcy requires a meeting of creditors, whereas this is often not necessary in a Canadian bankruptcy or consumer proposal. In an American bankruptcy, the professional that an individual uses is a bankruptcy attorney, or a personal advocate, whereas in Canada, an individual uses a bankruptcy trustee, who is usually a professional accountant and whose role is to ensure fairness between the debtor and creditors.
American solutions are similar to those in Canada in these ways:
Both Canadian and American consumers have the same common causes for financial difficulties. Both Canadians and Americans can use the debt solutions of debt consolidation and credit counselling with debt management. Bankruptcy in both countries is governed by federal law, with some regional or local variations in detail. Canadian bankruptcy exemptions differ from province to province, while American bankruptcy exemptions and the income criteria for Chapter 7 have state and local differences.
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22. Can I have a U.S. bankruptcy if I live in Canada?

Any individual who lives, owns a business, or has property in the U.S. is eligible for Chapter 7 or Chapter 13 bankruptcy. However, having assets and debts on both sides of the border is a special case. Anyone facing possible bankruptcy should seek professional help in the country where their situation is desperate. If they have major assets in a different country, their bankruptcy attorney or trustee is likely to hold up the bankruptcy until those assets are liquidated. To learn more about bankruptcy in America, go to Bankruptcy America at www.bankruptcy-america.com. If you are suffering in Canada from debts which could lead to bankruptcy, contact a Canadian bankruptcy trustee in your area (see list of trustees starting on page 138).
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23. How many people go bankrupt?

The total number of Canadians who either filed for personal bankruptcy or filed a consumer proposal passed 100,000 for the first time in 2005, then fell slightly in 2006 the first decline since 2002. In 2007, a total of 99,282 Canadians filed bankruptcy or filed a consumer proposal, an increase of 2.5% over 2006 levels. Consumer proposals rose to one for every four bankruptcies, according to bankruptcy statistics from the federal Office of the Superintendent of Bankruptcy. The long-term trend in Canadian personal bankruptcy statistics is upward. Bankruptcies are gradually increasing, mainly because of the high levels of debt many Canadians now carry. Debt rising faster than wealth Statistics show Canadian consumers piling up debt much faster than the growth in the economy. By September-October 2006, as compared to 2005:

Credit cards with balances were up 7.3% to 26.4 million. The average VISA or MasterCard balance was up 3.8% to $2,489. Personal lines of credit increased by 16.8% to one in four families, with a median balance of $9,000. Average total debt per consumer rose by 9.8%, after rising 9.7% in 2005.
As a result, Canadians are much more vulnerable to personal financial trouble. In fact, consumer debt reached 122% of annual income, meaning that for every $4 the average Canadian earns in a year, they now have $5 in debt, and the amount of debt relative to personal assets rose 3.5%, in spite of fast-rising housing values. In 2006, the number of people whose debts were over double their assets rose 6.9%, while the number of people whose debt payments exceeded 40% of their income rose almost a quarter, to 3.2% of debtors. Then why arent bankruptcies rising even faster? A booming economy has helped many Canadians to keep their debts from overwhelming them. In September-October 2006, as compared to 2005: Unemployment fell to a 30-year low of 6.3%. Employment grew 1.9%, adding 315,000 jobs, most of which were full-time. Wages rose 2.6% (median), because of the tight job market. Interest rates remained relatively low and stable, although they were gradually rising.
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Why should I care? All those statistics can be baffling and seem meaningless. What they really mean is this: If you think you are okay, because people like you seem okay, your confidence may be falsely based. In fact, a large number of Canadians are living on the edge when it comes to their debt management. For them, any drop in income could prevent them from making their debt payments, leading to serious financial trouble or even bankruptcy. And because most mortgage renewals will be at higher interest rates, causing even higher monthly payments, on top of the higher debt loads that Canadian families are carrying, the average Canadian cannot survive even a temporary job loss without experiencing some financial hardship or serious trouble. Basically, Canadians have too much debt and are living at the extreme end of their standard of living. If anything were to happen, many Canadians will not survive financially. What should I do? Act now to make sure your debts are under control, while economic times are still good. Steps you can take to keep your debts under control include:
Add up your monthly income and expenses, to know where you stand. This is the beginning of budgeting. Find opportunities to increase your income and/or reduce your expenses. This will help you to pay down your debts and create a savings reserve. Check for signs that you are in financial danger. If you are worried about your situation, take our free bankruptcy evaluation at http://www.bankruptcy-canada.ca/emailUs.htm . To ask a personal financial question, or to have a free consultation, contact a bankruptcy trustee near you; a list of trustees is available starting on page 138.

Personal bankruptcy statistics can be dry, or scary, but you can benefit if you learn to avoid high debts and not become another bankruptcy statistic yourself.
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24. What bankruptcy records are kept in Canada?

The official bankruptcy records in Canada are compiled by the federal Office of the Superintendent of Bankruptcy (OSB) and are public records. The OSB sends a monthly list of new bankruptcies to each of the credit bureaus, who record them on their credit histories of individual consumers. The bankruptcy record for each person is removed from that persons credit report after a set number of years. These are the records that you would be most interested and concerned about. The records are held by companies like Equifax and Trans Union of Canada, two credit bureaus in Canada. This record is called your credit report and it affects your ability to get credit. All credit applications that you make, whether it be for a loan for a car, your mortgage, a credit card, or a line of credit, will include a check of your credit report. If you are bankrupt or have been bankrupt, this is the record of your bankruptcy that matters most to you.
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25. Who will know about my bankruptcy?

When you go bankrupt, you feel embarrassed and youre probably worried about who will find out that you went bankrupt. There are only a few people that know about your bankruptcy without you volunteering the information. The Office of the Superintendent of Bankruptcy Official bankruptcy records in Canada are compiled by the federal Office of the Superintendent of Bankruptcy (OSB) and are public records. Every time someone goes bankrupt, it is through this office. Credit bureaus Every month, the OSB sends a list of new bankruptcies to each of the credit bureaus, like Equifax and Trans Union. These companies then record the bankruptcies on their credit histories of individual consumers. The bankruptcy record for each person is removed from that persons credit report after a set number of years. Current creditors In order to stop wage garnishments, threatening phone calls, and to alert them of the situation, your trustee will send out letters to each of your creditors informing them of your bankruptcy. If you owe money to friends or relatives, then they will also be included in the mailing, which means they will find out in this way. Potential creditors If you are bankrupt, you must, by law, inform a creditor of your status if you are borrowing more than $500. Not informing the creditor that you are bankrupt is illegal and is considered fraud. Your employer Some jobs require that you are not or have not been bankrupt in order to be employed in certain professions. Working at places like casinos, or other professions where you are in charge of money, generally come with limitations as to whether or not you can be bankrupt. Check with your employer beforehand, or look into the profession if you are still in school, in order to find out if you can go bankrupt and continue to work in your chosen field. If it turns out that you cant, there are other options available for you to deal with your debts that wont count against you as harshly. If you dont have these limitations with your job, your employer will never know unless you tell them. Newspaper/Media If you are newsworthy enough, your bankruptcy will be published in the newspaper or in the media. If youre not newsworthy enough, but you have a lot of assets, then your trustee may publish your bankruptcy in the paper or media in order to inform all of your
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creditors. These situations are very rare, and will not happen to the average Canadian or the majority of bankrupts. Anyone you tell People will not know that you have gone bankrupt just by looking at you. You are free to tell anyone you wish or withhold the information, as long as they arent a current creditor, a potential creditor, or your employer if your job requires you to report any bankruptcies.
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26. How can I check whether someone has been bankrupt?

You can pay a fee to the Office of the Superintendent of Bankruptcy (OSB) to have them search for any record of bankruptcy. You can access this service online by following these steps:
Go to the OSB's Insolvency Name Search at https://strategis.ic.gc.ca/cgibin/sc_mrksv/bankruptcy/bankruptcySearch/startup.cgi?button='proceed' . Establish an account for searching. Specify criteria for your search. These can include names and age of the person, and place of filing. Each search costs $8.00, whether successful or not. If the search finds more than ten matches to your search criteria, it will cost a further $8.00 to view each ten or fewer after the first ten.

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27. What is the Bankruptcy and Insolvency Act and how does it affect me?
The federal government established The Bankruptcy and Insolvency Act (BIA) to help unfortunate, honest citizens with their financial trouble. Sometimes referred to as the bankruptcy act, it was created to protect the rights of you and your creditors, and informs trustees and the court of their responsibilities, powers, and duties. What is in the Bankruptcy and Insolvency Act? The bankruptcy act details how different financial options work legally, and defines the roles that the Superintendent of Bankruptcy, the representatives of the Superintendent of Bankruptcy (official receivers), the court, trustees, creditors, and you, the consumer, have. The BIA is organized into 14 parts: Part Title What it deals with Responsibilities of the Superintendent of Bankruptcy (SB), the official receivers (representatives of the SB), and the trustees Acts of bankruptcy and how to apply for bankruptcy Proposals to your creditors, including consumer proposals; discusses what they are and the roles of the trustee and you, the consumer How your property is dealt with How your estate(assets, property, money) will be handled by creditors and trustees Your rights, responsibilities, and duties, and how the law will help you The courts duties, roles, and authority The consequences of not following the laws and procedures of the BIA Items that do not fit in any other category, like the rights of banks Discussion of an alternative to bankruptcy an Orderly Payment of Debt How property is handled with secured creditors
Administrative Officials
Bankruptcy Orders and Assignments
Proposals
4 5 6 7 8 9 10 11
Property of the Bankrupt Administration of Estates Bankrupts Courts and Procedures Offences Miscellaneous Provisions Orderly Payment of Debts Secured Creditors and Receivers
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12 13 14
Security Firm Bankruptcies International Insolvencies General Rules
How to deal with security firms in bankruptcies How to deal with the international filing of bankruptcies How to handle different aspects of the bankruptcy process
To find out how the BIA will affect you and your situation, contact a licensed bankruptcy trustee. They are trained on how the BIA works and know how to make it work for your situation.
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28. What are the laws for bankruptcy in Canada?

If you are having financial trouble, there are many bankruptcy laws in Canada to help you get a fresh start. Some of the laws were established by the federal government and others were put into place by your province or territory. All the bankruptcy laws, though, work to preserve your rights and the rights of your creditors, or the people you borrowed money from. Federal Law There are two major pieces of legislation that govern bankruptcies in Canada the Bankruptcy and Insolvency Act and the Companies Creditors Arrangement Act. The Bankruptcy and Insolvency Act The Bankruptcy and Insolvency Act (BIA) was established by the federal government to help unfortunate, but honest people recover from their financial problems and have a fresh financial start. This law details the responsibilities and rights of all the people involved in solving debt problems the Superintendent of Bankruptcy, the official receivers who represent the Superintendent of Bankruptcy, the court, licensed bankruptcy trustees, and you, the consumer. The BIA governs all bankruptcies in Canada. For more information about the BIA, visit our page about the Bankruptcy and Insolvency Act. You can also read the BIA online on the federal governments web site at http://laws.justice.gc.ca/en/notice/index.html?redirect=/en/B-3/index.html . The Companies Creditors Arrangement Act The Companies Creditors Arrangement Act (CCAA) is a federal bankruptcy law that governs insolvency of companies and corporations. Essentially, it preserves the rights of the company and creditors, or people they owe money to, and details the responsibilities of the court, the corporation, and the creditors. It is separated into 3 parts: 1. Compromises and Arrangements - governs agreements between the company and creditors for debt repayment 2. Jurisdiction of Courts - governs the powers and responsibilities of the court, and discusses the courts role in international insolvencies 3. General - discusses how this act interacts with others and other information not covered in the other sections For information about the CCAA, you can read the act online, or contact a licensed bankruptcy trustee in your area. Provincial Law Bankruptcy in Canada What You Need to Know 96
Each province has specific laws for dealing with bankruptcy and debt solutions. These laws often deal with what property you can keep when you go bankrupt, and how to handle your assets and income during the period of bankruptcy. Below is a list of laws that affect bankruptcies in each province and territory. There are links to the laws online, as well as a link to a brief explanation that we have written to assist you. Remember, though, that these pages should not be used as a substitute for a licensed trustee, as this is information changes often and may be applied differently to your situation. For a list of trustees in Canada that provide free consultations, please see page 138. Alberta Bankruptcy Law Read the Civil Enforcement Act for more information: http://www.qp.gov.ab.ca/documents/Acts/C15.cfm?frm_isbn=9780779720828 . British Columbia Bankruptcy Law Read the Court Order Enforcement Act at http://www.qp.gov.bc.ca/statreg/stat/C/96078_01.htm and the Regulations at http://www.qp.gov.bc.ca/statreg/reg/C/CourtOrderEnf/28_98.htm for more information. Manitoba Bankruptcy Law Read the Executions Act at http://web2.gov.mb.ca/laws/statutes/ccsm/e160e.php and the Judgements Act at http://web2.gov.mb.ca/laws/statutes/ccsm/j010e.php for more information. New Brunswick Bankruptcy Law Read the Memorials and Executions Act at http://www.gnb.ca/0062/acts/acts/m-09.htm for more information. Newfoundland and Labrador Bankruptcy Law Read the Judgment Enforcement Act at http://www.hoa.gov.nl.ca/hoa/statutes/J01-1.htm and the Regulations at http://www.hoa.gov.nl.ca/hoa/regulations/rc990102.htm for more information. Nova Scotia Bankruptcy Law Read the Judicature Act at http://www.gov.ns.ca/legislature/legc/index.htm and the Regulations at http://www.gov.ns.ca/just/regulations/regs/j11285.htm for more information. Ontario Bankruptcy Law Read the Executions Act at http://www.elaws.gov.on.ca/DBLaws/Statutes/English/90e24_e.htm for more information. Prince Edward Island Bankruptcy Law Bankruptcy in Canada What You Need to Know 97
Read the Judgment and Execution Act at http://www.gov.pe.ca/law/statutes/pdf/j-02.pdf for more information. Quebec Bankruptcy Law Read the Code of Civil Procedure at http://www.tribunaux.qc.ca/mjq_en/cquebec/contenu-reglements.html for more information. Saskatchewan Bankruptcy Law Read the Exemptions Act at http://www.qp.gov.sk.ca/index.cfm?fuseaction=publications.details&p=494 and the Farm Security Act at http://www.qp.gov.sk.ca/documents/English/Statutes/Statutes/S17-1.pdf for more information. Northwest Territories Bankruptcy Law Read the Exemptions Act at http://www.justice.gov.nt.ca/PDF/ACTS/Exempt.pdf for more information. Yukon Bankruptcy Law Read the Exemptions Act at http://www.gov.yk.ca/legislation/acts/exemptions.pdf for more information. Nunavut Bankruptcy Law Read the Exemptions Act at http://action.attavik.ca/home/justice-gn/attachen_conlaw_prediv/Type0641.pdf for more information.
Contact a licensed bankruptcy trustee for more information Every situation is unique and every province has its own laws, which do change from time to time. Contact a licensed bankruptcy trustee in your area to discuss your financial trouble (see list of licensed trustees offering a free consultation on page 138).
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29. What happens if I use my credit cards immediately before going bankrupt?
It is a common temptation: you are about to declare bankruptcy, so why not max out your credit cards first? Since your credit card debts will be discharged in your bankruptcy, why not take advantage of your credit cards and buy what you need before you go bankrupt. We have a simple answer to those questions: Dont. When you declare bankruptcy in Canada, all creditors are required to provide the trustee with a list of all transactions over the previous three months. This means that each credit card company must prepare a list of all purchases you made on your credit card over the past three months. If you used your credit card for excessive purchases, the credit card company will know; it will be obvious to them when they produce the list of transactions to send to the trustee. If the credit card company sees excessive transactions leading up to the bankruptcy they can go to court and charge you with fraud. Since fraudulent debts are not discharged in a bankruptcy, you will be required to repay those purchases, plus interest. The court may even allow the credit card company to garnishee your wages to recover the money. In some cases credit card companies can go back up to one year to investigate fraudulent transactions. Once you realize that you are in financial trouble and may need to declare bankruptcy, our advice is simple: stop using your credit cards. If you stop using them immediately, it is far less likely that you will face a prosecution for fraud.
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30. What are my options to avoid bankruptcy?

If you have money problems, but want to avoid bankruptcy, you have a number of options: 1. Keep working hard, cut your expenses, and use whatever money have to pay off your debts, starting with the highest interest rate debts. If you can only afford minimum payments, this strategy wont work. 2. Get a consolidation loan from a bank. If you have good credit, you may be able to consolidate your unsecured debts at a lower rate of interest, so that more of your payments go towards principal, and you repay your debts faster. However, it is unlikely a bank will lend you a large amount with no collateral. 3. Do a Debt Management Plan (see page 6) through a non-profit credit counsellor. To repay $96,500 over a 5 year period would cost over $1,600 per month, so credit counselling only works if you can afford it. 4. File a consumer proposal through a licensed trustee in your area. In most consumer proposals you are able to repay less than the full amount owing, so in your case it may be possible to pay, say, $500 per month for three to five years to eliminate your debt. Certain rules apply, but if your debts are joint with your husband, this may be a good option. 5. The final option is personal bankruptcy. Bankruptcy eliminates your debt, but the payment you are required to make each month is based on your income. The higher your income, the more you pay, so this may or may not be the correct option. For more information, contact a licensed trustee in your area. There are options, so we strongly suggest that you investigate your options, and decide on the solution thats right for you.
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Bonus Question: Can a Collection Agent Take My Furniture?

A collection agents job is to collect money from you, so they will try whatever means of persuasion they think will help them to convince you to pay them. Many times that includes saying if you dont pay, we will send a bailiff to your house and seize your furniture. Another variation of that line is: you used your credit card to purchase that bed, so if you dont pay us now we will send someone to your house to seize your bed. Does it mean that a collection agency can take your furniture? Is it possible for a collection agent to seize your personal belongings? In most cases, the answer is no. Creditors dont usually seize your property for several obvious reasons. First, your household items would cost money to repossess. They cant exactly take your couch and put it in the back seat of a car. They would need a moving truck and two people to remove it. And they would need to pay for it. Second, your belongings probably have minimal value if sold. You might have spent $300 for your couch ten years ago, but as a used couch today they would be likely to sell it for $25. It, therefore, doesnt make sense for a collection agent to take your furniture, spend $50 on a moving van and two movers so that he/she can seize something that can be sold for $25. Finally, in most provinces basic household goods are exempt from seizure, meaning they cannot be taken. For detailed information on what is exempt in your province, please see page 151. In addition, for any creditor to seize or repossess any of your assets, they must have one of the following: First, to be able to take your goods, including furniture, a collection agency must have a court order allowing it to seize your goods. That means the agency must go to court and convince a judge to allow them to seize your property. In most cases this comes down to a lot of work and high lawyers fees - all to seize goods that have minimal value. Second, for a lender to be able to seize your goods without a court order, the lender has to have your permission to place a lien on your goods that you signed at the time of borrowing money from the lender. If you purchased a table using your credit card, the only document you probably signed was the credit card slip, which means you didnt sign a lien document. Therefore in most cases the creditor or collection agency doesnt want to take your furniture, and probably doesnt have the legal authority to seize your goods; they will, however, threaten to do so if you havent paid your bills. If collection agents are threatening to take your furniture or other assets, you probably have more bills than you can handle, so we recommend that you arrange for a free consultation with a licensed bankruptcy trustees (see list on page 138).
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Chapter 8 After Bankruptcy: Will I Ever Be Able to Borrow Again?

You have completed your bankruptcy and all of the duties that go with it. All of your debts are forgiven and you are finally free to begin your healthy financial life. Is there anything else to consider? What will life after bankruptcy be like? Will you ever be able to borrow again? The editors of www.bankruptcy-canada.ca have summarized the most asked questions about life after bankruptcy below:
Life After Bankruptcy

What happens after my bankruptcy? What comes next? How long does a bankruptcy stay on my credit report? Will I ever be able to borrow money again? How do I rebuild my credit after bankruptcy? What about my mortgage? Can I get a renewal after declaring bankruptcy? How do I get a mortgage after a bankruptcy? Page 103 Page 104 Page 105 Page 106 Page 107 Page 108
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What happens after my bankruptcy? What comes next?

When you complete all of your duties in bankruptcy, you will obtain a type of discharge, which is the official certification of how your bankruptcy was completed. Your bankruptcy is now a part of your life Your personal bankruptcy will now be a permanent part of your life history. When asked if you have been bankrupt, you must always answer yes. If you do otherwise, you are committing fraud. Your credit is reset for your fresh start Once your bankruptcy is completed, a record of your bankruptcy will remain on your credit report, from the credit bureaus, for several years after your discharge. But other than this note, your credit status will be clear. Essentially, it will be as if you had never had credit and, like a young adult starting independent life, you will have to earn the trust of creditors from the ground up. You have officially been given a fresh start. You get to enjoy your relief and learn from your past After you complete your bankruptcy, the burden of debts you cant pay will be wiped out. Most people experience a great feeling of relief at finally achieving that fresh financial start they needed so much. The lessons you have learned will be valuable for your future success. You must know that the ways you handled money need to be changed. Armed with the credit counselling you received during bankruptcy, you are now ready to use your new skills to manage your money better. Whether you actually use your new skills or not is up to you. Will you follow the help and good advice you have received? Its your choice. Make sure you take advantage of your fresh start and your debt-free status. Live the healthy financial life you deserve.
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How long does a bankruptcy stay on my credit report?

You are probably wondering how long your bankruptcy will stay on your credit report and whether or not that will affect your borrowing power. How long a bankruptcy stays on your credit report depends on which credit bureau is reporting the information. The largest credit bureau in Canada, Equifax, maintains this record on your credit report for a period of six years from the date of your discharge from a first-time bankruptcy. If this is not your first bankruptcy, but rather your second or third, it will stay on your report for 14 years after the date of your discharge. Trans Union, another credit bureau in Canada, states that they keep a bankruptcy on your credit file for six to seven years from the date of discharge or fourteen years from the filing date, depending on provincial legislation. You are able to get a copy of your credit report from either of these bureaus to see exactly what is on your report. After a bankruptcy, you will see your bankruptcy, as well as the fact that you have no debt. You will also see that your credit rating is the same as if you had never had credit before, meaning you need to rebuild your credit in order to be able to borrow again.
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Will I ever be able to borrow money again?

After bankruptcy, it will probably take some time until you can get access to new credit again. The reason for this is simple youre starting over. Just as you wouldnt give a young adult a large loan or a credit card until they have proven themselves as reliable, you need to prove to lenders and creditors that you are trustworthy again. Your number one job in this time is to manage your finances wisely, and take the time to rebuild your credit. You manage your finances wisely by paying your rent, utilities and other monthly phone bills on time. Next, start saving money. The best way to demonstrate that you are a credit worthy individual is to save money. Another way to begin rebuilding your credit is to get a secured credit card. You put $1,000 on deposit with the credit card company, and they give you a credit card with a $1,000 limit. It appears on your credit report as a normal credit card, which begins the credit rebuilding process. More information on secured credit cards can be found here: http://www.moneyproblems.ca/credit-repair-with-secured-visa-card.htm . By saving money, and keeping your bills current, you will begin to re-establish credit. There are many people who have completed their bankruptcy, saved money, and then purchased a car or even a house a few years after the bankruptcy has ended. Whether or not you recover and rebuild your credit is all up to you. Good luck.
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How do I rebuild my credit after bankruptcy?

Rebuilding your credit will take some time, but if you follow this six-step plan your credit will be glowing in no time. 1. Complete your bankruptcy in the shortest time you can. In Canada, if you were never previously bankrupt, you can qualify for an automatic discharge from bankruptcy in nine months. To be discharged this quickly, you have to make monthly payments and reports to your trustee and attend your credit counselling sessions. The sooner your bankruptcy is completed, the sooner it will disappear from your credit report, so complete all of your bankruptcy duties as soon as possible. 2. Start saving money. It is a simple fact of life: banks lend money to people who dont need it, not to people who urgently require cash. To borrow again, you need to prove that you can handle money, and the best way to do that is to show that you have some savings. You probably were making monthly payments to the trustee during your bankruptcy. Now that your bankruptcy is finished, continue making those payments, but make them to your own savings account. Savings will be the foundation for your future borrowing. 3. Get a copy of your credit report. Go to Equifax and Trans Union, the two largest credit bureaus in Canada, and get a copy of your credit report. Check it for errors. If you find any, such as debts appearing that were included in your bankruptcy, notify the credit bureau immediately. 4. Get a secured Visa card. Start rebuilding your credit with a secured Visa card. You use your savings to place a deposit with Visa; they give you a credit card with a similar credit limit. It shows up on your credit report as a normal credit card, and now you have a credit card for use when required. 5. Get an RRSP. Use more of your savings to put money in an RRSP. If you invest $1,000 in an RRSP, the bank will probably be willing to lend you another $1,000 to contribute to your RRSP. That $2,000 you contribute will generate a refund at tax time that will be almost enough to pay off your loan. Your credit report now shows a paid off loan, which looks great on your credit report, and you have $2,000 invested in an RRSP. 6. Keep saving. You will soon have enough for a down payment on a car, and if you save long enough, the down payment on a house.
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What about my mortgage? Can it be renewed after declaring bankruptcy?

In most cases, you will be allowed to make your mortgage renewal after bankruptcy, as if you haven't filed for personal bankruptcy. Most mortgages contain a standard clause that says something like if you go bankrupt, we can foreclose on your house. Even though that term exists, banks virtually never foreclose just because you went bankrupt. The reason is simple: the bank would prefer to have you make the mortgage renewal and continue paying off both the principal amount and the interest, for the next 25 years, than to foreclose on it now, and risk losing all the future profit plus an additional amount of money by selling your house at a discounted foreclosure price. To be sure, you should check with your lender, but in most cases, provided that mortgage payments are up to date, bankrupts are able to make a mortgage renewal after bankruptcy.
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How do I get a mortgage after a bankruptcy?

Getting a mortgage after declaring bankruptcy is more difficult, but not impossible. Essentially, a note was put on your credit report since you declared bankruptcy, and will remain there for 6 years after your bankruptcy is completed. This note will make it harder to get a mortgage, but there are things you can do to counteract the effect of your credit report. Get a good paying job. Working at a good paying job and earning a steady income indicates that you can support the mortgage that you are applying for. The bank will look at how long you have been working there and how much you are making. Pay your bills on time. Paying your bills on time indicates to the bank that you are responsible with your money and that you can support your lifestyle. Missed bill payments demonstrate that you arent able to handle a large loan, especially not a mortgage. Keep your bills up-to-date. Save a sizeable down payment. If you had a perfect credit report, you wouldnt require that much money down in order to get a mortgage. But because you have a bankruptcy note on your report, you will need at least a down payment of 25%. It might seem like a lot of money, but with your good paying job, getting a down payment is easier than it looks. The most efficient way to save money is through your RRSPs. The federal government has set up the Home Buyers Plan (HBP) for first-time home buyers. The HBP lets you, as a first-time home buyer, withdraw up to $20,000 from your RRSPs to put towards a down payment. If you have a partner, and they are also contributing to an RRSP, the amount that you can borrow from your RRSPs will total $40,000. Begin, or continue, to contribute to your RRSPs, and those of your partner. Each contribution means a higher tax refund. When you receive the refund, put it directly back into your RRSPs to make the money grow even faster. Contributing to your RRSPs is not only a responsible planning step for a healthy financial future, but it is also an easy and fast way to get a down payment for your new home. Buying a house sooner Keep up the good work with your job and your bill payments, contribute to your RRSPs and savings, and you will have house in no time.
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Appendix A Bankruptcy Application Form

On the following pages are a sample bankruptcy application form. To speed up the start of the bankruptcy process, complete the attached form and bring it with you to your first meeting with your trustee.
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110
111
112
Summary of Assets
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115
Liabilities (Debts)
Name of Creditor Amount Owing Address Account Number
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Appendix B Surplus Income Worksheet

Use this worksheet to calculate the surplus income payment required in your bankruptcy.
Number of persons Threshold 1 $1,797 2 $2,237 3 $2,750 4 $3,339 5 $3,787 6 $4,271 7 $4,755
Sources of income:
Personal take home pay per month ADD BACK: voluntary deductions (please specify): Spouses take home pay per month ADD BACK: voluntary deductions (please specify): Child tax benefit Social assistance Pension income Other (please specify): SUBTOTAL (A)
Deductions from income:
Support payments Child care expenses Medical expenses Court fines Other (please specify): SUBTOTAL INCOME SUBJECT TO SURPLUS(A-B)
LESS THRESHOLD AMOUNT FROM THE TABLE
(B) (C)
(D)
SURPLUS INCOME (C-D) SURPLUS PAYMENT REQUIRED (50 % of the first $1,000) (75 % of the amount over $1,000) TOTAL SURPLUS PAYMENT REQUIRED PER MONTH Note: this calculation may be more complicated in your circumstances. Most trustees will also require a minimum contribution each month of your bankruptcy, regardless of whether or not you have surplus, so we strongly recommend that you contact a trustee for full details (See page 138). See next page for more examples.
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Appendix C Surplus Income Examples

When you file for bankruptcy, you will be assessed to see if you owe any surplus income as part of your duties as a bankrupt. Generally, the surplus income payment calculation is straightforward, but we know that not everything in life is as simple. Here we have included different situations that you may find yourself in, and how they would be handled when calculating whether or not you need to make any surplus income payments. These more complicated situations are described in detail in the following pages. One person in the household paying support for children Two people in the household, only one has filed bankruptcy Two people in the household and both have filed bankruptcy separately Two people in the household and they have filed bankruptcy jointly Two people in the household, only one has filed bankruptcy and they have a payroll deduction for RRSPs Four people in the household, only one has filed bankruptcy Page 120 Page 121 Page 122 Page 123 Page 124 Page 125
Four people in the household, only one has filed bankruptcy and they are paying support for children Page 126 One person in the household that is self-employed Page 127
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Appendix C Surplus Income Example #1 - One person in the household paying support for children
The following is an example of how surplus income calculation would look when there is only one person in the household and that person pays support for children. David is divorced and is required to pay $650 a month in child support to his ex-wife. He makes the payments himself (i.e. his wages are not being garnisheed). His take-home pay is $500 a week. Davids surplus income calculation looks like this: Total household income (4 X $500): Less child support payments: Net income minus support: Less the government threshold: Income over the threshold: Surplus income to pay: $2,000 650 $1,350 - 1,797 NIL $0
In this example, no surplus income payment is required because after David pays his support his income falls below the governments threshold. If Davids paycheque was being garnisheed, instead of David making the payments himself, then the surplus income calculation would look like this: Total household income (4 X $500): Less the government threshold: Income over the threshold: Surplus income rate (50%): Surplus income to pay: x $2,000 - 1,797 $203 0.5 $101.50
The support payments would not be deducted because they have already been taken off his paycheque.
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Appendix C Surplus Income Example #2 - Two people in the household, only one has filed bankruptcy
The following is an example of how surplus income calculation would look when there are two persons in the household and only one of them filed for bankruptcy. Consider this example. Jane and Steven are common-law partners. Jane earns $875 takehome every two weeks and Steven earns $400 take-home a week. Jane has debts from a previous relationship that she cant handle so she decides to file bankruptcy. Janes surplus income calculation looks like this: Janes income (2 x $875): Stevens income (4 x $400): Total household income: Less the government threshold: Income over the threshold: Surplus income rate (50% of $1,000): (75% of $1,000): Total surplus income: Janes portion of income (a/c) Janes surplus income payment (d x 52%) $1,750 (a) $1,600 (b) $3,350 (c) - 2,194 $1,156 500 117 $617 (d) 52% $321
In this example, Jane would be required to pay an additional $321 to her trustee this month due to the surplus income requirement.
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Appendix C Surplus Income Example #3 - Two people in the household and both have filed bankruptcy separately
The following is an example of how surplus income calculation would look when there are two persons in the household and each of them filed for bankruptcy separately. Lets use the same facts as the last example, only this time both Jane and Steven have filed bankruptcy. Janes surplus income calculation would look the same as it did in the last example. Stevens surplus income calculation would look like this:
Janes income (2 x $875): Stevens income (4 x $400): Total household income: Less the government threshold: Income over the threshold: Surplus income rate (50% of $1,000): (75% of $1,000): Total surplus income: Stevens portion of income (a/c) Stevens surplus income payment (d x 48%)
$1,750 (a) $1,600 (b) $3,350 (c) - 2,194 $1,156 500 117 $617 (d) 48% $296
In this example, Jane would be required to pay $321 in surplus income and Steven would be required to pay $296 in surplus income.
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Appendix C Surplus Income Example #4 - Two people in the household and they filed for bankruptcy jointly
The following is an example of how surplus income calculation would look when there are two persons in the household and they have filed bankruptcy jointly. A joint bankruptcy filing is one in which the trustee treats both of the people that filed as one person (instead of treating them like two people). This is done in cases where the debts are substantially similar (that means 90% the same) and/or it makes sense from an administrative standpoint to treat the couple as a single file (to reduce the costs). Lets look at the last example again, only this time the couple have filed jointly. The surplus income calculation looks like this:
Janes income (2 x $875): Stevens income (4 x $400): Total household income: Less the government threshold: Income over the threshold: Surplus income rate (50% of $1,000): (75% of $1,000): Total surplus income:
$1,750 $1,600 $3,350 - 2,194 $1,156 500 117 $617
In this example, Jane and Steven would have to make an additional payment of $617 to their trustee due to their surplus income.
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Appendix C Surplus Income Example #5 - Two people in the household, only one has filed bankruptcy and they have a payroll deduction for RRSPs
The following is an example of how surplus income calculation would be performed when there are two people in the household, only one has filed bankruptcy, and they have a payroll deduction for RRSPs. In this example Bob and Carol are a married couple living together. Bobs take-home pay is $1,200 every two weeks he would be taking home $1,250, but he has $50 taken off of every paycheque for RRSPs. Carol earns $100 a week working part-time while she continues her education. Bob has filed bankruptcy because the small business he was running failed. Bobs surplus income calculation looks like this:
Bobs income (2 x $1,200): Add his RRSP contribution (2 x $50): Bobs total income: Carols income (4 x $100): Total household income: Less the government threshold: Income over the threshold: Surplus income (50%): Bobs portion of income (a/c): Bobs surplus income (d x 86%):
$2,400 100 $2,500 (a) 400 (b) $2,900 (c) - 2,194 $706 353 (d) 86% $304
In this example, Bob would be required to pay an additional $304 to his trustee due to the surplus income requirement.
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Appendix C Surplus Income Example #6 - Four people in the household, only one has filed bankruptcy
Below is an example of how surplus income calculation would look when there are four persons in the household and only one has filed bankruptcy. Grant and Mary live with their 2 children. Grant earns $900 a week take-home and Marys only income is $250 of child tax benefit every month. Grant ran up his credit cards and filed bankruptcy to sort things out. Grants income (4 x $900): Marys income: Total household income: Less the government threshold: Income over the threshold: Total surplus income (50%): Grants portion of income (a/c): Grants surplus income (d x 93%): $3,600 (a) $250 (b) $3,850 (c) - 3,303 547 $274 (d) 93% $255
In this example, Grant would be required to pay an additional $255 this month to his trustee due to his surplus income obligation.
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Appendix C Surplus Income Example #7 - Four people in the household, only one has filed for bankruptcy and they are paying support for children
Below is an example of how surplus income calculation would look when there are four people in the household, only one person has filed for bankruptcy, and they pay support for children. Linda and Frank live common-law. Linda has one child from a previous relationship that lives with her. Frank has one child that lives with him and another for which he pays $375 a month in support directly to his ex (instead of having his wages garnisheed). Frank earns $1,750 every two weeks and Linda earns $100 every week, receives $250 in support and $175 from the child tax benefit. Linda co-signed all of her exs debts. When he filed bankruptcy she ended up doing the same thing 3 months later. Lindas surplus income calculation looks like this: Lindas income (4 x $100): Plus her child support received: Plus her child tax benefit: Lindas total income: Franks income (2 x $1750): Less support he pays: Franks total income: Total household income (a + b): Less the government threshold: Income over the threshold: Total surplus income (50%): Linda`s portion of income (a/c): Lindas surplus income (d x 21%): $400 250 175 $825 (a) $3,500 375 $3,125 (b) $3,950 (c) - 3,303 647 (d) $324 21% $68
In this example, Linda would be have to pay an additional $68 this month to her trustee due to her surplus income requirement.
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Appendix C Surplus Income Example #8 - One person in the household that is self-employed
The following is an example of how surplus income calculation would look when there is one, self-employed, person in the household. Self-employed individuals add an entirely new level of complexity to the surplus income calculation. Surplus income is always applied to an individuals after tax income. In order to determine their after tax earnings a self-employed person needs to be able to determine the net income after expenses, estimate the taxes they will owe on that income, make an installment to the government for their taxes and then we can calculate their surplus income requirement. Take a look at this example: Peter is an owner-operator working for a large trucking company. He gets paid mileage by the company he works for, but he pays all of his own truck costs (fuel, maintenance, his lease, etc). No taxes are deducted from his pay so he has to make certain he pays those too. For the last couple of years things have been slow and to make ends meet Peter stopped paying the government. They caught up with him last month and he decided to file bankruptcy so that he could get a fresh start. In order to determine his surplus income obligation, each month Peter must prepare an income statement for his business. It might look like this: Mileage paid by Trucking Inc.: Less expenses: Fuel Maintenance Lease payment Insurance Licenses Meals ($500 x 50%) Cell phone Office (bookkeeper) Total expenses: Net income before taxes: Tax estimate (25%) Net income for surplus calculation: Less the government threshold: Income over the threshold: Bankruptcy in Canada What You Need to Know $3,500 1,275 2,243 750 150 250 500 150 $8,818 $2,682 $670 $2,012 - 1,755 $257 127 $11,500
Surplus income rate: Surplus income to pay:
x 0.5 $129
Some important things to remember for self-employed individuals: 1. You have to decide when you start your bankruptcy if you will be working on an accrual or cash basis. Accrual accounting means you apply the income and expenses in the months that they were earned or incurred (not when you actually received the money or made the payment). With the cash method you record income when you get paid and expenses when you pay them. 2. In order to claim the deduction for your taxes you will have to actually make an tax installment to the government. If you cant prove that you made the payment you will not be allowed to deduct the expense. In this example, Peter would have to pay an additional $335 in surplus (50% of $670 tax) to his trustee if he doesnt make the tax installment. In addition, next year when he files his taxes he will still have to pay the $670 so he gets dinged twice. 3. Normally, your trustee will allow you to deduct any expense that you would be allowed to deduct for income tax purposes. Keep in mind that just because your bookkeeper tries to deduct something for income taxes that doesnt necessarily mean your trustee will agree and or accept the deduction. For instance, if Peter claimed all of his house rent every month as a business expense it would probably be disallowed. If you are a self-employed individual we strongly suggest you discuss in detail your trustees reporting requirements and procedures for determining your surplus income obligation before you file your assignment. In our experience, surplus income causes more problems for self-employed persons than any other aspect of bankruptcy. If you dont understand what is required then you may be setting yourself up for problems with your trustee and that might result in your bankruptcy being extended and/or your appearance in court to resolve any disputes that may arise.
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Appendix D Bankruptcy Documents: What You Will Be Signing

Reproduced on the next few pages are examples of the documents you will be required to sign to start the bankruptcy process. Each trustee will also add other documents to confirm the procedure.
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Statement of Affairs Form 79 This form has four sections, and lists your assets, liabilities, personal information, and includes your sworn statement that all of the information disclosed is true, accurate, and complete.
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131
132
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Form 65 Monthly Income and Expense Statement This is the form the trustee prepares based on your monthly budget (see page Error! Bookmark not defined.)
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Form 22 Assignment in Bankruptcy This is the form that officially starts your bankruptcy.
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Assessment Certificate This form confirms that you have met with a licensed trustee, and they have assessed your situation and explained to you your options. You can read more about this process on page 21.
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Appendix E List of Canadian Bankruptcy Trustees Offering Free Consultations

We have compiled a list of trustees with offices across Canada. We have personally interviewed each of these trustees, and all trustees on this list provide free initial consultations. All trustees operate by appointment only so that they can set aside sufficient time to answer your questions. Please call them at the numbers listed to arrange your no charge initial consultation. To contact a trustee by e-mail, or for more information, please go to www.bankruptcycanada.ca
British Columbia
Abbotsford Sands & Associates 316 - 31935 South Fraser Way (604)-864-5799 Burnaby Sands & Associates
302 - 5050 Kingsway (604)-451-5799
Richmond Sands & Associates 410 - 1100 Melville Street Vancouver , B.C (604)-684-3030 or Toll Free 1-800-661-3030 Surrey Sands & Associates 203-10366-136A Street (604)-583-5499 Vancouver Sands & Associates 410 - 1100 Melville Street (604)-684-3030 or Toll Free 1-800-661-3030
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Alberta
Calgary Bromwich & Smith Inc. 210, 683 - 10 Street S.W. (403) 266-6665
Edmonton Goth & Company Inc. 815, 5241 Calgary Trail (780) 435-5110
Saskatchewan
Regina Deloitte & Touche Inc. 900-2103 11th Avenue 1 800 961-DEBT (3328) or Toll Free 1 800 961-DEBT (3328) Saskatoon Deloitte & Touche Inc. 122 1st Ave, Suite 400, PCS Tower (306) 525-DEBT (3328) or Toll Free 1 800 961-DEBT (3328)
Manitoba
Brandon, Dauphin, and Portage PwCDebtSolutions 1-888-792-3328 Winnipeg PwCDebtSolutions 2300 One Lombard Place 1-888-792-3328 Bankruptcy in Canada What You Need to Know 139
Ontario
Barrie Hoyes, Michalos & Associates Inc. 92 Caplan Avenue Phone: (705) 719-4948 or 310-PLAN (7526) www.hoyes.com
Brampton Hoyes, Michalos & Associates Inc. 10 George Street North, Unit 116 Phone: 310-PLAN (7526) www.hoyes.com
Brantford Hoyes, Michalos & Associates Inc. 218 Brant Avenue Phone: (519) 770-4440 or 310-PLAN (7526) www.hoyes.com
Cambridge Hoyes, Michalos & Associates Inc. 8 George Street North, 2nd Floor Phone: (519) 622-3773 or 310-PLAN (7526) www.hoyes.com
Chatham Hoyes, Michalos & Associates Inc. 75 Thames Street Phone: (519) 351-2323 or 310-PLAN (7526) www.hoyes.com
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Etobicoke Hoyes, Michalos & Associates Inc. The Clarica Center 3300 Bloor Street West, Center Tower, Suite 3140 (11th floor) Phone: 310-PLAN (no area code required) www.hoyes.com
Goderich Hoyes, Michalos & Associates Inc. 138 The Court Goderich Ontario Phone: 310-PLAN (7526) www.hoyes.com
Guelph Hoyes, Michalos & Associates Inc. 207 Woolwich Street Phone: (519) 823-0330 or 310-PLAN (7526) www.hoyes.com
Hamilton Hoyes, Michalos & Associates Inc. 10 George Street, 4th Floor or 1030 Upper James Street, Suite 301 Phone: (905) 777-0770 or 310-PLAN (7526) www.hoyes.com
Kitchener Hoyes, Michalos & Associates Inc. 607 King Street West, Suite 204 Phone: (519) 747-0660 or 310-PLAN (7526) www.hoyes.com
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Leamington Hoyes, Michalos & Associates Inc. 1 Russell Street Phone: (519) 326-1467 or 310-PLAN (7526) www.hoyes.com
London Hoyes, Michalos & Associates Inc. 186 Albert Street, Suite 207 Phone: (519) 435-1500 or 310-PLAN (7526) www.hoyes.com
Mississauga Hoyes, Michalos & Associates Inc. 2 Robert Speck Parkway, 7th Floor, Suite 750 Phone: (905) 848-3649 or 310-PLAN (7526) www.hoyes.com
North York Hoyes, Michalos & Associates Inc. 4950 Yonge Street, Suite 1906 Phone: (416) 730-8060 or 310-PLAN (7526) www.hoyes.com Ottawa Surgeson Carson Associates Inc. 99 Fifth Avenue, Suite 8 (613) 567-6434 Extension 222
Sarnia Hoyes, Michalos & Associates Inc. 265 North Front Street 4th Floor, Suite 411 www.hoyes.com Phone: (519) 344-1058 or 310-PLAN (7526) Bankruptcy in Canada What You Need to Know 142
Scarborough Hoyes, Michalos & Associates Inc. 55 Town Centre Court, Suite 700 Phone: (416) 730-8060 or 310-PLAN (7526) www.hoyes.com
Thunder Bay Grant Thornton Limited 979 Alloy Drive (807) 345-6571
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Toronto Hoyes, Michalos & Associates Inc. has six offices to serve you in the GTA; all offices can be reached by calling 310-PLAN (7526) (no area code required). North York - 4950 Yonge Street, Suite 1906 Yonge & Bloor - 2 Bloor Street West, Suite 700 (7th floor) Etobicoke - 3300 Bloor Street West, Center Tower, Suite 3140 (11th floor) Scarborough - 55 Town Centre Court, Suite 700 Vaughan (Woodbridge) - 216 Chrislea Rd. Suite 401 Mississauga - 2 Robert Speck Parkway, 7th Floor, Suite 750
www.hoyes.com
Vaughan (Woodbridge) Hoyes, Michalos & Associates Inc. 216 Chrislea Rd. Suite 401 Phone: 310-PLAN (310-7526) www.hoyes.com
Windsor Hoyes, Michalos & Associates Inc. 420 Devonshire Road Phone: (519) 250-8060 or 310-PLAN (7526) www.hoyes.com
Quebec
Montreal Budd, Rochelle Pont 8000, Boulevard Dcarie Phone: (514) 731-3191 Ext: 461 or cell phone (514) 949-9133
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New Brunswick
Fredericton Allan Marshall & Associates Inc. 212 Queen Street, Suite 102 Fredericton, NB Telephone: 1-506-454-7850 Toll Free: 1-888-371-8900 Moncton Allan Marshall & Associates Inc. 500 St. George Street, Moncton, NB Telephone: 1-506-384-7850 Toll Free: 1-888-371-8900 Riverview Stephenson & Partners LLP 567 Coverdale Road Riverview, NB 1-800-368-1677
Nova Scotia
Halifax PwCDebtSolutions 1809 Barrington St., Suite 600 (902) 491-7400 Dartmouth, Kentville, Sackville PwCDebtSolutions 1-877-804-3909
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Newfoundland
St. Johns Deloitte & Touche Inc. 10 Factory Lane Fort William Building St. John's, Newfoundland and Labrador 1-800-563-8337
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Appendix F Report of Trustee on Bankrupts Application for Discharge

Form 82, the Report of Trustee on Bankrupts Application for Discharge, is reproduced on the following three pages. This report summarizes the activities of the trustee and the bankrupt during the first seven or eight months of the bankruptcy, and contains the trustees recommendation for the bankrupts discharge.
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Appendix G Exempt Assets across Canada by Province and Territory

Presented in this section are lists of assets you are permitted to keep if you file bankruptcy. Since exemptions are governed by provincial law, the exemption lists are presented by province. CAUTIONS: The exemption lists we provide below are simplified summaries of the law. Even where there is no dollar limit, exemptions are limited to what you and your dependants really need. The provinces often adjust the exemptions for various reasons, such as inflation.
For interpretation of the rules in your case, we strongly recommend that you contact a Canada bankruptcy trustee to review your situation to determine which assets would be exempt if you were to file for bankruptcy. You should be completely clear on what you can keep if you go bankrupt in Canada versus what you may lose if you go bankrupt in Canada. Each province and territory has specific information. Read about your province below. Alberta British Columbia Manitoba New Brunswick Newfoundland & Labrador Northwest Territories Nova Scotia Nunavut, Yukon, NWT Ontario Prince Edward Island Quebec Saskatchewan Page 152 Page 153 Page 154 Page 154 Page 156 Page 162 Page 157 Page 162
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Page 158 Page 159 Page 160 Page 161
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Alberta - Exempt Property

1. Food: 12 months supply. 2. Clothing: up to $4,000. 3. Household furniture and appliances: up to $4,000 4. One motor vehicle; up to $5,000 5. Health aids: no dollar limit. 6. Tools of your trade: up to $10,000. 7. Farm property: requirements for 12 months operations. 8. Principal residence: up to $40,000, reduced to your share if you are a co-owner. 9. Farm land: up to 160 acres. 10. Social allowance, handicap benefit or a widow's pension if the proceeds from the payment are not intermingled with your other funds. Read the Civil Enforcement Act for more information: http://www.qp.gov.ab.ca/documents/Acts/C15.cfm?frm_isbn=9780779720828 .
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British Columbia - Exempt Property

1. Food and fuel: none. 2. Clothing: no dollar limit. 3. Household goods: up to $4,000 4. One motor vehicle: up to $5,000 (or $2,000 if you behind on child support payments). 5. Health aids: no dollar limit. 6. Tools of your trade: up to $10,000. 7. Farm property: none. 8. Principal residence: up to $9,000 (or $12,000 in Greater Vancouver or Victoria). Read the Court Order Enforcement Act at http://www.qp.gov.bc.ca/statreg/stat/C/96078_01.htm and the Regulations at http://www.qp.gov.bc.ca/statreg/reg/C/CourtOrderEnf/28_98.htm for more information.
153
Manitoba - Exempt Property

1. Food and fuel: six months supply or cash equivalent. 2. Clothing: no dollar limit. 3. Household furniture and appliances: up to $4,500 4. One motor vehicle (needed for occupation): non-farmers up to $3,000, farmers no limit. 5. Health aids: no dollar limit. 6. Tools of your trade: up to $7,500. 7. Farm property: buildings and requirements for 12 months operations. 8. Principal residence: farm house; non-farmers up to $2,500, or $1,500 if you are a co-owner. 9. Farm land: up to 160 acres. 10. Items needed for religious services. 11. Locked-in pension plans. 12. Certain life insurance policies. 13. Municipal or school property. Read the Executions Act at http://web2.gov.mb.ca/laws/statutes/ccsm/e160e.php and the Judgements Act at http://web2.gov.mb.ca/laws/statutes/ccsm/j010e.php for more information.
154
New Brunswick - Exempt Property

1. Food and fuel: three months supply. 2. Clothing: no dollar limit. 3. Household furniture and appliances: up to $5,000 (more in some cases). 4. One motor vehicle (needed for occupation): up to $6,500 (more in some cases). 5. Health aids: no dollar limit. 6. Tools of your trade: up to $6,500. 7. Farm property: farm animals to specified limits, their feed for six months, and seeds to specified limits. 8. Principal residence: none. 9. Items needed for religious services. 10. Pets. 11. Pension plans. Read the Memorials and Executions Act at http://www.gnb.ca/0062/acts/acts/m-09.htm for more information.
155
Newfoundland & Labrador - Exempt Property

1. Food and fuel: twelve months supply. 2. Clothing: up to $4,000. 3. Household furniture and appliances: specific types, up to $4,000 4. One motor vehicle: up to $2,000 5. No dollar limit. 6. Tools of your trade: up to $10,000. 7. Farm or fishing or aquaculture property: up to $10,000. 8. Principal residence: up to $10,000. 9. Pets. 10. Items of sentimental value: up to $500. 11. Certain pension plans. 12. Certain income. Read the Judgment Enforcement Act at http://www.hoa.gov.nl.ca/hoa/statutes/J01-1.htm and the Regulations at http://www.hoa.gov.nl.ca/hoa/regulations/rc990102.htm for more information.
156
Nova Scotia - Exempt Property

1. Food and fuel: no dollar limit. 2. Clothing: no dollar limit. 3. Household goods: up to $6,500, more in some cases. 4. One motor vehicle: up to $3,000, or up to $6,500 if needed in occupation. 5. Health aids: no dollar limit. 6. Tools of any occupation: up to $1,000. 7. Seeds and livestock for domestic use: no dollar limit. 8. Principal residence: none. Read the Judicature Act at http://www.gov.ns.ca/legislature/legc/index.htm and the Regulations at http://www.gov.ns.ca/just/regulations/regs/j11285.htm for more information.
157
Ontario - Exempt Property

1. Food, fuel, household furniture, appliances: up to $11,300. 2. Clothing: up to $5,650. 3. One motor vehicle (needed for occupation): up to $5,650 4. Health aids: none. 5. Tools of your trade: up to $11,300. 6. Farm property: seed for up to 100 acres, feed and bedding for the current winter, 14 bu. potatoes, other up to $28,300. 7. Principal residence: none. 8. Most pension plans, life insurance policies, and certain RRSPs. Read the Executions Act at http://www.elaws.gov.on.ca/DBLaws/Statutes/English/90e24_e.htm for more information.
158
Prince Edward Island - Exempt Property

1. Food, fuel, household furniture, appliances: up to $2,000. 2. Clothing: no dollar limit. 3. One motor vehicle (needed for occupation): up to $6,500. 4. Health aids: no dollar limit. 5. Tools of your trade: up to $2,000. 6. Farm property: seed for up to 100 acres, other up to $5,000. 7. Principal residence: none. 8. RRSPs with beneficiary a family member: no dollar limit. Read the Judgment and Execution Act at http://www.gov.pe.ca/law/statutes/pdf/j-02.pdf and the Personal Property Security Act at http://govpe.ca/law/statutes/pdf/p-03_1.pdf for more information.
159
Quebec - Exempt Property

1. Food and fuel: no dollar limit. 2. Clothing: no dollar limit. 3. Household furniture and appliances: specific types, up to $6,000. 4. Motor vehicle: no dollar limit. 5. Disability aids, accident benefits: no dollar limit. 6. Tools of your trade: no dollar limit. 7. Farm property: no dollar limit. 8. Principal residence: $10,000. 9. Support received through court order, donation, or bequest. 10. Most property declared exempt by a donor or will. 11. A certain portion of your wages and salaries, based on the number of your dependants. 12. Benefits payable and employer contributions under an employer-sponsored pension plan. 13. Family papers and portraits, medals and other decorations, and documents. 14. Items used in religious worship. 15. Income for services as a minister of religion. 16. Food, lodging, and transportation passes received for employment travel. Read the Code of Civil Procedure at http://www.tribunaux.qc.ca/mjq_en/cquebec/contenu-reglements.html for more information.
160
Saskatchewan - Exempt Property

1. Food and fuel: cash equivalent of supply until the next harvest. 2. Clothing: no dollar limit. 3. Household furniture and appliances: up to $4,500 (or $10,000 for a farm). 4. One motor vehicle (needed for occupation): no dollar limit. 5. Health aids: none. 6. Tools of your trade: up to $4,500. 7. Farm property: livestock and equipment for up to 12 months, two bushels seed per acre of land under cultivation, and enough cash or current crop for farming costs to the next harvest. 8. Principal residence: up to $32,000 (your share) and associated land up to 160 acres. 9. All retirement savings plans: RRSPs, RRIFs, and DPSPs. 10. Certain life insurance policies. Read the Exemptions Act at http://www.qp.gov.sk.ca/index.cfm?fuseaction=publications.details&p=494 and the Farm Security Act at http://www.qp.gov.sk.ca/documents/English/Statutes/Statutes/S17-1.pdf for more information.
161
Northwest Territories / Nunavut / Yukon - Exempt Property

1. Food and fuel: twelve months supply. 2. Clothing: no dollar limit. 3. Household furniture and appliances: up to $200. 4. Health aids: none. 5. Tools and animals of your trade, including motor vehicle: up to $600. 6. Principal residence: up to $3,000. 7. RRSPs associated with insurance policies. The above exemptions for the territories do not apply if:

You are behind on child or spousal support payments. You have absconded or are about to abscond from the territories leaving no spouse or family behind.
Northwest Territories Bankruptcy Law Read the Exemptions Act at http://www.justice.gov.nt.ca/PDF/ACTS/Exempt.pdf for more information. Yukon Bankruptcy Law Read the Exemptions Act at http://www.gov.yk.ca/legislation/acts/exemptions.pdf for more information. Nunavut Bankruptcy Law Read the Exemptions Act at http://action.attavik.ca/home/justice-gn/attachen_conlaw_prediv/Type0641.pdf for more information.
162
Appendix H: Bankruptcy Reform: What is Bill C-55 and how will it affect me?
Bill C-55 is an amendment to the Bankruptcy and Insolvency Act and the Companies Creditors Arrangement Act, and will work to establish the Wage Earner Protection Program Act. It is the answer to the report titled Debtors and Creditors Sharing the Burden: A Review of the Bankruptcy and Insolvency Act, which was presented in November 2003. The report was prepared by the Senate Committee on Banking, Trade and Commerce because the law states that the Bankruptcy and Insolvency Act, which governs debt resolution, must be reviewed every five years. It is not law yet, because at the same time that the bill was introduced, a new minority government was elected. This new government has not had the bill on its list of priorities, so it has not come into effect yet. What does Bill C-55 mean for me? Bill C-55 contains amendments to change the way bankruptcies are handled in this country. Essentially, if the law is enacted and you file for bankruptcy, the new rules may affect you and your bankruptcy. Creation of the Wage Earner Protection Program Act A new act will be created if the Bill C-55 came into practice called the Wage Earner Protection Program Act. This new act will guarantee wage payments of up to $3,000 per employee if their employer goes bankrupt. The government estimates that this program may cost up to $50 million, and help 10,000 to 15,000 workers who have unpaid wage claims when their employers go bankrupt. It will remain to be seen whether or not this change will increase taxes, or bring about the introduction of a federal payroll tax to fund the program and its administration. Student loans and bankruptcy Under existing laws, a student loan is only automatically discharged in a bankruptcy if the debtor ceased to be a student at least ten years earlier. Under the proposed new legislation, student loan debt will be eligible for discharge in bankruptcy if at least seven years have elapsed since the bankrupt ceased to be a student. In addition, in cases of undue hardship, a bankrupt may apply to the Court to have their student loans discharged after five years. To prove hardship, the debtor must convince the court that they have acted in good faith, and they will continue to experience financial difficulties if they must continue to service their student loans. Exemption for RRSPs Under current laws, most non-locked-in RRSPs are seized in a bankruptcy, and the funds distributed to the creditors. This is perceived to be somewhat unfair, since generally employer sponsored pension plans are not seized in a bankruptcy. It is proposed that all RRSPs will be exempt from seizure in a bankruptcy. Bankruptcy in Canada What You Need to Know 163
To prevent abuse, RRSP contributions made in the 12 months prior to bankruptcy will not be exempt from seizure. The governments Insolvency and Wage Earner Protection Legislation press release announcing Bill C-55 states that the seizure exemption will only apply if the bankrupt individual locks in their RRSPs and that a cap will also be applied to the amount a bankrupt can protect, but we have not been able to find any references to these clauses in the legislation. High Income Tax Debt The proposed new legislation will make it more difficult for individuals with high income tax debt to be automatically discharged from bankruptcy. Individuals owing more than $200,000 in personal income tax debt representing 75% or more of their unsecured debts will not be eligible for an automatic discharge. They will be required to obtain a court order to be discharged of their debts, whereby the court may refuse to discharge the debts, suspend the bankrupt for a period of time, or may require the bankrupt repay a portion of the debt. Mandatory Surplus Income Payments Under current law, if a bankrupt earns more than the amount prescribed, they are required to pay a portion of that surplus income into their estate. Under the new rules, if a firsttime bankrupt has surplus income, they will be required to pay that surplus income into their estate for the initial 9-month bankruptcy period, and for a further 12-month period, or further if ordered by the court. In other words, a bankrupt with surplus income will no longer be eligible to be discharged after nine months, but will be eligible to receive an automatic discharge after 21 months, if no-one opposes their discharges. Second time bankrupts with surplus income will be eligible for an automatic discharge after 36 months. What do I do? There is no clear timeline as to when Bill C-55 and its amendments will come into effect. If Bill C-55 is passed, it will be renamed based on the Parliament that passes the law. If you are considering bankruptcy now or in the future, a licensed bankruptcy trustee will be prepared to help you with your situation by bringing a clear understanding of the old and new legislation, depending on when you file. Dont let these new laws deter you from solving your debt problems contact a bankruptcy trustee today and trust their expertise to help you find the right solution.
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Filing Personal Bankruptcy in Canada: What You Need to Know Before You File

Am I Alone? How Many People Went Bankrupt in Canada Last Year?

84,638 79,218 79,796

Bankruptcy in Canada What You Need to Know

Chapter 1 How to Avoid Bankruptcy

Bankruptcy in Canada What You Need to Know

A. Repay your debts on your own

Bankruptcy in Canada What You Need to Know

The Biggest Budget Mistake

Bankruptcy in Canada What You Need to Know

B. Get a debt consolidation loan

Bankruptcy in Canada What You Need to Know

C. Credit counselling Making a debt management plan

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

D. File a consumer proposal

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

Step one: Assessing your financial situation

Bankruptcy in Canada What You Need to Know

Step two: Determining your eligibility

Bankruptcy in Canada What You Need to Know

Step three: Preparing the documents you need to file

Bankruptcy in Canada What You Need to Know

Step four: Deciding the terms of your proposal

Step five: Mailing your proposal and waiting for an answer

Bankruptcy in Canada What You Need to Know

Step six: Living with your consumer proposal

Bankruptcy in Canada What You Need to Know

Step seven: Finishing your proposal: Now what?

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

Chapter 3 Bankruptcy: The Process from Start to Finish

The steps in your bankruptcy

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

b. the family or personal situation of the debtor; 23

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

___________________________________________ Signature of bankrupt or consumer debtor

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

Your duties at the end of your bankruptcy

Bankruptcy in Canada What You Need to Know

Chapter 4 What Debts are Included and Excluded When I Go Bankrupt?

Special Feature: What Happens to My Tax Debts if I go Bankrupt?

Bankruptcy in Canada What You Need to Know

Special Feature: What Happens to My Mortgage if I go Bankrupt?

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

Special Feature: Using Credit Cards Before Bankruptcy: Fine or Fraud?

Bankruptcy in Canada What You Need to Know

Bankruptcy in Canada What You Need to Know

Special Feature: Bankruptcy and Car Loans: Do They Mix?

Bankruptcy in Canada What You Need to Know

Chapter 5 What Assets Do I Get to Keep When I Go Bankrupt?