Bankruptcy
What happens when I go bankrupt?
Will I lose everything if I go bankrupt?
What assets are exempt from seizure by creditors?
Will I lose my house if I go bankrupt?
Will I lose my car if I go bankrupt?
If I go bankrupt will I ever be able to get credit again?
If I go bankrupt will it affect my spouse?
What are the main duties of a bankrupt?
What is the Office of the Superintendent of Bankruptcy Canada?
What is surplus income and how is it calculated?
Some debts are not discharged from bankruptcy?
How does bankruptcy affect my credit rating?
Let us answer your questions today. Contact Welker and Associates.
What happens when I go bankrupt?
Generally speaking:
- Bankruptcy legislation in Canada is designed to help an honest but unfortunate debtor to get a fresh start
- Bankruptcy legislation isn't designed to make it impossible for you to live or to rebuild your credit rating
- Filing personal bankruptcy ends your legal obligation to pay your unsecured creditors and gives you a way to become discharged of your debts.
- Immediately stops all creditor collection action including wage garnishments
- Provided you make your payments, filing personal bankruptcy doesn't affect secured creditors (mortgages & car loans)
- If you have surplus income you will have to pay something to your creditors
- Many assets are exempt from seizure (not seizable by creditors), but some are not and creditors will have an interest in them
Will I lose everything if I go bankrupt?
No, because the Office of the Superintendent of Bankruptcy Canada was individuals filing personal bankruptcy to get a fresh start certain assets are exempt from seizure by creditors.
What assets are exempt from seizure by creditors?
- Personal possessions totalling up to $5,650
- A motor vehicle valued up to $5,650
- Household furniture and appliances totalling up to $11,300
- Tools/equipment used to earn a living totalling up to $11,300
- Most life insurance policies
- Majority of RRSP’s and pensions
Will I lose my house if I go bankrupt?
It depends whether or not there is any net equity available if your property were to be sold. Net equity is calculated as: appraised value minus selling costs and mortgages
If there is no net equity in your property (ie: the value of your property is less than the amount of your mortgages and selling costs) then there is no issue with you keeping the property.
If there is net equity (ie: the value of your property is more than the amount of your mortgages and selling costs) then your creditors would want your share of this amount to be paid to them.
Having net equity does not mean that you have to sell your house. Your creditors do not care how they receive the net equity. Obviously one way that your creditors could realize the net equity in your property would be to sell, but if you are able to make payments to your creditors totalling the amount of net equity then you will be keep your property.
Many people that go bankrupt own their homes. Some have equity in their properties and others don’t, but the majority of people are able to keep their homes despite filing personal bankruptcy.
Will I lose my car if I go bankrupt?
You are allowed to own a vehicle with up to $5,650 of equity that is exempt from seizure by your creditors. If your vehicle has more than $5,650 of equity you can still keep it but you will be required to pay the amount in excess of the exemption to your creditors
Filing personal bankruptcy does not affect the rights of your secured creditors. Therefore, if your vehicle is collateral for a loan you must continue making payments or the secured creditors will repossess your vehicle.
If I go bankrupt will I ever be able to get credit again?
Yes, you can start rebuilding your credit immediately after filing personal bankruptcy
If I go bankrupt will it affect my spouse?
No, you and your spouse are two separate legal entities.
Nothing you do can affect your spouse’s credit rating or their legal obligation to pay their creditors. For example, if your spouse has co-signed on any of your debts, your filing personal bankruptcy won’t prevent the joint creditors from pursuing your spouse.
What are the main duties of a bankrupt?
- Attend 2 credit counselling sessions
- Provide the trustee with monthly income and expense reports.
- Provide the trustee with information for your pre and post-bankruptcy income tax returns
- Pay the bankruptcy administration fees or required surplus income payments
What is the Office of the Superintendent of Bankruptcy Canada?
The Office of the Superintendent of Bankruptcy Canada is a division of industry Canada which is a part of the federal government. All consumer proposals and bankruptcy filings are registered with the Office of the Superintendent of Bankruptcy Canada.
The Office of the Superintendent of Bankruptcy Canada monitors all trustee practices and is responsible for trustee licensing.
If a debtor is dissatisfied with the services provided by a licensed trustee in bankruptcy they can file a complaint with the Office of the Superintendent of Bankruptcy Canada.
What is surplus income and how is it calculated?
One of the duties imposed on everyone filing personal bankruptcy.
How do I start the process?
Make an appointment to meet with one of our licensed trustees
Some debts are not discharged from bankruptcy?
How does bankruptcy affect my credit rating?
- Bankruptcy results in a R9 credit rating
- For a first-time bankrupt this R9 rating stays on your credit report for 6 years after discharge
- For a second-time bankrupt this R9 rating stays on your credit report for 13 years after discharge
