bankruptcyinstruction

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.

A person has to use a trustee if he or she goes bankrupt. However, trustees are not just for filing bankruptcy. They are also Professional Debt Consultants and can make arrangements with your creditors on your behalf; provide debt counselling; negotiate settlement agreements and help you make a proposal to your creditors to avoid bankruptcy. If a trustee feels you need the protection of independent legal advice the trustee will 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.

When dealing with a trustee you are protected as follows:

By the fact that the federal government regulates trustees;
By the stringent code of ethics to which all trustees are subject;
If you have a dispute there is a mechanism in place to have the dispute mediated .
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.

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 licence. Ongoing professional development is mandatory.

Summary of the Major Changes Affecting Consumer Bankruptcy

High Income Tax Debt: Bankrupt individuals with more than $200 000 in personal income tax debts representing 75 percent or more of their total unsecured liabilities will not be eligible for an automatic discharge. These individuals will have to seek a Court order to be discharged of their debts. They will have to convince the Court that the relief they are seeking is justified on the basis of their efforts to repay their debts, their financial situation when the debt was incurred and their future financial prospects. The Court will be able to fix conditions on the discharge. Specifically, the Court may refuse to discharge these individuals from bankruptcy, suspend their discharge for a period of time, or require the bankrupt to comply with any requirement as the Court may direct. This is meant to be an anti-abuse measure targeting high-income individuals who may strategically use bankruptcy to avoid paying large income tax debts.

Exemption for RRSPs: RRSP and RRIF exemptions will be in accordance with the laws of the province where the provinces have such exemptions. The provinces that have RRSP and RRIF exemptions are Saskatchewan, Manitoba, Quebec, Prince Edward Island and Newfoundland and Labrador.

This wording change will result in the following:

A one year claw back will only be in effect for RRSPs in provinces without RRSP exemption laws;
There will be no upper cap on the amount of RRSPs that can be protected;

There will be no need to set up the RRSPs in a locked in plan to make them eligible for exemption;
The court will have no jurisdiction to extend the one year claw back period period in an appropriate case.
Dollar Threshold for a Consumer Proposal is Raised: A consumer debtor can now be considered for filing a consumer proposal if the individual's aggregate debts, excluding debts secured by the individual's principal residence, are not more that $250,000. This is an increase from $75,000.

Mandatory Surplus Income Payments: Bankrupts will be required to make surplus income payments to the estate in accordance with directives issued by the Superintendent of Bankruptcy. Trustees will no longer have the discretion to recommend that a bankrupt should pay less of their surplus income than the amount determined according to the Superintendent's directive.

First-time bankrupts with surplus income will be required to make payments for nine months. If, at that end of the nine-month period, the surplus remains, the bankrupt will be required to make additional payments for a further 12 months and for a further time as the Court may order.

Second-time bankrupts with surplus income will be required to make payments for 24 months. If the surplus income remains after 24 months, the bankrupt will be required to make surplus income payments for a further 12 months and for such further time as the Court may order. The changes are intended to require bankrupts who have the financial ability to make reasonable contributions to their creditors to do so prior to obtaining their discharge.

Automatic Discharge of Second-Time Bankrupts: Second-time bankrupts will be eligible for an automatic discharge after 24 months from the date of bankruptcy. This measure will only apply to those who have completed mandatory counselling and who have made payments of their surplus income to the creditors.

Student Loans: Student loan debt will be eligible for discharge in bankruptcy if seven years have passed since the former student has terminated his/her studies. In addition, in cases of undue hardship, a bankrupt may apply to the Court to obtain the discharge of the student loans after five years. For the Court to discharge on hardship grounds, it must be satisfied that the debtor has acted in good faith and is expected to continue to experience financial difficulties.

Note: The "hardship provision" will be available to those people whose date of bankruptcy was prior to the coming into force of this provision.

Prohibition on Ipso Facto Clauses in Bankruptcy: The amendments place limits on the exercise of "ipso facto" contract clauses in bankruptcy. An ipso facto clause is a contractual term that generally allows a creditor to terminate a contract or a supply of service if an individual enters into proceedings under an insolvency statute. For consumers, the primary concern over ipso facto clauses relates to basic services, such as telephone, gas, electricity and leases. This prohibition previously existed only in the case of consumer proposals and is now extended to bankruptcy situations.

Will my Creditors Stop Harassing me?

Yes, they will! By law, all actions against a bankrupt must cease once the documents are filed. This does not apply to secured creditors such as banks holding, for example, a lien on a car.

Who Will Know?

 In a bankruptcy, where there are significant assets, a notice is placed in the "legals" section of the newspaper notifying creditors of the date of the meeting of creditors. If there are minimal assets, the creditors are notified by mail only - there is no advertisement in the "legals" section of the newspaper. Any legal filing of a bankruptcy is a public document which the general public has access to. From this documentation, the Credit Bureau is notified and the bankruptcy is recorded and will remain on your credit record for 6 years. This does not mean that you cannot obtain credit during this time. Any granting of credit is the responsibility of the creditor to approve.

How is my spouse affected?

Your spouse, whether common law or married will not be affected by your bankruptcy if he or she is not responsible for any of your debt (did not sign an agreement or contract for any of your debt). If they have a supplemental credit card they are probably responsible for that debt. Your spouse's credit rating will not be affected by your bankruptcy and any assets in the spouse's name will not be part of the bankruptcy.

If your spouse is responsible for any of your debt or has his own debt then the spouse may have to file bankruptcy too.

Can my bank refuse to let me open a bank account or cancel my existing account?

No. They cannot. If your bank cancels or refuses to open a bank account for you because you have been or are in bankruptcy they are breaking the laws of the land. For more information and to lodge a complaint please refer to this page.

What do I do if I have Canadian debt but now live in a foreign country?

You have a number of options, and may even be able to file Canadian bankruptcy from that foreign country. For details please refer to this page.

How much am I allowed to keep?

The property exempt from seizure is set by the provinces and territories as follows:

Alberta; B.C.; Manitoba; New Brunswick; Newfoundland; Nova Scotia; NWT/Nunavut;

What don't I keep?

 In a bankruptcy, assets in excess of your allowed personal exemption, such as, real estate, automobiles and boats that are the property of the bankrupt as at the date of bankruptcy and anything that the bankrupt acquires during the bankruptcy vests in the trustee for the benefit of the creditors of the bankrupt. This would include inheritances received or to which the bankrupt might become entitled, by the death of someone during the time of the bankruptcy. It also includes such things as lottery winnings and anything that the bankrupt might accumulate, such as assets bought with any surplus income.

Tax refunds outstanding, as at the date of the bankruptcy, also vest in the trustee for the benefit of the creditors. Income Tax law requires a bankrupt to file two tax returns for the year of the bankruptcy. The first (pre bankruptcy tax return) covers the period January 1st through to the date of bankruptcy. The second (post bankruptcy tax return) covers the period starting with the date of the bankruptcy and ending December 31st. Pre and Post bankruptcy tax rebates vest in the trustee for the benefit of the creditors.

How do I go into bankruptcy?

There are two ways a person can go into bankruptcy. The first and more common way is to have the person make an assignment in bankruptcy (voluntarily go into bankruptcy). The second, and rarely used way, is for creditors to ask the Court to make an Order that a person is bankrupt. In both these cases a Trustee in Bankruptcy is required to administer the bankruptcy.

What about my wages during bankruptcy?

There are standards supplied to the trustee by the Superintendent of Bankruptcy which instructs the trustee to collect funds, for the benefit of creditors, from any earnings above what is reasonable for the number of people in the family and the bankrupt's personal situation.  To find out how much you would have to pay fill in this form.

When is my bankruptcy over?

For those people who have not been bankrupt before, an automatic discharge will take place after nine months if the creditors, Superintendent of Bankruptcy or trustee have not opposed your discharge and you have received counselling. Occasionally, creditors do object and the matter goes to mediation or is heard before a Registrar or a Judge. The discharge is usually granted where the bankrupt is only earning sufficient income to keep himself and his dependants reasonably provided for. It is the discharge of the bankrupt, with minor exceptions, that cancels the bankrupt's debts. In the event that you have been bankrupt before, your discharge will not be automatic and must be heard before a Judge or a Registrar.  

What if I have the cash flow to make a proposal?

If a person has the ability to make a proposal (i.e. his or her income exceeds living expenses), then he or she should consider making a proposal.
If any person files for bankruptcy when he or she has the ability to make a proposal, it is the Trustee's duty to oppose the bankrupt's discharge.  In this case, the bankrupt may be in bankruptcy up to an additional 12 months beyond the usual 9 months.  The bankrupt will be required to make payments in each of these months.

 What about the terrible stress that I am under?

Once you file bankruptcy or a proposal you'll find that your stress will be gone.

You have taken a positive step to regain financail control over your life. Once the bankruptcy or proposal papers are filed the trustee takes over all dealings with your creditors. If a creditor or collector calls tell him you have filed and refer him to your trustee.

It's the law in Canada that all legal action stops once a bankruptcy or proposal is filed.

Will I end up with a better credit rating if I use a credit counsellor?

No! So long as you are on any kind of payment plan the credit bureau will record this fact. Using a credit counsellor will not give you a better credit rating faster. In fact, you will likely take longer to re-establish a good rating and pay much more if you use credit counsellor rather than a trustee. For more information about credit counsellors and trustees refer to this page.

What is counselling and do I have to take it?

You must take counselling in order to be eligible for a discharge from bankruptcy and to complete your consumer proposal. 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 bankruptcy; the second counselling session must be held no later than 210 days following the date of bankruptcy. The cost for this is $85, plus GST, for each individual counselling session.

What happens during the bankruptcy?

The bankrupt must keep the trustee informed as to where the bankrupt is living and also must respond to the trustee's requests and assist him as required and provide whatever information is requested. The bankrupt must also provide the trustee with reports as to earnings and living expenses and any change in the bankrupt's family situation. The trustee will provide the bankrupt with appropriate forms to be filled in that will provide the trustee with the necessary information.  A meeting of creditors is not required unless requested by the Superintendent of Bankruptcy or creditors with an aggregate of at least 25% of the proven claims.  These meetings are usually held at the office of the trustee.

What about alimony and maintenance?

Alimony or maintenance payments are not affected by bankruptcy. These payments must be kept up to date. A bankruptcy does not stop any actions for collection.  Alimony and maintenance are provable claims and will be paid as a preferred claim for amounts incurred in the year before bankruptcy.

What about student loans?

If the date of bankruptcy is more than ten years after the finish of studies, the debt will be wiped out upon the bankrupt's discharge.

A discharge from bankruptcy does not release a student loan if the bankruptcy occurs within ten years after finishing studies.  A Court can order the discharge from a student loan at any time after ten years of ceasing to be a student, and after being discharged from bankruptcy, if the person has acted in good faith and the person will continue to experience financial difficulty in paying the student loan.

What debts are erased in a bankruptcy?

Most debts are erased by the bankrupt's discharge except for the following:

1.Fines imposed by a Court;
2.Money owing for things stolen;
3.Things obtained by misrepresentation;
4.Alimony or maintenance payments.
5.Award of damages by a court for intentionally inflicting bodily harm or sexual assault.
6.Student loans if bankruptcy is filed prior to or within ten years after the finish of studies.

What does it cost?

Trustee fees, filing fees and counselling fees are regulated by the government. The trustee normally is paid out of the funds arising from the liquidation of the bankrupt's assets. If the bankrupt has no assets available, then the trustee will require a retainer or require the bankrupt, over time, to pay the trustee's fees and disbursements. In the simplest cases this amounts to $1,347 plus GST and counselling costs. The firms listed on BankruptcyCanada.com have a payment plan that allows you to pay the costs over time. To find out how much you would have to pay fill in this form.

Will I ever get credit again?

You will get credit again after a bankruptcy or a proposal. Please refer to our tips on reestablishing a good credit rating and our list of After Bankruptcy Lenders all across Canada.

Referred from: (http://www.bankruptcycanada.com/)