F.A.Q. Bankruptcy.

What impact will bankruptcy have on my credit rating?
Bankruptcy reduces your credit rating to R9 and this rating remains on your record for 6 years after your discharge for a first time bankrupt. These ratings are set by the relevant credit bureaus whose rules may vary.

How much does it cost?
Our fees are determined by law. The cost of bankruptcy varies by case according to, among other parameters, household income, household size, non-discretionary expenses, and seizable assets.

When will I be discharged from bankruptcy? 
– If you are a first-time bankrupt and you are below the surplus income guideline, then your bankruptcy period is 9 months. 
– If you are a first-time bankrupt and you are above the surplus income guideline, then your bankruptcy period is 21 months. 
– If you are a second time bankrupt and you are below the surplus income guideline, then your bankruptcy period is 24 months. 
– If you are a second time bankrupt and you are above the surplus income guideline, then your bankruptcy period is 36 months.

How will filing a bankruptcy affect my spouse? 
That depends on whether or not you have joint debts.

How will my spouses assets be affected by my bankruptcy? 
Assets owned entirely by your spouse or partner are not included in your bankruptcy. If you and your spouse or partner own assets jointly, your interest will vest in the Trustee. The Trustee will seek to sell your interest in the jointly owned assets to your spouse/partner, or alternatively, to a third party. This answers assumes there have been no recent transfers of assets to your spouse or partner.

Can I file jointly with my spouse?
Yes you may file a joint bankruptcy with your spouse if you have joint debts. This avoids paying double the fees and costs to the Trustee.

What happens to windfalls such as lottery winnings or inheritances?
All windfalls such as lottery winnings and inheritances that you receive or become entitled to prior to your discharge from bankruptcy must be turned over to the Trustee. If there is a surplus of funds after payment of the creditors claims, the surplus will be remitted to you.

Will legal actions continue after bankruptcy?
Bankruptcy immediately stops substantially all legal claims, garnishments or other legal proceedings. If you are served with legal or collection notices after bankruptcy, we will immediately advise the creditor and put an end to the proceedings. Exceptions are legal proceedings with respect to alimony claims, spouse and partner support claims and child support claims.

What happens to my debts in a bankruptcy?
A: Filing a bankruptcy does not terminate or extinguish your debts but it does put a freeze or stay of proceedings on them. This means that your creditors may no longer continue collection or garnishment proceedings against you. There are some exceptions to this. Contact our office and we will be happy to discuss the exceptions with you. Legal liability to pay your debts, except those listed under section 178(1) of the Bankruptcy and Insolvency Act, is terminated or extinguished upon obtaining your discharge from bankruptcy.

What is a section 178 debt?
The debts listed under section 178(1) of the BIA include: court fines, penalties and restitution orders; support arrears; an amount owed due to fraud or theft while acting in a trust or fiduciary capacity; debt attributable to the obtaining of property or services by false pretences or fraudulent misrepresentation; damages awarded by a civil court in relation to intentionally inflicted bodily harm, sexual assault or wrongful death resulting therefrom; and certain student loans.

What happens to my credit cards when filing a bankruptcy?
If you declare bankruptcy, you are required to turn over all of your credit cards to the Trustee, whether or not amounts are owed on these cards.

What happens to the co-signer of my loans if I choose to file bankruptcy?
A bankruptcy does not remove your creditors rights to collect from the co-signers of your loans. Your co-signers will have to pay the debt in your place but may be entitled to a dividend instead of the creditor.

How can I rebuild my credit? 
Good credit is based on responsible and positive credit activities recorded on your credit bureau report. Responsible and positive credit activity means paying on time every month. Your goal is to maintain a credit rating of R1 for each of your active creditors.

What is a secured credit card and how do I get one?
A secured card is a card secured by funds you have deposited with the bank. The card looks like a credit card, and acts like a credit card but will have available credit limited to the amount of money that secures the card. To learn more about secured cards, consult the following website of the Financial Consumer Agency of Canada www.fcac.gc.ca . You will learn more about how secured cards work and which banks and companies offer them.

Can my tax debt be included when filing a bankruptcy?
Yes your income tax debt can be included. Income tax debts are not considered secured debts.

Can my student loans be included when filing a bankruptcy?
Yes. Student loans cannot be discharged unless seven years have passed since you were last a student.

What is surplus income?
– The federal government determines net monthly income thresholds for a household to maintain a reasonable standard of living. When you file for bankruptcy every dollar you make above that limit is considered to be surplus. The government has deemed that 50% of that surplus must be remitted to your bankrupt estate for the benefit of your creditors. You are required to make these payments every month for the period of time you are in bankruptcy.
– If you make less than the amount the government deems is appropriate to maintain a reasonable standard of living, and therefore do not have a surplus income, you may still be required to make a payment to the Trustee to satisfy its fees and costs.

If I declare bankruptcy, what happens to my tax refunds, GST/HST refunds, Ontario Trillium Benefit, and monies that I receive for my children (ie. Child Tax Benefit, Universal Child Care Benefit, Baby Bonus)?
– Tax refunds for the bankruptcy year may be seized by the Trustee. GST refunds will be sent to the Trustee during your bankruptcy but in most cases will be returned to you at the end of the administration. 
– Family allowances (ie. Child Tax Benefit, Universal Child Care Benefit, Baby Bonus) will not be seized by the Trustee, however, you are required to report these amounts as household income when filing your monthly reports.

Can I start my own business if I declare bankruptcy?
When you are in bankruptcy, you cannot be the director of an incorporated company but you may continue to be self-employed.

Will I have to go to Court at any point in time?
You may have to attend Court in the event the Trustee or your creditors oppose your discharge from bankruptcy. In this circumstance you may choose to attend Court to plead your situation.