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Difference between revisions of "Assignments in Bankruptcy"
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Assignments in Bankruptcy (view source)
Revision as of 23:43, 16 September 2018
, 23:43, 16 September 2018no edit summary
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* assignments in bankruptcy
| * assignments in bankruptcy
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* proposals
| * proposals
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* orderly payment of debts (this remedy is not available in BC at this time)
| * [[Consumer and Ordinary Proposals|orderly payment of debts]] (this remedy is not available in BC at this time)
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This section discusses assignments in bankruptcy. Usually this involves a client working with a licensed insolvency trustee and volunteering to declare bankruptcy. | This section discusses assignments in bankruptcy. Usually this involves a client working with a licensed insolvency trustee and volunteering to declare bankruptcy. | ||
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* owe more than $1,000 to their creditors,
| * owe more than $1,000 to their creditors,
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* are generally unable to pay their credit obligations as the obligations become due, and
| * are generally unable to pay their credit obligations as the obligations become due, and
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* are unable to file a viable proposal.
| * are unable to file a viable [[Consumer and Ordinary Proposals|proposal]].
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It is possible to go bankrupt by owing money to only one creditor, but most people who go bankrupt have several creditors. | It is possible to go bankrupt by owing money to only one creditor, but most people who go bankrupt have several creditors. | ||
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As well, all essential clothing and medical and dental aids are exempt. A bankrupt may also keep equity in their principal residence of $12,000 if the residence is located within the Metro Vancouver or Victoria areas, and $9,000 if the residence is located elsewhere in BC. If two spouses own a principal residence together and both declare bankruptcy, they may each be able to claim a $9,000 or $12,000 (depending on the location) exemption on the equity in that principal residence (see [http://canlii.ca/t/fmscg ''Re Halverson'']). | As well, all essential clothing and medical and dental aids are exempt. A bankrupt may also keep equity in their principal residence of $12,000 if the residence is located within the Metro Vancouver or Victoria areas, and $9,000 if the residence is located elsewhere in BC. If two spouses own a principal residence together and both declare bankruptcy, they may each be able to claim a $9,000 or $12,000 (depending on the location) exemption on the equity in that principal residence (see [http://canlii.ca/t/fmscg ''Re Halverson'']). | ||
In cases where creditors have security claims over a debtor’s assets, bankruptcy can be a particular hardship because the creditor is usually entitled to repossess the asset as soon as a bankruptcy is started. It does not matter if the asset is normally exempt from being sold off for the creditors. If an asset is subject to a security agreement (extra assurance for the creditor in case the borrower cannot repay a loan), even down to basic household furnishings, the secured creditor is legally allowed to take it and sell it. Debtors may be forced to make arrangements to repay at least the actual value of the assets, during or after the bankruptcy, to avoid having the assets repossessed. | In cases where creditors have security claims over a debtor’s assets, bankruptcy can be a particular hardship because the creditor is usually entitled to repossess the asset as soon as a bankruptcy is started. It does not matter if the asset is normally exempt from being sold off for the creditors. If an asset is subject to a [[Security Agreements|security agreement]] (extra assurance for the creditor in case the borrower cannot repay a loan), even down to basic household furnishings, the secured creditor is legally allowed to take it and sell it. Debtors may be forced to make arrangements to repay at least the actual value of the assets, during or after the bankruptcy, to avoid having the assets repossessed. | ||
=== What may still be owed after bankruptcy=== | === What may still be owed after bankruptcy=== | ||
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* spousal or child support arrears
| * spousal or child support arrears
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* debt or liabilities arising from certain types of fraudulent conduct on the part of the debtor
| * debt or liabilities arising from certain types of fraudulent conduct on the part of the debtor
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* student loans if the debtor files for bankruptcy before ceasing to be a student or within seven years of ceasing to be a student (however, a former student can make a special application to be discharged from their student loan after having been out post-secondary studies for five years; see the section on Types of Lenders and Creditors)
| * student loans if the debtor files for bankruptcy before ceasing to be a student or within seven years of ceasing to be a student (however, a former student can make a special application to be discharged from their student loan after having been out post-secondary studies for five years; see the section on [[Types of Lenders and Creditors]])
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In some instances, a debtor will have to pay back some money to their creditors as a condition of their discharge. Courts are more likely to order partial repayment when the bankrupt has an income tax debt. | In some instances, a debtor will have to pay back some money to their creditors as a condition of their discharge. Courts are more likely to order partial repayment when the bankrupt has an income tax debt. | ||
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In most instances, a debtor goes to a trustee before making an assignment. The debtor may be referred to the trustee by a credit counselling service, a lawyer, or the official receiver. The trustee helps the debtor prepare the assignment papers. The trustee is usually then confirmed by the official receiver to handle the bankruptcy for that debtor. | In most instances, a debtor goes to a trustee before making an assignment. The debtor may be referred to the trustee by a credit counselling service, a lawyer, or the official receiver. The trustee helps the debtor prepare the assignment papers. The trustee is usually then confirmed by the official receiver to handle the bankruptcy for that debtor. | ||
The most important effect of an assignment is that all legal actions by creditors against the bankrupt are stopped. Unless creditors get court permission, they cannot sue a bankrupt or take judgment enforcement proceedings (see the sections on Enforcing Judgments Against Chattels and Enforcing Judgments Against Land). Most insolvent individuals and families file for bankruptcy under the “summary administration” provisions because the value of their eligible assets is less than $15,000. | The most important effect of an assignment is that all legal actions by creditors against the bankrupt are stopped. Unless creditors get court permission, they cannot sue a bankrupt or take judgment enforcement proceedings (see the sections on [[Enforcing Judgments Against Chattels]] and [[Enforcing Judgments Against Land]]). Most insolvent individuals and families file for bankruptcy under the “summary administration” provisions because the value of their eligible assets is less than $15,000. | ||
=== Licensed insolvency trustees === | === Licensed insolvency trustees === | ||
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Creditors who hold at least 25% of the dollar value of the total claims filed may request a meeting of creditors. They must do so within 30 days of the assignment. | Creditors who hold at least 25% of the dollar value of the total claims filed may request a meeting of creditors. They must do so within 30 days of the assignment. | ||
The ''Bankruptcy and Insolvency Act'' treats '''secured creditors''' differently from other creditors. A bankrupt cannot claim exemption of assets covered by a security agreement. The result can be harsh for the bankrupt since it is possible in some cases for secured creditors to take almost everything a bankrupt possesses. For example, if a properly registered security agreement specifically covers a bankrupt’s present household furnishings, they could be taken. Creditors can take and sell the assets covered by the security agreement and may also be able to make a claim to the trustee for the balance. In practice, the creditor and the bankrupt may agree to avoid the seizure by having the bankrupt enter into a new credit contract to pay the creditor for the actual value of the assets covered by the security agreement. | The ''Bankruptcy and Insolvency Act'' treats '''secured creditors''' differently from other creditors. A bankrupt cannot claim exemption of assets covered by a [[Security Agreements|security agreement]]. The result can be harsh for the bankrupt since it is possible in some cases for secured creditors to take almost everything a bankrupt possesses. For example, if a properly registered security agreement specifically covers a bankrupt’s present household furnishings, they could be taken. Creditors can take and sell the assets covered by the security agreement and may also be able to make a claim to the trustee for the balance. In practice, the creditor and the bankrupt may agree to avoid the seizure by having the bankrupt enter into a new credit contract to pay the creditor for the actual value of the assets covered by the security agreement. | ||
If a bankrupt owns a house, it may have to be sold, even if the bankrupt owns the house with a non-bankrupt person (including a spouse). The bankrupt is only entitled to a half-share of the net sale value of a jointly owned house. If half of the equity exceeds the exemption limit for a principal residence prescribed by the [http://canlii.ca/t/84h5 ''Court Order Enforcement Act''], it must go into the estate for the creditors. | If a bankrupt owns a house, it may have to be sold, even if the bankrupt owns the house with a non-bankrupt person (including a spouse). The bankrupt is only entitled to a half-share of the net sale value of a jointly owned house. If half of the equity exceeds the exemption limit for a principal residence prescribed by the [http://canlii.ca/t/84h5 ''Court Order Enforcement Act''], it must go into the estate for the creditors. | ||