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Difference between revisions of "Dealing with Debt (10:V)"
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→2. Personal Bankruptcy
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Personal Bankruptcy is governed by the BIA, and is based on the premise that the debtor is completely unable to pay their debts, even at a reduced rate, and does not have assets to liquidate (debtor is insolvent). Bankruptcy is one option to deal with a heavy debt burden. The record of a bankruptcy stays on a person’s credit record for a '''minimum''' of six years from the day the debts are discharged for a first-time bankrupt. This increases to 14 years for a second-time bankrupt. This does not necessarily mean that credit will be denied, only that the bankruptcy will be a factor that a potential creditor will consider when deciding whether or not to extend credit to that person. Certain professionals (such as lawyers, accountants, and mortgage brokers) may be required to report their bankruptcy to their professional organization. The BIA does provide that no person may be terminated just for filing bankruptcy. | Personal Bankruptcy is governed by the BIA, and is based on the premise that the debtor is completely unable to pay their debts, even at a reduced rate, and does not have assets to liquidate (debtor is insolvent). Bankruptcy is one option to deal with a heavy debt burden. The record of a bankruptcy stays on a person’s credit record for a '''minimum''' of six years from the day the debts are discharged for a first-time bankrupt. This increases to 14 years for a second-time bankrupt. This does not necessarily mean that credit will be denied, only that the bankruptcy will be a factor that a potential creditor will consider when deciding whether or not to extend credit to that person. Certain professionals (such as lawyers, accountants, and mortgage brokers) may be required to report their bankruptcy to their professional organization. The BIA does provide that no person may be terminated just for filing bankruptcy. | ||
The debtor is required by law to engage a trustee to administer their bankruptcy. Personal bankruptcy using a trustee may cost the debtor approximately $1685 (including $85 per counselling session, of which two are mandatory for a first-time bankruptcy and GST). Usually, the trustee will require a minimum payment to initiate the proceedings; however, the first appointment with a Trustee is free. The timelines for automatic discharge, in addition to being subject to fulfilment of the terms and conditions of the bankruptcy, are dependent on both bankruptcy history and the individual’s surplus income (as prescribed by the Superintendent of Bankruptcy standards – Directive 11R2). For monthly surplus income under $200, a bankrupt is not required to pay any amount to the bankrupt’s estate (Directive 11R2, 5(6)), and for monthly surplus income equal to or greater than $200, a bankrupt is required to 50% of their surplus income (Directive 11R2, 5(7)). For the | The debtor is required by law to engage a trustee to administer their bankruptcy. Personal bankruptcy using a trustee may cost the debtor approximately $1685 (including $85 per counselling session, of which two are mandatory for a first-time bankruptcy and GST). Usually, the trustee will require a minimum payment to initiate the proceedings; however, the first appointment with a Trustee is free. The timelines for automatic discharge, in addition to being subject to fulfilment of the terms and conditions of the bankruptcy, are dependent on both bankruptcy history and the individual’s surplus income (as prescribed by the Superintendent of Bankruptcy standards – Directive 11R2). For monthly surplus income under $200, a bankrupt is not required to pay any amount to the bankrupt’s estate (Directive 11R2, 5(6)), and for monthly surplus income equal to or greater than $200, a bankrupt is required to 50% of their surplus income (Directive 11R2, 5(7)). For the 2022 version of Directive 11R2 and example calculations, visit https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br03249.html | ||
If all the conditions of bankruptcy have been met, there are no facts for which a discharge may be refused pursuant to s 173 of the BIA, and no objections have been filed by creditors or the Superintendent of Bankruptcy Canada; | If all the conditions of bankruptcy have been met, there are no facts for which a discharge may be refused pursuant to s 173 of the BIA, and no objections have been filed by creditors or the Superintendent of Bankruptcy Canada; | ||
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*A second-time bankrupt with surplus income greater or equal to than $200 is automatically discharged after 36 months. | *A second-time bankrupt with surplus income greater or equal to than $200 is automatically discharged after 36 months. | ||
The average monthly surplus income is calculated at different times (Directive 11R2, 7(1)) depending on whether there have been any material changes in the bankrupt’s financial circumstances. Examples for calculating the average monthly surplus income can be found at https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br03249.html. The period of the discharge may also be extended for certain prescribed reasons under the BIA. Consult the Office of the Superintendent of Bankruptcy or trustee. | The average monthly surplus income is calculated at different times (Directive 11R2, 7(1)) depending on whether there have been any material changes in the bankrupt’s financial circumstances. Examples for calculating the average monthly surplus income can be found at https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br03249.html. The period of the discharge may also be extended for certain prescribed reasons under the BIA. Consult the Office of the Superintendent of Bankruptcy or trustee. | ||
=== 3. Debts That Bankruptcy Will Not Discharge === | === 3. Debts That Bankruptcy Will Not Discharge === | ||