What is the Bankruptcy Assistance Program?
Bankruptcy is a legal process that frees you from all your debts (with few exceptions, such as child support, spouse support, and court fines).
It is considered a last resort when dealing with debts.
It offers you honest but unfortunate protection you’re your creditors and a ‘discharge’ of all the debts (excluding those that are not dischargeable), at the end of the bankruptcy term.
We recommend that you file for bankruptcy only if other debt relief measures fail.
The Bankruptcy Assistance Program (BAP) is a very significant program for consumers who decide to opt for bankruptcy.
Here’s a look at what this program is, how to use it, and whom it benefits.
But first, let us look at what bankruptcy means.
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Personal bankruptcy
Personal bankruptcy entails surrendering certain assets to a Licensed Insolvency Trustee (LIT) in exchange for the elimination of your debts.
The Licensed Insolvency Trustee is a professional who has the authority to administer a bankruptcy in Canada.
While the service fees of a LIT is regulated and therefore moderate, several Canadians cannot afford to pay these fees.
In such cases, the Bankruptcy Assistance Program comes to the rescue.
What is the Bankruptcy Assistance Program?
The Bankruptcy Assistance Program is a program designed under the Bankruptcy and Insolvency Act to make bankruptcy affordable for low-income consumer debtors who can’t afford to pay the high fees of a licensed Trustee in Bankruptcy.
Not everyone can opt for the Bankruptcy Assistance Program, and individuals must qualify to benefit from the program.
Who qualifies for the BAP?
You will qualify for the Bankruptcy Assistance Program if you:
- Have contacted at least two LITs and have not been able to work out a lower payment plan with them;
- Are currently not in jail;
- Have not been recently involved in any commercial activities like selling goods or running a business;
- Don’t have sellable assets;
- Don’t have surplus income (surplus income is any money that you earn over a predefined limit).
How the BAP can help you
Many low-income groups cannot afford the fees of a Licensed Insolvency Trustee.
When you apply for help through the program:
- The program will help you find an affordable Trustee;
- The Trustee will allow you to make only a minimum fee payment;
- You will have a longer period to pay them if making regular payments will cause you hardships;
- The fees will depend on your disposable income after taking your reasonable living expenses into account.
How to apply for the Bankruptcy Assistance Program
1. The first step is to try to secure the services of a LIT the regular way.
Contact the Office of the Superintendent of Bankruptcy (OSB).
Explain your problem to them and request they send you their information package and registration form.
All the information is available on their website.
2. The OSB will send you a list of LITs in your area who participate in the BAP (not all trustees participate in this voluntary program), as well as a registration form.
Do not fill-up the form at this point.
3. Visit a trustee who is on the provided list.
Most trustees offer the first consultation for free.
The trustee will assess your financial situation and explain your options.
If, after the standard consultation, you cannot reach an agreement on how to handle the bankruptcy, you must ask the trustee to provide a signed statement regarding the reason you couldn’t reach an agreement.
4. Try the same process with a second trustee on the list.
If you again cannot come to an arrangement, they will need to provide a signed statement regarding the reason you couldn’t reach an agreement.
5. Only after the above steps can you fill the registration form to enroll in the Bankruptcy Assistance Program.
If you are eligible for the BAP, the Office of the Superintendent of Bankruptcy will refer you to a third trustee under the Bankruptcy Assistance Program.
This trustee is legally bound to help you file a bankruptcy and notify your creditors of the same.
All this is done for ‘costs.’
The cost will vary anywhere between $400 and $800.
Will I continue to be eligible for BAP if my income increases after I have been accepted into the program?
If your income increases after your acceptance into the Bankruptcy Assistance Program, the Trustee will determine if you have a surplus income (under the Superintendent of Bankruptcy Standards for Surplus Income Payments).
If you do have a surplus income, then the Bankruptcy Assistance Program will not be available to you any longer.
You will have to make surplus income payments based on your new income to the Bankruptcy estate.
That is also a clause to ensure your discharge from Bankruptcy.
The federal government sets standards to assess if you will be required to make surplus income payments to the bankruptcy estate.
How long will it take for me to be discharged from bankruptcy?
If this is your first bankruptcy, you are eligible for automatic discharge in 21 months provided:
- Your discharge is unopposed
- You have complied with every one of the required surplus income payments.
If this is your second bankruptcy, then you are eligible for discharge after 30 months provided:
- Your discharge is unopposed
- You have complied with every one of the required surplus income payments.
What is the amount of surplus income payments that are required to be made to the bankruptcy estate?
The amount will depend on several factors, such as:
- Your household income;
- The number of people residing in your household along with you;
- Whether you have been bankrupted before;
Will I have to attend court for my discharge?
Yes, you will have to attend court for your discharge if you have been bankrupted on three or more occasions.
That is regardless of whether or not you have to pay surplus income payments.
Conclusion
A bankruptcy process can be very costly.
The Bankruptcy Assistance Program is the Canadian government’s way of helping those who are unable to pay the fees of court, document filing, and trustee’s fee.
However, bankruptcy can have some severe consequences, such as lower credit rates, and the loss of all your non-exempt assets.
So, ensure that you have run out of options before filing for bankruptcy.
Canadian Bankruptcies
How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?
