What Happens When I File Bankruptcy?

After your Licensed Insolvency Trustee (LIT),  files the necessary paperwork with the Office of the Superintendent of Bankruptcy, you are officially bankrupt. Once you have become bankrupt you will promptly receive protection from your creditors through what is known as the “stay of proceedings.” Your trustee will also now deal directly with your unsecured creditors that were included in your bankruptcy, which means: * You won’t make any payments to your unsecured creditors, and will instead make all payments directly to the LIT. You will continue to pay your secured creditors if the debt was not included in the bankruptcy; * Any lawsuits to attempt collection by your creditors will stop; * Wage garnishments will stop; * Any non-exempt property will be surrendered to the trustee and sold. The proceeds will be distributed to your creditors. Once you go bankrupt, a record of the fact will be reported to the credit bureaus and your credit report. You will stop paying on all of your unsecured debts, although they won’t be legally eliminated until your bankruptcy is over.

Licensed Insolvency Trustee (LIT) Role

What Are The Responsibilities of a Licensed Insolvency Trustee (Bankruptcy Trustee)?

Your LIT is responsible to ensure your rights and the rights of the creditors are respected. Your Trustee is a court-appointed officer, and therefore does not work for you or your creditors. The trustee will always give you their best advice and will work to ensure you and your creditors are treated fairly. Your trustee will be responsible for selling any of your non-exempt assets that you must surrender when going bankrupt. Some of your assets are protected by the bankruptcy exemptions; Your LIT will be responsible for holding the money that is collected from the sale of your non-exempt assets in a trust for distribution to your unsecured creditors that are included in your bankruptcy papers; Your trustee will be responsible for notifying your creditors of your bankruptcy. As a Licensed Insolvency Trustee can also act as a consumer proposal administrator, your trustee will also notify your creditors in the case you file a consumer proposal; Your trustee will also be responsible for collecting the required payments you must make to your bankruptcy estate, including any “surplus income” payments.

The Bankrupts’ Duties While in Bankruptcy

When you go bankrupt you will have several duties that you must complete in order to get your discharge, which is the document that ends your bankruptcy and eliminates all of your debts. Without your bankruptcy discharge, you will remain an undischarged bankrupt, and your debts will still exist. * You will be responsible to disclose to your LIT information about the assets you own and your debts and liabilities; * You must inform your bankruptcy trustee about any property that was sold or transferred over the past few years; * You will be required to surrender all credit cards to your Licensed Insolvency Trustee, even if they have a zero balance; * If a creditors meeting is requested (which is rare), you will be required to attend this meeting; * A bankrupt is required to attend two counselling sessions with their trustee; * You will be responsible to pay the trustee all required fees, including any potential surplus income payments. The basic cost of bankruptcy is $1,800 paid over 9 months. During the bankruptcy process you will be required each month to report to your trustee your income so the trustee can calculate your surplus income payments, if any.

What Happens When I Go Bankrupt – Surplus Income

The government sets an amount of income for a family to maintain a reasonable standard of living based on family size and if your income exceeds this threshold any part of your earnings over the threshold is considered surplus income. If your household income exceeds the level that is set by the OSB, you must make additional payments to the bankruptcy estate and your bankruptcy will be extended by 12 months. If your surplus income is $200 a month or more per month you will have to pay 50% of the amount to your LIT.

Attending a Meeting of Creditors

In the rare case of a meeting of your creditors is called by your creditors you will be required to attend this meeting. At this meeting you will be able to meet with your creditors with your trustee with you to ensure your rights are protected and the meeting is fair. The meeting of creditors is called to: * Give creditors more information about your bankruptcy and to allow your creditors to learn more about the circumstances surrounding your bankruptcy; * Allow the creditors a chance to give direction to the LIT; * Confirm the appointment of the Licensed Insolvency Trustee; * Allow a chance for up to 5 inspectors be appointed to supervise the administration of your estate;

Attending Two Counselling Sessions

All bankrupts are required to attend two financial counselling sessions. You can elect to have these meetings one-on-one with the trustee or you have the option of attending meetings with other bankrupts that are working with your trustee. The choice is totally yours. At these sessions with the trustee you will learn about money management skills and you will learn about the causes of your bankruptcy and how you can avoid the same problems in the future so you can avoid a second bankruptcy.

Getting Your Bankruptcy Discharge

Once you have completed all of your required duties and you have reached the time you are required to be in bankruptcy you will be discharged from bankruptcy.

Automatic Bankruptcy Discharge

First time bankrupts without surplus income payment requirements (surplus income payments are calculated to be $200 or less per month) will receive an automatic discharge from bankruptcy 9 months from the time your bankruptcy officially started. If your surplus income payments are calculated to be $200 or higher then your bankruptcy will be extended by 12 months to a total of 21 months and if you complete all of your duties, and make the required surplus income payments, you will still receive your automatic bankruptcy discharge after the 21 month bankruptcy period.

Timing of Your Automatic Bankruptcy Charge – First Bankruptcy

If you are a first time bankrupt without surplus income payments you will receive an automatic bankruptcy discharge in 9 months; If you are a first time bankrupt with required bankruptcy surplus income payments you will receive your automatic bankruptcy discharge in 21 months.

Second Bankruptcy – Automatic Bankruptcy Discharge Timing

If you are a second time bankrupt without surplus income payments you will receive an automatic bankruptcy discharge in 24 months from the official date of your bankruptcy filing; If you are a filing a second bankruptcy with required bankruptcy surplus income payments you will receive your automatic bankruptcy discharge in 36 months from the start of your bankruptcy.

Non-Automatic Discharge

In rare cases, such as a third time bankruptcy, you will not qualify for an automatic discharge. If you are not eligible to receive your discharge automatically your LIT will have to schedule a date for a discharge hearing. Your LIT will help you prepare a report to take to the discharge hearing, which you are required to attend. The document prepared by the trustee will help you inform the court of your bankruptcy circumstances and will have a note on your financial situation. The causes of your bankruptcy, the completion of your bankruptcy duties, your conduct during bankruptcy and a note of whether you were convicted of any Bankruptcy & Insolvency Act offences from section 198 to 208 during your bankruptcy. The court will then decide if you will receive your bankruptcy discharge, or they could grant a conditional discharge. If you receive a conditional discharge you will be required to complete the conditions before you can complete your bankruptcy and receive your discharge. The court may also give you a suspended discharge, which means your discharge from bankruptcy will be postponed to a later date. The court might also refuse your discharge.

How Do I Obtain a Bankruptcy Discharge if I Didn’t Receive My Discharge From Bankruptcy?

If you did not receive your bankruptcy discharge your debts are still alive and you are known as an undischarged bankrupt, which can put limits on your financial life. If you did not receive your discharge from bankruptcy you must work quickly to fix the situation. The first step to take will be to contact the LIT that provided you bankruptcy help. Your Licensed Insolvency Trustee can help you explore the reasons why you did not receive your discharge and what you can do to receive your discharge. Most people that did not get their discharge did not complete their bankruptcy duties and the trustee can help you complete your duties if this is the case. The OSB can help you find your original trustee if you cannot remember the name of the trustee. If your trustee will not help you obtain your discharge you can ask an insolvency lawyer to apply for your discharge. Certain provinces offer a do-it-yourself discharge kit.

What Debts Are Not Erased in Bankruptcy?

Certain debts that you might have might not be included in your bankruptcy. In other words, some debts can not be wiped out in bankruptcy and you will still be required to pay these debts in full if you go bankrupt. You are released from the legal obligation of repaying debts that existed at the time of your bankruptcy and were included in your bankruptcy paperwork with the following exceptions: * Alimony payments; * Child support payments; * Court imposed fines and penalties; * Debt Arising from fraud; * Student loans, if it has been less than 7 years since you stopped being a part-time or full-time student. A trustee might be able to help you make an application for the release of student loan debt based on hardship to repay the loan.

What About My Wages in Bankruptcy?

Your wages will not be affected by your bankruptcy, although your income can increase your cost of bankruptcy and the time you will be in bankruptcy. If you have surplus income payment requirements based on your wages you will be required to pay a certain amount of your surplus income to the trustee, who will distribute the funds to your creditors. A bankrupt is required to inform his LIT of his or her income during each month of the bankruptcy.