{"id":8581,"date":"2019-09-16T21:00:46","date_gmt":"2019-09-17T01:00:46","guid":{"rendered":"http:\/\/www.irasmithinc.com\/blog\/?p=8581"},"modified":"2019-09-14T13:05:37","modified_gmt":"2019-09-14T17:05:37","slug":"how-to-file-for-bankruptcy-in-canada-personal-bankruptcy","status":"publish","type":"post","link":"https:\/\/irasmithinc.com\/blog\/how-to-file-for-bankruptcy-in-canada-personal-bankruptcy\/","title":{"rendered":"HOW TO FILE FOR BANKRUPTCY IN CANADA: PERSONAL BANKRUPTCY MODUS OPERANDI"},"content":{"rendered":"

\"how<\/a><\/p>\n

If you would prefer to listen to the audio version of this how to file for bankruptcy in Canada Brandon’s Blog, please scroll to the bottom and click on the podcast below<\/strong><\/p>\n

Introduction<\/b><\/span><\/h2>\n

I am most often asked by people <\/span>how to file for bankruptcy in Canada<\/b>.\u00a0 When I receive that question, I tell people that there are a few steps that need taking before the actual filing.\u00a0 These steps are the process I use to make sure that the person can actually benefit from <\/span>personal bankruptcy<\/span><\/a>.\u00a0 I don\u2019t just put someone into bankruptcy and hope that it will work out alright for them.\u00a0 I have to make sure upfront that there is a benefit for them. It has to make sense.<\/span><\/p>\n

Getting over the initial fear<\/b><\/span><\/h2>\n

It takes a lot for a person to overcome that initial fear and reach out to phone me.\u00a0 They are admitting that they have financial problems. I understand the fear a person has.\u00a0 My role in that first phone call or meeting, for which there is no charge, is to help the person get over their fears.\u00a0 I answer the most important questions the person wants to be answered. I also need to remind them that the answers are by necessity, generic.\u00a0 Once I have their specific information, then I can answer their questions in a way that is specific to their situation.<\/span><\/p>\n

How do I apply for bankruptcy in Canada?<\/b><\/span><\/h2>\n

The first step in the application process is providing me with detailed information about your specific situation.\u00a0 We get this information by having you complete our initial assessment intake sheet. We call ours the <\/span>Debt Relief Worksheet<\/span><\/a>.<\/span><\/p>\n

The Debt Relief Worksheet collects the information we need to do a proper initial assessment.\u00a0 The information collected includes:<\/span><\/p>\n

    \n
  1. Basic details such as name, address and marital status.<\/span><\/li>\n
  2. A listing of all your assets and your debts.<\/span><\/li>\n
  3. Your employment.<\/span><\/li>\n
  4. Your household monthly cash flow\/budget.<\/span><\/li>\n
  5. Questions whose answers are important to understanding who you are.<\/span><\/li>\n<\/ol>\n

    You can <\/span>click here to see a copy of our Debt Relief Worksheet<\/span><\/a>.<\/span><\/p>\n

    The free assessment<\/b><\/span><\/h2>\n

    Once I have a fully completed Debt Relief Worksheet, I can then analyze the information and provide you with an assessment designed specifically for you.\u00a0 Normally, when you first submit the information to me, I will have to follow up on questions for you to answer. This is all normal.<\/span><\/p>\n

    Once I have the full picture, I can properly assess what bankruptcy will mean for you.\u00a0 This will lead us to a discussion of alternatives to avoid bankruptcy that is right for you.\u00a0 It may be that you have a specific issue that can be dealt with outside of bankruptcy. Once resolved, the rest of your situation is manageable without resorting to a filing under the <\/span>Bankruptcy and Insolvency Act<\/span><\/i><\/a>, RSC 1985, c B-3 (BIA).<\/span><\/p>\n

    The next possibility is you can\u2019t fix things on your own, but you still do not need a <\/span>licensed insolvency trustee<\/span><\/a> (formerly known as a trustee in bankruptcy) (Trustee) to do a BIA filing on you.\u00a0 Perhaps with <\/span>credit counselling<\/span><\/a>, you can get your budget under control and pay down your debts.\u00a0\u00a0<\/span><\/p>\n

    If the right answer is that you do not need to file under the BIA, I will tell you so and connect you with the proper help that you need.\u00a0 The cost for me to review your situation and provide you with the right alternatives available to you is zero. It will not cost you anything.<\/span><\/p>\n

    Consumer proposal vs bankruptcy<\/b><\/span><\/h2>\n

    If you do need a formal insolvency filing, we have to figure out which one.\u00a0 We are still looking at if you can <\/span>avoid bankruptcy<\/span><\/a>.\u00a0 We do this by looking at your whole situation.\u00a0 We first look at what bankruptcy means to you. What would the outcome of your bankruptcy be?<\/span><\/p>\n

    Some of the factors we consider are:<\/span><\/p>\n

      \n
    1. Your assets that would not be exempt and therefore would be handed over to us as your Trustee.<\/span><\/li>\n
    2. Have you ever been bankrupt before?<\/span><\/li>\n
    3. Are your debts $250,000 or higher, not including any mortgages or other loans secured by your principal residence?<\/span><\/li>\n
    4. Do you owe $200,000 or more to Canada Revenue Agency (CRA) for unpaid income tax?<\/span><\/li>\n
    5. Are all your tax filings up to date?<\/span><\/li>\n
    6. Your income and do you have a surplus income?<\/span><\/li>\n
    7. If you do have surplus income, what would your monthly payment be and can you afford it in your budget?<\/span><\/li>\n
    8. Based on the information you gave us, can we determine the likelihood of any creditor opposing your discharge from bankruptcy?<\/span><\/li>\n
    9. Any other special circumstances you have told us about.<\/span><\/li>\n<\/ol>\n

      The answers to these questions help us determine if you need to file for <\/span>bankruptcy<\/span><\/a> or not.\u00a0 In many cases, I help people avoid bankruptcy by filing a <\/span>consumer proposal<\/span><\/a>.\u00a0 As I have written before, in many cases, it is possible to avoid bankruptcy.\u00a0\u00a0<\/span><\/p>\n

      By filing a viable consumer proposal <\/span>debt settlement plan<\/span><\/a>, you are offering to pay your creditors a fraction of what you owe.\u00a0 You are promising to make monthly payments for a time period not greater than 60 months.\u00a0 A successfully completed consumer proposal will release you from your debts that exist at the time of your filing.<\/span><\/p>\n

      Those that are eligible to file a consumer proposal choose this option.\u00a0 They are happy to avoid bankruptcy. Our assessment and the advice we give you on consumer proposal vs bankruptcy is still free.<\/span><\/p>\n

      How to file for bankruptcy in Canada<\/b><\/span><\/h2>\n

      If we decide that <\/span>bankruptcy<\/span><\/a> is necessary, we will then prepare the required documents.\u00a0 These documents include your sworn Statement of Affairs and your monthly cash flow budget.\u00a0 The Statement of Affairs is a document that:<\/span><\/p>\n

        \n
      1. Identifies you.<\/span><\/li>\n
      2. Lists your assets with their respective estimated realizable value.<\/span><\/li>\n
      3. Indicates which assets are exempt from seizure, if any.<\/span><\/li>\n
      4. Lists your creditors by name and amount owing.<\/span><\/li>\n<\/ol>\n

        Part of the filing process is that the<\/span> insolvent person<\/span><\/a> swears that the document is accurate.\u00a0 This is done in our office as our Trustees are also commissioners for taking oaths for the work we do.\u00a0 All of this is done in my office.<\/span><\/p>\n

        I then electronically file the sworn Statement of Affairs and other required documents with the <\/span>Superintendent of Bankruptcy<\/span><\/a>.\u00a0 Once the Official Receiver, who is the Superintendent of Bankruptcy\u2019s local official, reviews and accepts the filing, the insolvent person is officially bankrupt.<\/span><\/p>\n

        This is how a person files for bankruptcy in Canada.<\/span><\/p>\n

        What happens if I declare bankruptcy in Canada?<\/b><\/span><\/h2>\n

        Once you declare bankruptcy (or file a consumer proposal), all collection and enforcement action against you stops.\u00a0 Creditors can no longer sue you or harass you trying to collect the outstanding debts. You are now protected by the <\/span>stay of proceedings<\/span><\/a>.<\/span><\/p>\n

        Then the Trustee needs to take possession of your assets that are not exempt from seizure under provincial law.\u00a0 Before you file, I always tell you what those assets are and what will happen.<\/span><\/p>\n

        If you declare bankruptcy (or file a consumer proposal), you will have to attend two <\/span>counselling sessions<\/span><\/a>.\u00a0 Those sessions are conducted in my office by the Trustee who is also a qualified credit counsellor.<\/span><\/p>\n

        If you have met all of your duties and responsibilities in your bankruptcy, including the payment of surplus income if required, you are then entitled to a <\/span>discharge from bankruptcy<\/span><\/a>.\u00a0 If no creditor or the Trustee objects to your discharge, then you receive an absolute discharge.\u00a0 If there is something in your activities or your background where there is an objection to your discharge, then the matter must be heard in the bankruptcy court.<\/span><\/p>\n

        Before you file, I will give you my best-educated guess on the likelihood of an objection to your discharge arising.<\/span><\/p>\n

        Will I lose my house if I file bankruptcy in Canada?<\/b><\/span><\/h2>\n

        If you declare bankruptcy, there are various ways and conditions in bankruptcy that you will NOT lose your house.\u00a0<\/span><\/p>\n

        Everybody who owns a house and also experiences financial issues is worried about losing their house. Losing your home is possibly among the most terrible concerns people with a huge debt load that is crushing them have. This is exactly how it functions if you file for personal bankruptcy in Ontario.<\/span><\/p>\n

        In Ontario, the provincial regulation that describes what is excluded from seizure is called the <\/span>Execution Act<\/span><\/i>, R.S.O. 1990, c. E.24<\/span><\/a>. For a full checklist of all bankruptcy Ontario exemptions, please review my Brandon’s Blog, <\/span>BANKRUPTCY IN ONTARIO CANADA SECRETS EXPOSED<\/span><\/a>.\u00a0<\/span><\/p>\n

        The exemption in Ontario for your house is $10,000 of equity. The present thinking is that if your equity is $10,000 or less, if you go bankrupt, then your entire equity is excluded from seizure by the Trustee. Nonetheless, if your equity is $10,001 or greater, your whole equity in your home is <\/span>NOT<\/b> exempt and also is readily available to your Trustee for the benefit of your creditors.<\/span><\/p>\n

        Keep in mind that we are talking about your equity.\u00a0 In determining your equity, we first have to determine the market value of the house.\u00a0 We then deduct any mortgages or other loans registered against the property. The net result of this calculation represents your equity.\u00a0 If you own the home jointly with your spouse, then it is half of that number that is your equity. The other half belongs to your spouse.<\/span><\/p>\n

        If someone is available and willing to purchase your equity from the Trustee for its value, then the Trustee will collect that money.\u00a0 Once the Trustee sells its interest in the equity of your home, the Trustee no longer has an interest. If the person purchasing your equity is your spouse, another relative or friend, they are doing it so that you will not have to leave your home.<\/span><\/p>\n

        If that happens, then you will not lose your house if you file for bankruptcy.\u00a0 If you have no equity because the loans registered against your home is equal to the home\u2019s value, again, you will not lose your home.<\/span><\/p>\n

        How much does it cost to file bankruptcy in Canada?<\/b><\/span><\/h2>\n

        The expense of declaring bankruptcy is something you will certainly need to take into consideration. Just how much you will need to pay to go bankrupt relies on a number of variables, including:<\/span><\/p>\n