How Bankruptcy Works

How Bankruptcy WorksBankruptcyCanada.com

Table of ContentsPage 3 How Bankruptcy Works

Page 6What You Keep in BankruptcyPage 7How to Choose a Good Trustee Page 12 What is the Bankruptcy Cost?

BankruptcyCanada.com

Page 16Steps in a Canadian Bankruptcy

Page 23Debts Erased in a Bankruptcy Page 25Discharge From BankruptcyPage 27Rebuilding Credit After Bankruptcy

How Bankruptcy Works

• A main purpose of the Canadian bankruptcy law is to afford a person the opportunity to get a fresh start by eliminating their overwhelming amounts of debt that they have no hope of repaying.• The main requirement for filing bankruptcy

in Canada is you must be insolvent which means your debts are at least $1,000 and you are unable to pay your debt as it becomes due.


How Bankruptcy Works• When going bankrupt you can keep certain assets to

help you with your “fresh financial start.”• The overview of how bankruptcy works is that most

people who file bankruptcy keep all their assets and are out of bankruptcy in nine months. In most cases all unsecured debts are erased upon the discharge (when the person is out of bankruptcy).

• In almost all bankruptcies the debtor must pay $200 each month for 9 months for a total cost of $1,800.

• Our bankruptcy cost calculator will give you the exact bankruptcy cost based on your personal situation.


https://bankruptcycanada.com/bankruptcy/bankruptcyexemptions/

https://bankruptcycanada.com/bankruptcy/discharge-from-bankruptcy/

https://bankruptcycanada.com/bankruptcy-calculators/bankruptcy-calculator/

How Bankruptcy Works

• How bankruptcy works is also by eliminating most debts.• While going bankrupt will eliminate most of your debts, certain debts

survive the bankruptcy:• Court imposed fines;• Money that you owe for items obtained through theft;• Money gained through misrepresentation;• Child support and alimony payment arrangements;• Damages that were awarded by the court for sexual assault or intentional

infliction of bodily harm;• Student loans if going bankrupt occurs prior to or within 7 years after

finishing the studies.


https://bankruptcycanada.com/canadian-student-loans/

What You Keep in Bankruptcy

• One of the major tenets of Canadian bankruptcy law is that a person, overwhelmed by debt, deserves the opportunity of a fresh financial start. Part of that fresh start includes leaving the person with enough possessions to maintain dignity and to help that person towards his or her fresh start.• The property exempt form seizure, in a bankruptcy, is set by

the provinces and territories.• Bankruptcy exemptions refer to the equity in the property

that is exempt from seizure in a bankruptcy or any other seizure situation.


https://bankruptcycanada.com/bankruptcy-law/

How to Choose a Good Trustee

• Choosing a bankruptcy trustee starts with setting up a meeting with a trustee. You can find a trustee here.

• You will need to make an appointment to meet with him or her. The initial consultation will be free.

• Your initial meeting may be with an Administrator and not the trustee in bankruptcy. This is alright. Administrators are highly skilled and trained. They are also under the close supervision of a trustee in bankruptcy. Before you sign any bankruptcy or proposal documents, a trustee in bankruptcy will meet with you and do an assessment of your financial situation. The trustee in bankruptcy will also sign some of the documents along with you.


https://bankruptcycanada.com/trustees1/


• Checklist for Choosing a bankruptcy Trustee.• When I first phoned the trustee office were they

responsive when I told them why I was calling? If I had to have someone phone me back did they get back to me quickly?• Is the initial consultation free?• If I wanted to see a trustee as soon as possible did the

trustee office set up the initial consultation in a matter of a day or two?



• If I had an emergency because someone was going to garnishee my pay was the trustee able to see me that day or early the next day?• Do the people at the trustee office treat me with

sensitivity and respect?• Did they keep you waiting much past your scheduled

appointment time?



• If they did keep you waiting past your appointment time did someone explain why they were delayed?• Did the trustee address all your questions and

concerns?• Am I going to be comfortable dealing with the

administrator or trustee?



• Did the administrator or trustee answer all my questions so I could understand how bankruptcy will affect my family and me?• Will I be given all my duties in writing?


What is the Bankruptcy Cost?

• In the vast majority of cases the bankruptcy cost is $1,800.00, which can be paid over 9 months at rate of $200.00 a month.• The cost of bankruptcy will depend on several

factors such as how much you earn and the size of your family.



• The base cost of filing bankruptcy: When you go bankrupt in Canada you will be required by your bankruptcy trustee to make a base contribution to your bankruptcy estate every month, which is generally $200 a month for 9 months (for a total of $1,800, which is the minimum cost of bankruptcy in Canada).



• Surplus Income Costs: In some bankruptcies you will have income over a threshold set by the government and in this case the cost of your bankruptcy will increase because you will be required to pay a portion of your excess income to your trustee for distribution to your creditors through your bankruptcy estate.


https://bankruptcycanada.com/what-is-surplus-income/


• These payments are known as surplus income payments. If you are required to make surplus income payment your bankruptcy will cost more and you will be bankrupt for longer.• You will be required to make surplus income payments if your

average income during the first 7 months you are bankrupt is $200 or more over the limit set by the government based on your family size.• Debtors who will have significant surplus income payments

might want to consider a consumer proposal as a bankruptcy alternative.


Steps in a Canadian Bankruptcy

• Step #1 in a Canadian Bankruptcy• Consultation with the Trustee.



• Step #2 in a Canadian Bankruptcy• Take the time to think over what

the trustee told you.



• Step #3 in a Canadian Bankruptcy• The trustee will mail out the bankruptcy

documents to your creditors within 5 business days of your signing the documents.



• Step #4 in a Canadian Bankruptcy• Each month you will send in your Statement of

Income & Expenses, pay stubs and the required monthly payment to your trustee.



• Step #5 in a Canadian Bankruptcy• Two financial counselling sessions are held at the

trustee’s office.• The first counselling session is held within the 1st

two months; the second one is held at the 7th month.• You must take the two financial counselling

sessions in order to be eligible for your discharge from bankruptcy.



• Step #6 in a Canadian Bankruptcy• At the eighth month, following your signing the

bankruptcy documents, your trustee must report on how you conducted yourself before and during the bankruptcy.• If you have conducted yourself properly and performed

all your duties your trustee will recommend an absolute discharge from bankruptcy.• The majority of bankrupts are discharged in nine

months.



• Step #7 in a Canadian Bankruptcy• Your Trustee will send you your Certificate of Discharge

which will certify that all your eligible debts have been erased.• The credit bureau will be notified and in 6 years the record

of the bankruptcy will be removed from your credit report.• If any former creditor tries to collect from you or says you

still owe them money showing them a copy of this document will prove that you do not owe them any money.


Debts Erased in a Bankruptcy

• When you receive your discharge from bankruptcy the debts erased are all of your eligible debts that existed at the time of the bankruptcy filing.• You must include all of your debts in

your bankruptcy paperwork.


https://bankruptcycanada.com/bankruptcy/discharge-from-bankruptcy/

Debts Erased in a Bankruptcy

• Debts Erased in a Bankruptcy include:• Credit Card Debt;• Payday Loans;• Mortgage Debt Shortfalls;• CRA Debts;• Student loans if you have been out of

school for 7 years.


Discharge From Bankruptcy

• Getting your discharge from bankruptcy is usually automatic.• In the vast majority of cases a person is discharged (released

from bankruptcy) nine months after filing bankruptcy.• The discharge from bankruptcy is very important to the

bankrupt as it results in the following:• * The debtor is no longer bankrupt and therefore not under

any more obligations under the Bankruptcy and Insolvency Act;


https://bankruptcycanada.com/bankruptcy-and-insolvency-act/

Discharge From Bankruptcy

• * The bankrupt no longer has a restriction on being a director of a corporation under provincial law;• *The countdown to when the credit bureau clears the

person’s record of having gone bankrupt begins its six-year term;

• If a person does not get a discharge from bankruptcy, the trustee will seek to be discharged once the file has been completed.


Rebuilding Credit After Bankruptcy

• A person can start to rebuild credit as soon as he is discharged from bankruptcy.• Rebuilding credit after bankruptcy will be quick

and painless If you follow the steps provided here.• You will be able to get a secured credit card and a

car loan shortly after you are discharged.



Rebuilding credit after bankruptcy – Step 1 – Get your Bankruptcy Discharge or the Certificate of Completion for your Consumer Proposal or Division I Proposal.After you have filed for bankruptcy or a proposal, you will need to follow your trustee’s directions on how to gain your Absolute Discharge or Certificate of Completion.If you have not gained your Absolute Discharge or Certification of Completion, it is impossible to gain any form of borrowing, even with private lenders. Attempting to gain financing before your discharge is futile.



Rebuilding credit after bankruptcy - Step 2 – Clean up your credit.Check your credit report and write to the credit bureau to correct any errors.The credit bureaus will correct mistakes on your credit report. They will not remove information that is correct.Now that you have your Absolute Discharge, you need to clean up your credit score, or ensure that it is clean already. It is very common to see multiple errors on credit scores.



Check your Credit Report to see if you have to correct errors.Get a free credit report from Equifax and TransUnion by downloading the forms. You will get your report in a few weeks. You can pay for Equifax’s report online and have it instantly. The online report costing $15.50 only includes your credit report.You can pay for TransUnion’s report online and have it instantly.


http://equifax.ca/

http://transunion.ca/


Rebuilding credit after bankruptcy -Step 3 – Gain New Credit.Re-Established Credit has to be New CreditAfter you receive your bankruptcy discharge you need to get new credit to start rebuilding your credit and increasing your credit score. By handling your new credit responsibly you will show lenders that you are responsible managing your money which will help your credit score improve.



A Bankruptcy Canada tip is to get a secured credit card and use it for small monthly purchases, such as your gym membership.This secured credit card is recommended because they report your payments to the credit bureaus.After You obtain the secured card you should do the following:RAISE YOUR SCORE: You want to get your FICO score back up to about 700 or higher, because then you can qualify for a mortgage.2) INCREASE YOUR LIMIT: If you start off with the minimum $500 limit, you will want to increase your limit on your card using this form to show that you can handle a higher limit.



Rebuilding credit after bankruptcy – Step 4 – Accumulate your Down Payment.



Rebuilding credit after bankruptcy – Step 5 – Contact a Mortgage Professional who is experienced at helping people, who were in bankruptcy, filed a proposal or a consumer counselling debt program, get a mortgage.


Contact a Licensed Insolvency Trustee

• To Learn More About Bankruptcy in Canada:

Call 24/ 7 For a Free Evaluation

1-877-879-4770


Economy & Finance

How Bankruptcy Works