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How do I declare bankruptcy?

There are two ways to declare bankruptcy. The first, and by far the most used, is the person’s voluntarily assignment of their assets pursuant to the Bankruptcy and Insolvency Act. The second, very seldom used, is when a creditor asks the court to issue an ordinance declaring a person bankrupt. In both cases, a trustee in bankruptcy is required to file the bankruptcy.

How much does a bankruptcy cost?

The costs for the trustee, the filing and consultation are imposed by the government. The trustee is usually paid through the sale of the assets of the bankrupt. If the debtor has no surplus income, the trustee will make arrangements for payment while keeping the debtor’s ability to pay in mind. These costs do not impede anyone from declaring bankruptcy. For more information, visit our page “Cost and duration of your bankruptcy“.

What assets am I allowed to keep?

Assets that may not be seized are defined as such in Quebec :

  • Essential furniture in the main residence up to a market value of $6,000;
  • Food, fuel, linen and clothes essential for every day life ;
  • Work related items that ensure one’s ability to continue working ;
  • Family papers and portraits, medals and other decorations ;
  • Affects given or willed considered “non-seizable”, under certain conditions ;
  • Awards  accorded by the courts with regards to wills, lawsuits, alimony etc ;
  • Contributions by an employer to the company pension plan, all monies declared non-seizable by the law that regulates these plans and all contributions that are and must be made to these plans ;
  • Periodical disability benefits paid pursuant to a sickness or accident insurance policy ;
  • Essential items and equipment for a person with a handicap ;
  • A certain portion of the gross salary and securities, calculated on the number of dependents.
  • Nevertheless, the goods described in paragraphs 1 and 3 (above) may be seized and sold by a creditor.
  • Since July 7  2008, the registered pension plans and the other applicable plans under the acronyms RRSP, RRIF, DPSP are exempt, except for the contributions made during the last twelve (12) months preceding the bankruptcy. However, on the last point, this affects only those plans not protected by provincial law, which is very rare. One can then affirm that almost all pension plans cannot be siezed due to bankruptcy. In closing, there is no ceiling on the amount that can be protected and the RRSP need not be compromised.

What assets will I lose?

In a personal bankruptcy, all assets except for those that are exempt as stated previously, that belonged to the bankrupt on the date of bankruptcy and all assets that are accrued by the bankrupt during the bankruptcy must be submitted to the trustee as payment to the creditors. This includes for example, a building, an automobile, a boat and even a heritage recieved by the bankrupt during the bankruptcy. This even includes lottery wins and anything else the bankrupt accrues during the bankruptcy, plus all surplus income. Tax refunds, on the date of bankruptcy, also go to the trustee as payment to the creditors. Fiscal law requires the banrupt to file two tax returns for each level of government for the year of bankruptcy. The first (pre bankruptcy return), covers the period from Jan 1 to the date of bankruptcy. The second (post bankruptcy return), covers the period from the date of bankruptcy to Dec 31. All pre-bankruptcy tax refunds go to the trustee to pay the creditors. You are also required to do the same for post bankruptcy refunds for the same reason. You are not legally obliged to give up your pre-bankruptcy refunds. However, the trustee and the creditors can ask the courts for an ordinance in this case and this could be added to your ” release from bankruptcy” file.

What debts are not covered by the “Release from Bankruptcy” NOTABLY!

  1. Fines of criminal nature imposed by the courts ;
  2. Money gained under false pretenses;
  3. Back payments for alimony or child support ;
  4. Money accorded by the courts for physical and sexual assault ;
  5. Student loans if bankruptcy is declared within seven years of termination of schooling

What happens during a bankruptcy?

The bankrupt must keep the trustee informed of his address, assist if required, adhere to all decisions and provide all pertinent information to the trustee. This person must also report all revenue, expenses and any changes in the family to the trustee. Forms for all required information will be provided by the trustee. A meeting of the creditors is not required in a personal bankruptcy unless the Superintendent of bankuptcy or the creditors representing at least 25% of the claims ask. These meetings are then usually held at the tustee’s office.

What happens if I have enough revenue to make a proposal?

When a person is able to make a proposal (meaning their revenue exceeds their cost of living), this person should definitely consider making a proposal as opposed to bankruptcy.

What happens to my salary during bankruptcy?

The income of a bankrupt, such as salary or commission, belongs to the bankrupt and the trustee does not generally get involved at this level. There are, however, norms set out by the Superintendent of bankruptcy that advise the trustees on the reasonable sums the bankrupt must pay during the bankruptcy, instructions based on the number of dependents and the personal situation of the latter. For more informations, consult this link

What happens with alimony?

Alimony is not affected by a bankruptcy. These payments must be made on a regular basis. Bankruptcy does not allow for collection of this money. Back payments on alimony are not annuled in a bankruptcy.

What happens with student loans?

If bankruptcy occurs more than seven years after termination of schooling, the debt is annuled by the “release from bankruptcy”. A “release from bankruptcy” does not annul a student loan if the bankruptcy occurs within seven years of termination of schooling.In this case, the courts can declare a student loan null and void at any time after 7 years, if the person has acted in good faith and yet still is not able to repay their student loan.

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