Have questions about bankruptcy? Here, we present some of the most frequently asked questions about the qualifications for and implications of bankruptcy. The world of bankruptcy can be a complicated place, and Exelby & Partners is here to help guide you through its complexities. Contact us today for a free, no-obligation quote
for our services.
Do I qualify for bankruptcy?
If you are considering claiming bankruptcy in Alberta, Nunavut, or NWT, you must first qualify. To qualify, you must:
• Owe at least $1000
• Be unable to meet required payments as they become due; or
• Own insufficient property to pay all of your debts
How do you file for bankruptcy?
The first step of filing for bankruptcy in Alberta, Nunavut, or NWT is choosing a trustee. A trustee is required to file for bankruptcy or a proposal. For more information on trustees, visit the Superintendent of Bankruptcy's website or peruse our other helpful links.
What are the costs?
It does not cost anything to ask questions. If you require the services of a licensed trustee to file an assignment into bankruptcy or a formal proposal, the trustee's costs are legislated and will be explained prior to any filing.
The cost of administrating a bankruptcy depends on a variety of factors, including the complexity of the bankrupt's affairs. The Superintendent of Bankruptcy regulates the fees charged by trustees. We can tailor your fee payment schedule to meet your individual situation.
Do I lose all of my assets?
No. Most assets are protected from seizure when you are claiming bankruptcy in Alberta pursuant to provincial legislation. The Bankruptcy & Insolvency Act and the Alberta Civil Enforcement Act exempt certain assets from seizure, including:
• Necessary clothing and personal effects to a liquidation value of $4000
• Household furnishings and appliances to a liquidation value of $4000
• Tools of the trade or property used by the debtor to earn his or her principle source of income
to a value of $10,000
• One car or truck with maximum equity therein of $5000
• $40,000 equity in your principal residence or your pro-rata share thereof
• Medical and dental aids
• Certain life insurance policies
• Certain pensions and RRSP's
Be sure to ask the trustee specific questions about your assets, particularly if you live in Nunavut or Northwest Territories.
What happens to my debts?
Most collection actions, lawsuits, and wage garnishees are suspended upon filing bankruptcy in Alberta, Nunavut, or Northwest Territories. Your creditors will be advised to stop contacting you and to deal directly with your trustee. In many cases, upon your discharge from bankruptcy, you are released from all your debts.
Do any debts survive bankruptcy?
Yes. Certain debts are not eliminated with your discharge from bankruptcy. For example:
• Fines or penalties imposed by the court
• Alimony, maintenance, or support
• Debts obtained by fraud or misrepresentation
In most cases, declaring bankruptcy in Alberta, Nunavut, or NWT does not prevent a secured creditor such as a bank, credit union, or finance company from realizing on any assets which have been pledged as security for a loan.
House mortgages are unaffected if monthly payments are current. Cars or other chattels pledged to a financial institution can be repossessed at the option of the secured creditor, even if your payments are current. In most cases, an individual is able to maintain payments with a secured creditor.
Do I have to list all my debts?
Yes. Bankruptcy cannot be applied selectively. When claiming bankruptcy in Alberta, Nunavut, or NWT, you are required to list all your debts, regardless of the source, even those owing to friends and relatives. Part of the legal process requires that you swear under oath that the information you provide is true and complete. If you intentionally fail to disclose debts, you will be liable for the dividend otherwise payable to that creditor.
If one feels a compulsion to pay back a friend or relative, or any other creditor, there are no restrictions on doing so after you have obtained your discharge. At that time, it is no longer a debt and any payment would be gratuitous.
Will I have to make payments to my creditors?
When declaring bankruptcy in Alberta, Nunavut, or NWT, one of your duties as a bankrupt will be to prepare and submit to the trustee a monthly budget detailing your income and expenses.
The Superintendent of Bankruptcy provides a series of income thresholds above which you will be required to make payments to the trustee for the benefit of your creditors. The income thresholds are determined primarily by the number of persons in your family.
How are loan co-signers affected by my bankruptcy?
Someone who has co-signed a loan for you will still be responsible for the loan after you go bankrupt, and will usually be required to pay that debt in your place.
What happens to my credit rating?
Most people that we talk to about bankruptcy already have a poor credit rating. Many people are already registered at the Credit Bureau, are unable to obtain a loan, or have had their credit cards suspended. Your credit rating can only improve following your discharge from bankruptcy.
How long will I be bankrupt?
Any individual who has not found their selves filing for bankruptcy in Alberta, Nunavut, or NWT before will normally be discharged 9 months after bankruptcy if the bankrupt's income falls below the superintendent's guidelines. The discharge will be automatic unless the bankrupt does not live up to his obligations or fails to perform the duties imposed upon him by the Bankruptcy & Insolvency Act or if a creditor objects to the discharge.
The bankrupt's discharge can be denied for outstanding duties or a creditor can object to the bankrupt's discharge, depending on the circumstances surrounding the origin of the debt. Third time or subsequent bankrupts are not eligible for an automatic discharge and the trustee must apply to court to obtain the bankruptcy’s discharge.
Who will know about my bankruptcy?
Once you have made an assignment in bankruptcy, the trustee is required to notify all of your creditors. In addition, information regarding your bankruptcy will be kept on file by credit reporting agencies, the courts, Canada Customs & Revenue Agency, and the Superintendent of Bankruptcy. The trustee does not file any information with credit bureaus and will not respond to the trustee's requests to change information on their files.
What is orderly payment of debt?
Instead of filing for bankruptcy, you could attempt an orderly payment of debt. Orderly payment of debt is an alternative to bankruptcy or a proposal. A third party will review your debts and make arrangements with your creditors to pay these debts in an orderly fashion over a period of time.
You will be required to pay your debt in full, plus a small interest charge.
What is a consumer proposal?
A consumer proposal offers an alternative to bankruptcy. For example, you may ask the creditors to reduce the amounts owing to them or request more time to pay the amounts due.
A consumer proposal must be made to all preferred and unsecured creditors, but it does not affect the rights of secured creditors. The terms of the proposal must be completed in 5 years and must offer the creditors at least what they would be paid in a bankruptcy. Consumer proposals are aimed at those who do not have many debts or complicated financial affairs. Non-mortgaged debt must below $250,000.
How do my creditors decide whether to accept my proposal?
Once you file a proposal, the trustee will send a notice to all of your creditors affected by the proposal. If 25% of your creditors request a meeting, and/or reject the proposal, a meeting of your creditors will be held. If a meeting is held, your creditors will vote as to whether to accept your proposal. If no meeting is held, your proposal is automatically deemed accepted.