FAQs about personal bankruptcy and insolvency

3. What does bankruptcy cost? Does it depend on my income?

4. How long does a bankruptcy take, and how long does it affect my credit?

6. Who will know if I go bankrupt or file a proposal?

7. What debts survive the bankruptcy or proposal process?

Bankruptcy is a legal process that provides you with immediate relief from your unsecured creditors. It usually allows you to rid yourself of your debt and provides you with a fresh financial start. The filing of bankruptcy “stays” or halts, the actions (harassing phone calls, garnishments and lawsuits) of your unsecured creditors.

While you are in bankruptcy, your debt still exists; however, your creditors are “stopped” from continuing collection actions. It is your discharge from bankruptcy that extinguishes the majority of debts.

See What debts survive the bankruptcy or proposal?

2. What assets can I keep?

The B.C. Court Order Enforcement Act defines your exempt property limits as follows.

Assets exceeding your provincial exemptions will have to be dealt with by your trustee. Often arrangements may be made to repurchase the excess assets from your bankruptcy estate.

The equity in the home in which you reside is limited to $12,000 in the Greater Vancouver Regional District and $9,000.00 elsewhere in the province.
$4,000.00 worth of household furnishings and appliances.
$10,000.00 in tools of the trade.
All necessary clothing and medical aids.
$5,000.00 in equity from a motor vehicle or $2,000.00 if you are in debt for child maintenance arrears.

3. What does bankruptcy cost? Does it depend on my income?

In most bankruptcies, the Trustee is paid in accordance with a tariff set by the Bankruptcy and Insolvency Act. The tariff determines what portion of the monies paid into the bankrupt’s estate are directed to the Trustee to cover fees and disbursements.

The Superintendent of Bankruptcy has set a net Income Standard, which varies depending on the number of people in the household. If the household’s net income exceeds the Income Standard, then the bankrupt is required to pay his proportionate share of the excess into the bankrupt’s estate. We will discuss this area in detail during the free initial consultation.

If you have no non-exempt assets and your net income is below the Income Standard we will normally set up a monthly payment plan based on your income and expenses, and after considering the complexity of your case.

4. How long does a bankruptcy take, and how long does it affect my credit?

If you are a first-time bankrupt, nine months after the bankruptcy, you will be eligible for an automatic discharge from bankruptcy provided:

your discharge from bankruptcy was not opposed, and
your duties have been complied with.

Your duties include:

timely reporting of monthly income and expenses
providing the Trustee with all the necessary tax information to file your tax returns
keeping the Trustee informed of any change in residence, employer, marital status, and so on
making payments to the Trustee in accordance with the surplus income standards and/or to cover the basic administration costs of your bankruptcy
attending both counseling meetings
surrendering all credit cards
informing the Trustee of any material change in your financial situation (inheritance, lottery winnings, and so on)

If your discharge is opposed or you have previously been bankrupt, your case will be heard by the Bankruptcy Court. After reading our report on your conduct throughout the bankruptcy, considering your present economic situation, and the opposing creditors' arguments, the Court may issue an Order of Discharge subject to the completion of certain conditions, suspend it to a specific date, or adjourn it generally.

During your bankruptcy, your credit rating will indicate that you are presently in bankruptcy. After your discharge from bankruptcy, for the next six years, your credit rating will indicate that you previously had filed into bankruptcy.

Under present legislation, a second time bankruptcy may show on your credit rating indefinitely.

5. What about income tax debt?

Your discharge from bankruptcy or a completed proposal will normally release you from an income tax debt. However, CCRA has enacted legislation allowing it the ability to become a secured creditor, and making it more difficult to discharge an income tax debt.

If you have not appealed a tax assessment and the assessment is more than 90 days old, CCRA may register a secured claim against your personal or real property (land & buildings). Based on our experience, CCRA will allow your provincial exemptions and will normally negotiate the amount to be paid for the removal of any lien it may have registered against your property.

If you have significant tax debt and CCRA is actively pursuing the collection of this debt, we strongly advise that you obtain independent financial advice or contact us for a free initial consultation.

6. Who will know if I go bankrupt or file a proposal?

Most personal bankruptcies and proposals are not advertised in the newspapers.

During the administration of the bankruptcy or a proposal, we are required to contact all of your creditors. In some circumstances, it is necessary to contact your employer or your financial institution (for example, to stop a garnishee).

If your non-exempt assets exceed $10,000 the bankruptcy will likely be advertised.

7. What debts survive the bankruptcy or proposal process?

Your discharge from bankruptcy or the completion of a proposal will not release you from any of the following obligations:

fines or penalties imposed by a Court or default on bail bond
alimony or child support arrears. On going obligations for child support or alimony are not stayed by a bankruptcy or a proposal; you will be required to continue to make these payments.
debts arising from fraud, embezzlement, or misappropriation of funds
debts not disclosed to the Trustee (These creditors will be entitled to the dividend that would have been paid if a claim had been submitted in the bankruptcy.
any award of damages by a court in civil proceedings with respect to: bodily harm intentionally inflicted, sexual assault, or wrongful death resulting therefrom
student loans, if you become bankrupt before or within 10 years after ceasing your studies. (After ten years of ceasing to be a student, after being discharged from bankruptcy, if you have acted in good faith and have continued to experience financial difficulty, you may make an application to the Court for an Order for the discharge of a student loan.)
debt for interest on debts that survive a bankruptcy

Download Personal Adobe PDF Forms (please allow for download time):

Consumer Bankruptcy Information

Personal Bankruptcy Questionnaire

Income and Expense Form

List of Creditors