FAQ - Bankruptcy

Frequently Asked Questions - Bankruptcy

How does a bankruptcy stop garnishments and creditor calls?
Section 69 of the Bankruptcy & Insolvency Act imposes a stay of proceedings that stops creditors from continuing any action against a person who is bankrupt.

Does bankruptcy effect my employment?
Generally speaking bankruptcy does not effect employment. However there are some careers where you are required to be discharged to be bonded and in those situations a proposal may be a better option.

If I file bankruptcy, I can't cross the border?
This is not true. Having a criminal record can effect you at the border, however when a person files bankruptcy, they are not breaking a law, in fact they are using a law and doing the right thing by acknowledging their situation.

Do I have to pay my 407 ETR bill?
Purely from a technical point of view, Section 178 of the Bankruptcy & Insolvency Act does not state that the 407 ETR debts will survive bankruptcy and therefore it does not survive. However, some debts are best paid for practical reasons. A person will have problems renewing their licence if this debt is not paid, so on practical note, it may be wise to pay it, depending upon how large the debts is.

Will I lose my income tax refunds?
The trustee will complete the tax returns for the year that you file bankruptcy, and for prior years, and those refunds are property of the bankrupt estate, for the benefit of your creditors

What is the effect of a bankruptcy on my credit rating?
Bankruptcy, like anything else, affects your credit rating. The credit rating score at Equifax, is a rating scale with R1 is being the best and R9 being the worst. A bankruptcy will be reported as an R9 which is the same as a judgement. It is important to note that proposals are an R7 which is slightly better than a bankruptcy.

If I want to walk away from my house can the bank still sue me?
Yes and No. A mortgage company that wants to commence power of sale proceedings will still commence a lawsuit to obtain an order for possession of the property so they can sell it. If they sell the property and there is a loss on sale, the shortfall is covered by the bankruptcy. So in the vast majority of cases, a person walking away from their home will not have to go to Court to defend the suit brought for the power of sale proceedings and the trustee will handle this matter.

What is the effect on my co-signers?
If you have a co-signer, that person will be responsible for your debt if you don’t pay.

What is the effect on spousal and child support payments?
If you have spousal or child support payments, you must continue to make those support payments.

Will my bankruptcy be advertised in the paper?
Most likely not. Most personal bankruptcies are not advertised, but all corporate bankruptcies are. This is because most personal bankruptcies are performed under a streamlined process called summary administration, which is designed to reduce the cost of administering bankruptcy proceedings. However in complex files, which will be administered as an Ordinary Administration it is a requirement.

Can I have a credit card if I am bankrupt?
Section 158 of the Act, requires that all credit cards be turned over to the trustee and prescribes that it is an offence to have a credit card while in bankruptcy

Will I lose my house if I file bankruptcy?
Probably not, however no one can answer that question absolutely except for your mortgage company. The vast majority of people who file bankruptcy are able to keep their homes. There are some mortgage companies, who will not work with people and will not renew a mortgage. However, the vast majority of mortgage companies will work with people. Once we have had the opportunity to review your situation in detail, you will have a better idea of what to expect.

Should I open a new bank account?
It's generally recommended that a person maintain an account at an institution where they have no other debts.

Will my car lease be cancelled if I file bankruptcy?
No, new laws in force prevent this from happening if you are making your payments.