Bankruptcy

Fees for Administering the Bankruptcy

There is a cost or fee that must be paid to the Trustee to administer the bankruptcy. In a Summary Administration that fee is set by a tariff under the Act and can vary depending on the assets that come into the estate (assets that vest in the Trustee and may be sold – see Assets below). The Trustee will generally work out a payment plan with the individual if there are insufficient assets available to cover the fees.   In an Ordinary Administration, the fee will be based on hourly rates for the services provided as well as out of pocket disbursements. The fees will vary depending on the complexity of the administration and must be approved by the Bankruptcy Court. Again, monthly payment plans can be worked out. The Trustee will explain the fees when you meet in a first consultation.

Initial consultation

The purpose of the initial consultation is to provide an exchange of information. During the consultation, the Trustee will gather the necessary information from you to create a clear picture of your financial situation. Once all of the information is obtained, we will provide you with the options that are available to you, based on your individual and unique situation. Once we have presented you with all of your options, you may then make an informed choice of the option that best suits your needs.

When bankruptcy is the option chosen, the Trustee will prepare the documents necessary for you to make the assignment into bankruptcy. An appointment will be made for you to sign the documents. Once the documents have been signed, they will then be filed with the Office of the Superintendent of Bankruptcy (“OSB”) and notices of your bankruptcy will be sent to your creditors. 

Notice to Creditors

The Trustee is required to send notice of the bankruptcy to all known creditors within 5 days of the bankruptcy being filed. Upon filing the bankruptcy, most legal proceedings that deal with property matters are stayed or stopped, preventing those creditors from continuing their action against you. Similarly, those creditors who may be garnishing your wages or who are threatening to do so will be stayed, preventing them from affecting the garnishee. There are some debts, such as child or spousal support as an example, that are not stayed. Your Trustee will discuss these debts as they apply to your situation.

General Administration

Upon making the assignment into bankruptcy, all unencumbered assets (those with no liens registered against them) vest in the Trustee, subject to certain Federal and Provincial legislation. Some of the more common assets and how they are dealt with in the bankruptcy are as follows:

1. Employer Pension Plans – most employer pension plans are exempt from seizure as they are protected under Provincial legislation.

2. RRSP’s –when registered with a life insurance company are exempt from seizure by the Trustee pursuant to Provincial legislation. A self-directed RRSP that is registered with a non-life insurance company or bank etc. are exempt pursuant to Act with the exception of any contributions made to the plan within the 12 months prior to the assignment.

3. RESP’s – pursuant to case law, RESP’s are considered an asset in your bankruptcy under certain situations, and any balance less the Government grant portion may be seized by the Trustee. Your Trustee will discuss this in further detail with you during the initial consultation.

4. Stocks and Bonds – Any stocks and bonds held, including Canada Savings bonds and any shares that are publicly traded are assets that would vest in the Trustee.

5. Life Insurance Policies – Life insurance policies are exempt from seizure as they are protected by Provincial legislation, providing the named beneficiary is within the protected class designation. Those beneficiaries that would be included in this class are: spouse, child, parent, grandchild, common-law opposite-sex spouse, or common-law same-sex-partner.

6. Personal Effects – Necessary and ordinary clothing of the debtor and his or her family are exempt from seizure as they are protected by Provincial legislation. The maximum value of the personal effects covered by the exemption would be $5,650.00.

7. Furniture – The household furniture that are contained in and form part of the home of the debtor are exempt from seizure as they are protected by the Provincial legislation. The maximum value of the furniture covered by the exemption would be $11,300.00.

8. Tools of the Trade – Tools and other personal property of the debtor, used to earn income from the debtor’s occupation, are exempt from seizure as they are protected by Provincial legislation. The maximum value of the tools of the trade covered by the exemption would be $11,300.00.

9. Automobiles – Each bankrupt is afforded an exemption under Provincial legislation for one unencumbered motor vehicle with a value not exceeding $5,650.00.

10. House Equity – Currently, any equity in your personal residence would be considered an asset of the debtor and would therefore vest in the trustee for the benefit of the creditors. At this time it is anticipated that a change in the Provincial legislation will likely exempt a certain value of your home. This site will be revised when the amount is known.

11. Other Assets – All recreational equipment, including but not limited to boats, trailers, snowmobiles are not afforded any exemption under Provincial legislation and would therefore vest in the Trustee.

When you file an assignment in bankruptcy, the Trustee is required to monitor your income for the duration of the bankruptcy. For this purpose, you will be required to submit monthly budgets throughout your bankruptcy to determine what your payments will be pursuant to the Superintendent’s Standards, as per the chart shown below:

Generally a meeting of creditors is not necessary but there may be instances where such a meeting will be held. Creditors or the Official Receiver may request one. If a meeting of creditors is called you must attend at this meeting. At the meeting of creditors the Trustee will give a report about your assets and liabilities and creditors may ask you related questions. The creditors will then vote to either confirm the Trustee appointment, or substitute a Trustee of their choice. The creditors will then have an opportunity to vote for the appointment of inspectors. They may also give directions to the Trustee with reference to the administration of the estate.

Duties of the Bankrupt 

During the period of the bankruptcy, the debtor has some duties that must be completed in order to receive a discharge. The duties of the bankrupt are contained in Section 158 of the Act. The duties of the debtor are as follows:

A bankrupt shall

1. make discovery of and deliver all his property that is under his possession or control to the trustee or to any person authorized by the trustee to take possession of it or any part thereof; (a.1) in such circumstances as are specified in directives of the Superintendent, deliver to the trustee, for cancellation, all credit cards issued to and in the possession or control of the bankrupt;

2. deliver to the trustee all books, records, documents, writings and papers including, without restricting the generality of the foregoing, title papers, insurance policies and tax records and returns and copies thereof in any way relating to his property or affairs;

3. at such time and place as may be fixed by the official receiver, attend before the official receiver or before any other official receiver delegated by the official receiver for examination under oath with respect to his conduct, the causes of his bankruptcy and the disposition of his property;

4. within five days following the bankruptcy, unless the time is extended by the official receiver, prepare and submit to the trustee in quadruplicate a statement of the bankrupt's affairs in the prescribed form verified by affidavit and showing the particulars of the bankrupt's assets and liabilities, the names and addresses of the bankrupt's creditors, the securities held by them respectively, the dates when the securities were respectively given and such further or other information as may be required, but where the affairs of the bankrupt are so involved or complicated that the bankrupt alone cannot reasonably prepare a proper statement of affairs, the official receiver may, as an expense of the administration of the estate, authorize the employment of a qualified person to assist in the preparation of the statement;

5. make or give all the assistance within his power to the trustee in making an inventory of his assets;

6. make disclosure to the trustee of all property disposed of within the period beginning on the day that is one year before the date of the initial bankruptcy event or beginning on such other antecedent date as the court may direct, and ending on the date of the bankruptcy, both dates included, and how and to whom and for what consideration any part as had been disposed of in the ordinary manner of trade or used for reasonable personal expenses;

7. make disclosure to the trustee of all property disposed of by gift or settlement without adequate valuable consideration within the period beginning on the day that is five years before the date of the initial bankruptcy event and ending on the date of bankruptcy, both dates included;

8. attend the first meeting of his creditors unless prevented by sickness or other sufficient cause and submit thereat to examination;

9.  when required, attend other meetings of his creditors or of the inspectors, or attend on the trustee; During the period of the bankruptcy you will be required to attend two counselling sessions in accordance with the Superintendent of Bankruptcy’s Directive 1R3. The counselling referred to in section 157.1 and paragraph 66.13(2)(b) of the Act shall consist of the following two stages:

(i) between 10 and 60 days following the date of the initial bankruptcy event,

(ii) within 10 days following the first meeting of creditors held pursuant to subparagraph 57(c)(i) of the Act where a Division I Proposal was refused by the creditors;

First Counselling Stage — Consumer and Credit Education

In the first stage, the qualified counsellor shall present information to provide the bankrupt and/or relative, or a consumer debtor, with consumer advice in the areas of:

(iii) warning signs of financial difficulties; and

(b) a second stage to be conducted not before the end of a 30-day period after the first stage and no later than 210 days following the date of the initial bankruptcy event, in the case of a bankrupt, or of filing a consumer proposal.

Second Counselling Stage — Identification of Roadblocks to Solvency and Rehabilitation

The second stage is to determine the budgetary and/or non-budgetary causes of insolvency or bankruptcy and requires that the qualified counsellor:

(a) follow up on the application by the debtor of the principles presented in the first stage to assist the bankrupt and/or relative, or a consumer debtor, to better understand his or her strengths and weaknesses with regard to money management and budgeting skills;

(b) assist, where appropriate, the bankrupt and/or relative, or a consumer debtor:

(i) to identify the non-budgetary causes (such as gambling abuse, compulsive    behaviour, substance abuse, employment and marital or family difficulties) that may have contributed to his or her financial difficulties;

(ii)to better understand his or her behaviour in financial management and consumption habits; and

(iii) to make him or her aware of the existence of resources that will help him or her achieve and maintain economic stability.

10. submit to such other examinations under oath with respect to his property or affairs as required;

11. aid to the utmost of his power in the realization of his property and the distribution of the proceeds among his creditors;

12. execute such powers of attorney, conveyances, deeds and instruments as may be required;

13. examine the correctness of all proofs of claims filed, if required by the Trustee;

14. in case any person has to his knowledge filed a false claim, disclose the fact immediately to the Trustee; (n.1) inform the trustee of any material change in the bankrupt's financial situation;

15. generally do all such acts and things in relation to his property and the distribution of the proceeds among his creditors as may be reasonably required by the trustee, or may be prescribed by the General Rules, or may be directed by the court by any special order make with reference to any particular case or made on the occasion of any special application by the trustee, or any creditor or person interested; and

until his application for discharge has been disposed of and the administration of the estate completed, keep the Trustee advised at all times of his place of residence or address.

A bankrupt’s eligibility for a discharge is as follows:

1.      A first time bankrupt with no surplus income is eligible for an automatic discharge at (9) nine months;

2.      A first time bankrupt with surplus income is eligible for an automatic discharge at (21)  twenty one months;

3.      A second time bankrupt with no surplus income is eligible for an automatic discharge at (24) twenty four months;

4.      A second time bankrupt with surplus income is eligible for an automatic discharge at (36) thirty six months.

If the discharge is opposed by either a creditor, the Trustee, or the Superintendent of Bankruptcy, a discharge hearing is scheduled with an additional $250.00 court fee applied and an order of discharge is determined by the Court.

The trustee is required to oppose the discharge in the event of the following;

• If the bankrupt failed to comply with the voluntary payment agreement;
• If the bankrupt failed to pay to the estate the amount required in accordance   with the Superintendent Standards within the prescribed time;
• If the bankrupt failed to disclose all assets and earnings to the trustee;
• If the bankrupt failed to provide the necessary information to file the pre and post bankruptcy income tax returns;
• If the bankrupt failed to attend the first and second counseling sessions within the prescribed time frames;
• If the bankrupt has on two previous occasion made an assignment into bankruptcy;

At a hearing for a discharge the Bankruptcy Court decides whether to postpone(adjourn) the hearing to a later date, refuse the discharge (very unusual), or issue any of the following orders:

Absolute Discharge: This official document discharges you from the bankruptcy and relieves you of the debt obligations incurred prior to your assignment into bankruptcy.

Order of Conditional Discharge: The court may impose certain conditions that must be met before your discharge becomes absolute. For example, the Court may require you to pay an amount to your trustee for distribution to your creditors. Upon complying with the terms set out by the Court the trustee will then proceed back to Court to obtain an Absolute Order of Discharge.

Order of Suspended Discharge: Generally in the case of a second and/or third time bankrupt the court orders a suspension delaying the discharge so it will not be effective until a later date.

Refused Order of Discharge; Generally in the case of a bankrupt refusing to co-operate with the Trustee, or has committed an offense under The Act, the court may refuse the discharge of the bankrupt.

Upon receiving a discharge from bankruptcy, you will be relieved of your debt obligations occurring prior to your assignment in bankruptcy. However, the discharge does not relieve you of any debts pursuant to Section 178 of the Act as discussed below:

Section 178 of the bankruptcy and Insolvency Act sets out what debts survive bankruptcy. These are;

• any fine, penalty, restitution order or other orders similar in nature;
• any award of damages by a court in respect of bodily harm intentionally inflicted, or sexual assault, or wrongful death;
• any debt or liability for alimony;
• any debt or liability for support of a spouse, former spouse, common-law partner or child living apart from the bankrupt;
• any debt or liability arising out of fraud;
• any debt or liability for obtaining property by false pretenses;
• any liability for the dividend that a creditor is entitled to receive on any provable claim not disclosed to the trustee;
• any debt in respect of a student loan where the debtor is still a full time or a part time student or the bankruptcy occurs within seven years following the termination of studies;
• any interest accrued for student loan debt noted above.

Trustee Discharge

Upon completing the administration of the bankruptcy, the Trustee will prepare a Final Statement of Receipts and Disbursements. This Statement will show the receipts (money collected through realization of assets and monthly payments) and disbursements (money paid for fees, disbursements and dividends to the creditors). It will also include notes outlining the status of all of the assets as well as the status of the individual’s discharge. A copy of this must be filed with the Superintendent of Bankruptcy and will be sent to the individual and all of their proven creditors. Once all of the applicable disbursements have been made and cheques cleared, the Trustee may close the bankruptcy estate’s trust account and be discharged as Trustee. It’s important to note that, if the Trustee is discharged but the individual debtor has not been discharged, the stay of proceedings noted above will no longer be in effect and the creditors’ rights to pursue for payment will revived. It is therefore important to comply with the duties in order to obtain a discharge from bankruptcy.