What is bankruptcy?
Bankruptcy is a legal process administered by federally Licensed Insolvency Trustees. A primary purpose of bankruptcy is to provide Canadians, who are unable to pay their debts, a fresh financial start.
Who can administer a bankruptcy?
Only a Licensed Insolvency Trustee, appointed by the federal government, can administer a bankruptcy. Baker Tilly Ottawa Ltd. is a Licensed Insolvency Trustee.
How long does bankruptcy last?
Subject to the amount of income earned, and completing their duties, first-time bankrupts are bankrupt either 9 or 21 months, while second-time bankrupts must be bankrupt either 24 or 36 months. Third or fourth-time bankrupts remain in bankruptcy until the court discharges them, typically, at least as long as second-time bankrupts, 24 or 36 months.
How much does bankruptcy cost?
The cost of bankruptcy is the greater of two amounts: a) the Licensed Insolvency Trustee’s minimum fee, and b) the sum of the statutory amount payable from income earned during the bankruptcy, plus the equity in assets that the bankrupt retains.
Will it impact my credit report and score?
The bankruptcy will appear on your credit report and reduce your credit score. Credit scores are primarily determined by current and more recent events that are reported on your credit report. Therefore, post-discharge, as time passes, the bankruptcy will have a less negative impact on your credit score. For first-time bankrupts, the bankruptcy will be struck from your credit report six years post-discharge; for second, third, and fourth-time bankrupts, 14 years post-discharge.
You may obtain credit post-discharge and, over time, improve your score by being patient and by promptly paying all financial obligations.
Secured credit cards will also benefit you as well as a family member agreeing to act as a co-signer for a modest amount of post-bankruptcy debt. Mortgage financing is often available to discharged bankrupts within a year or two of discharge provided the lender’s other terms can be fulfilled.
Are some assets exempt from bankruptcy?
Yes, many assets are exempt from the law that requires the Licensed Insolvency Trustee to otherwise take possession of them. Exempt assets include: household furnishings and appliances to a value of $13,150; RRSPs and RIFs, with the exception of contributions made in the 12 months preceding bankruptcy; locked in retirement accounts; registered pension plans; term life policies; certain whole life and universal life policies; assets required to earn a living to a maximum value of $11,300; and, equity in a vehicle to a value of $6,600.
Can I keep my home and car in bankruptcy?
In order to improve their budgets, and to get on a more solid financial footing, many individuals relinquish possession of over-financed houses and cars. The assets are sold by the mortgage holder and the loss is included in the bankruptcy. Others wish to keep their homes and vehicles. This is certainly possible when there is little if any equity in the home or vehicle, the bankrupt is current with their payments and they can afford to keep making the payments. If there is equity in a home or vehicle, it may be retained provided you can afford to pay the equity to the Licensed Insolvency Trustee over the term of the bankruptcy.
Will my spouse or partner be impacted by my bankruptcy?
Your spouse or partner will be impacted by your bankruptcy if he or she guaranteed or co-signed your debts. If they did guarantee or co-sign any of your debts they will be held responsible for them, despite your bankruptcy. If you are both unable to pay your respective debts, you may, in most cases, file a joint bankruptcy.
The best thing to do if you have questions about bankruptcy is to give us a call. These are general bankruptcy FAQ answers, but many more depend on information regarding your individual circumstances. If you would like more information about bankruptcy, please contact us to arrange a no-charge initial consultation.Get Help Now