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206, 5800 - 2nd Street S.W.
Calgary, Alberta, T2H 0H2
Tel: (403)252-1766
Fax: (403)640-0591
Infoline: (403)252-3481
Email:
Calgary@Insolvency.net

 

    

Do I qualify for Bankruptcy?


In order to make an assignment in Bankruptcy, an individual must meet the following minimum criteria:

a) must owe at least $1,000
b) must be unable to meet their regular payments as they fall due, or;
c) must have ceased making their payments generally as they come due; or
d) the individual has insufficient non exempt assets that if when liquidated, would not provide sufficient funds to fully pay all their creditors.

 

What does an Assignment
in Bankruptcy do?


The Assignment in Bankruptcy serves to transfer all non-exempt assets of the debtor to the Trustee in accordance with the Bankruptcy and Insolvency Act for the benefit of the estate.

Making an assignment acts as a stay of proceedings against all creditors except those with properly documented and registered security (i.e. mortgages and conditional contracts). All collection procedures, lawsuits, and garnishees are ceased by creditors. This feature is often referred to as the relief given by the Bankruptcy and Insolvency Act.
 

What can I keep in bankruptcy ?

Under Provincial legislation you can claim exemptions for and retain certain assets. In Alberta, the Civil Enforcement Act allows for the following exemptions:

a) the necessary clothing of the debtor and dependents that are of a value not exceeding $4,000;

b) household furnishings and effects to the value of $4,000 

c) one motor vehicle to the value of $5,000;

d) medical and dental aids required by the debtor and his or her dependents;

e) the books of a professional, required in his or her profession;

f) tools of the trade to a value of $10,000 and used by the debtor to earn income;

g) equity in the principal residence of the debtor to the value of $40,000.

Debtors involved in farming or fishing have other exemptions in addition to the above.

The values indicated above are based upon what the asset would bring if sold (i.e. garage sale prices) not replacement cost.

What are my duties
and responsibilities while in Bankruptcy?

The duties of the debtor are explained in detail in the Bankruptcy and Insolvency Act but are outlined briefly below:

a) submit monthly statements of income and expenses to the Trustee;

b) attend a meeting of creditors if one is requested by either the Official Receiver or one of the creditors;

c) make voluntary payments to the Trustee, the amount of which will be discussed and determined between you and the Trustee, taking into consideration family responsibilities and the income standard set by the Superintendent of Bankruptcy;

d) attend an examination by the Official Receiver if requested;

e) attend two counselling sessions, the purpose of which is to assist you to discover and understand the root causes of your financial difficulties, assist you in obtaining help to resolve these issues, and enable you to acquire money management skills;

f) disclose and provide the Trustee with any required information;

g) turn over all non-exempt assets received after the date of Bankruptcy but prior to the date of discharge (i.e. lottery winnings, inheritances, etc.) Certain sources of income, such as pension plan benefits, welfare, and child tax benefits are exempt from seizure;

h) provide any necessary information to enable the Trustee to file outstanding tax returns.

Failure to comply with any of the duties listed under the Bankruptcy and Insolvency Act is considered a Bankruptcy offense.

What are the duties and responsibilities
of the Bankruptcy Trustee?

The Trustee is responsible for notifying all the creditors of your bankruptcy. He is also responsible to all creditors to ensure they get fair and equal treatment under the Bankruptcy and Insolvency Act.

The Trustee will also file tax returns for the prior year to Bankruptcy, if not already done, and for the year of Bankruptcy.

The Trustee disposes of all non-exempt assets in accordance with the Bankruptcy and Insolvency Act for the benefit of the estate. After you are discharged, the Trustee will pay out whatever dividends are available for the creditors and then proceed to his discharge from his obligations as your Trustee.

How long will I be in Bankruptcy?

For consumer debtors who are in Bankruptcy for the first time, a discharge will be granted automatically nine months after Bankruptcy, provided no objections are received and the bankrupt has performed his/her duties satisfactorily. In the event of an objection, or in the case of a previous Bankruptcy , the Trustee will set a discharge hearing before a Registrar in Bankruptcy. At this hearing you may receive an Absolute Discharge, Suspension, Condition, Adjournment, or Refusal. After you are discharged the Trustee will pay out whatever dividends are available for the creditors and then proceed to his discharge from his obligations as Trustee.

How much does a Bankruptcy cost?


The fee in a summary administration estate is calculated on a tariff basis and is based on a percentage of funds the Trustee actually receives. The basic fee for a first time bankrupt, however, is calculated as follows:

Basic Bankruptcy Fee $975
Filing Fee $50
Court Fee $50
Administrative Disbursements $100
First Counselling Session $85
Second Counselling Session $85
GST of 7%

The costs can be covered in a number of ways. For example, by retainer (up front) to the Trustee; by monthly payments to the estate; by income tax refunds; by third party deposit with the Trustee; by sale of assets before or during the Bankruptcy; or by a combination of the above.

In an ordinary administration the fee is based on time and can vary; but normally these fees are paid through the realization of assets.

Although monthly payments may be considered as initially covering the Trustee's costs, they are determined in relation to the debtors financial circumstances and accordingly may be varied during the bankruptcy. Any surplus arising after payment of the Trustee's fees will give rise to a dividend payment to creditors.

The cost of a corporate bankruptcy will entirely depend upon the complexity of the file and the Trustee's fees will usually be based on time spent. Individual circumstances should be discussed with us to obtain an estimate.
 

How do I deal with secured creditors
while in bankruptcy

 

An assignment into Bankruptcy does not interfere with the rights of secured creditors, providing their encumbrance is properly documented and registered. Where the assets pledged are exempt or where there is no equity to the Trustee, it will be up to the Bankrupt to make arrangements with the secured creditor to continue payments or allow the creditor to repossess. Where the value of the security is less than the amount due to the creditor, arrangements can usually be made for the bankrupt to pay some lessor amount.

What about co-signed debts
while in bankruptcy?


The bankrupt should be aware that while Bankruptcy will relieve them of their obligations the co-signer will continue to be responsible for the payments.

How do I deal with writs
while in bankruptcy?


If any of the creditors to which you are indebted have filed writs against your estate, these writs can be removed once you are discharged from Bankruptcy. To have the writ removed it will be your responsibility to provide us with details of the writs and copies of the title to your property. After you are discharged we can assist in obtaining an order removing the writ and provide it to you for filing in Land Titles. There will be a minimal cost for registering this Order which will be your responsibility.

Can I obtain credit and/or operate a business
while in Bankruptcy?


On making an Assignment one acquires the status of an undischarged bankrupt and is then subject to certain duties and restrictions with respect to going into business and acquiring credit. We would be pleased to discuss them in detail with you at our meeting.

What are surplus guideline payments
while in bankruptcy?


Should you earn income in excess of that necessary to maintain a reasonable standard of living, you are expected to make voluntary payments to the Trustee until the date of discharge. The amount of the payment will be discussed between the debtor and the Trustee, taking into consideration family responsibilities. The payment usually amounts to 50% of the debtor's surplus income (i.e. the amount which is above the Superintendent's Guideline.

PROPOSALS


The Bankruptcy and Insolvency Act provides an alternative to Bankruptcy by means of a process called a Consumer Proposal. Under this part of the Act, the debtor, through a Trustee, proposes an arrangement to his creditors.

What is the consumer proposal process?


After the proposal is made the creditors are notified of the terms of the proposal and are given an opportunity to vote in favour or against. If no objections are received the proposal is deemed to have been accepted and all creditors are bound by it. It is then up to the individual making the proposal to fulfil its terms and once done, their debts are satisfied. Should you fail to comply with the terms of the proposal, however, the proposal is annulled and your creditors are free to continue their collection efforts.

Should any creditors object to the proposal a meeting of the creditors is held and a vote is taken. After review and discussion if the majority of creditors approve the proposal all creditors are bound by it and you continue as above. Should the proposal not be accepted the debtor does not automatically become bankrupt, however, the creditors are free to continue collection efforts.

As in a personal bankruptcy, proposals cannot interfere with the rights of the secured creditors and arrangements must be made with these creditors separately.

How much does a proposal cost?


The fee in a consumer proposal is set by tariff and is based upon a percentage of receipts. The structure exclusive of GST is as follows:

Basic Fee $1500
Filing Fee 75
Court Fee 50
First Counselling Session 85
Second Counselling Session 85
Plus the Trustee will receive 20% of the amounts paid to the creditors.

What do I bring to the
initial bankruptcy interview?


When you attend the meeting please bring with you the following as it will make it easier to assess your situation and available alternatives:

the enclosed Financial Evaluation Form completed as fully as possible;
copy of last personal tax return filed and current tax information;
any judgements, writs, garnishees, etc.;
any security documents, such as chattel mortgages, conditional sales agreements, promissory notes, etc.;
all credit cards;
current pay stubs with year to date earnings.