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.
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