Any person that is insolvent (debts > assets) and owes more than $1,000 can file bankruptcy.

If you file personal bankruptcy your assets vest with your trustee and become property of your bankrupt estate. However, many assets are exempt or protected from seizure pursuant to provincial or federal legislation. Exempt assets are completely unaffected by bankruptcy. Exemptions vary slightly by province, but in Ontario the most common exemptions are:

• $6,600 worth of equity in a car or other personal vehicle.

• $13,150 worth of household furniture and appliances.

• $11,300 worth of tools of trade (tools used to earn income).

• Personal clothing and effects.

• Most life insurance policies.

• Pensions.

• Most RRSP’s.

As trustees, we work with people to find solutions that allow them deal with their debts and have as minimal an affect on their assets and income as possible. That said, if you own assets that do not fall into one of these exempt categories filing personal bankruptcy may not be the best option for you. As part of our assessment process we will explain how each of your assets would be affected if you were to file bankruptcy, and what other options you may have to settle your debt and protect all of your assets.

How your vehicle is affected by personal bankruptcy depends on a couple of factors. There are two scenarios:

Scenario 1: Your vehicle has less than $6,600 of equity:

In Ontario there is an exemption for equity in a vehicle of up to $6,600. Therefore, if you file personal bankruptcy and own a vehicle that has less than $6,600 of equity (value of vehicle less lien) your vehicle is completely exempt from seizure by creditors and will be unaffected if you file personal bankruptcy.

Scenario 2: Your vehicle has more than $6,600 of equity:

If the total equity (value of vehicle less lien) in your vehicle exceeds the $6,600 exemption the portion of your vehicle’s equity that exceeds the exemption would be an asset that your creditors would have an interest in. That said, the fact that your vehicle’s equity is not fully covered by the exemption does not necessarily mean that you would lose your vehicle. It means that you would need to make payment arrangements with the trustee regarding the non-exempt equity or consider other options to settle your debt (ie: consumer proposal).

NOTE: In either scenario if you want to keep your vehicle and there is a lien registered against it you must continue to make your vehicle loan payments. Filing bankruptcy does not affect the rights of secured creditors and if you do not make the required vehicle loan payments the secured creditor can and will repossess your vehicle.

Filing personal bankruptcy does not necessarily mean that you will lose your home. While house equity is an asset that is not protected from creditors in a bankruptcy, many people who file personal bankruptcy are able to keep their homes. Creditors have a right to the money that would come if your home were to be sold, but they don’t care whether that money is paid to them as a result of the sale of your property or through some other payment arrangement.

For example: If you own a home with $25,000 worth of net equity (value of your home less mortgages and selling costs) and decide to file bankruptcy your creditors would have a right to $25,000. Your creditors don’t care whether that $25,000 is paid to them as result of the sale of your property, or if that $25,000 is paid to them through some other payment arrangement you may make with your trustee.

We understand that protecting your home is a top priority, and we will do what we can to help you find solutions to deal with your debt and keep your home. That said, if you own your home filing personal bankruptcy may not be the best option for you. As part of our assessment process we will explain how your home would be affected if you were to file bankruptcy, and what other options you may have to settle your debt and keep your house.

Yes! Despite the fact that filing personal bankruptcy has a negative impact on your credit rating, and that the negative impact will remain on your credit report for some period of time after being discharged from bankruptcy, you can rebuild your credit rating after bankruptcy. Providing advice around how to rebuild your credit rating after bankruptcy is part of the credit counselling services that we provide.

The minimum bankruptcy administration fee for a first-time bankrupt without surplus income (low income) is $1,800. This fee is normally paid at the rate of $200/month for 9 months. For second or third time bankrupts the fees and length of the bankruptcy process are different.

It is important to note that while the minimum bankruptcy administration fee applies in all bankruptcy filings, if you have income above the Superintendent of Bankruptcy’s income guidelines additional “surplus income payments” may be required.

The theory behind surplus income payments is that when you file personal bankruptcy you are no longer required to make any payments directly to your creditors, but if you have a higher income you should be able to pay something.

The calculation of surplus income payments is legislated under the Bankruptcy and Insolvency Act (Directive 11r2) and based on your income relative to the Superintendent of Bankruptcy’s income guidelines. The income guidelines are adjusted annually based on consumer price index and vary depending on the number of people in your family.

When you file bankruptcy you are required to submit monthly income reports to the trustee. These reports are used to calculate the amount of surplus income payable. Since surplus income payments are based on your actual reported income they can vary significantly throughout the bankruptcy process.

Almost all unsecured debt can be included in a bankruptcy, including but not limited to:

• Credit card debt.
• Payday loans.
• Canada Revenue Agency debt.
• Bank loans.

There is a very small list of debts that cannot be included in a bankruptcy. These debts are listed in Section 178 of the Bankruptcy and Insolvency Act and include:

• Traffic fines.
• Court awarded damages related to bodily harm, assault or wrongful death.
• Spousal support.
• Child support.
• Any debt incurred as the result of fraud.
• Government student loan debts (if you have haven’t been out of school for more than 7 years).

Step 1: Meet with a licensed insolvency trustee:

• Review your situation and discuss options.
• Consider how filing personal bankruptcy will affect your assets and income.
• Confirm that filing personal bankruptcy is the right option for you.

Step 2: File the bankruptcy documents:

• Complete and sign the bankruptcy documents with the trustee.
• Register your bankruptcy with the Office of the Superintendent of Bankruptcy.
• Send notice of your bankruptcy to your creditors.

Step 3: Perform required duties and obtain discharge:

• Complete all required duties.
• Make all required payments.
• Obtain discharge from bankruptcy.

The goal of anyone who files bankruptcy is to obtain a discharge. A discharge from bankruptcy means two things; that you have performed all of the required duties and completed the bankruptcy process, and that you are discharged (released) of any future obligations to the creditors that were included in your bankruptcy.

• Attend 2 credit counselling sessions.
• Provide monthly income reports.
• Provide tax information related to the year of bankruptcy, and prior years.
• Pay bankruptcy administration fees and/or surplus income payments, as required.

Bankruptcy results in an R9 (worst) credit rating.

For a first-time bankrupt, the R9 credit rating (worst) stays on the credit report for 7 years after the discharge.

For a second-time bankrupt, the R9 credit rating (worst) stays on the credit report for 14 years after discharge.