Glossary

Bankrupt

This is the legal status of a person who declares bankruptcy.

Bankruptcy and Insolvency Act (the Act)

This is the federal law which regulates business and consumer proposals and bankruptcies in Canada.  It falls under the responsibility of the Office of the Superintendent of Bankruptcy at Industry Canada.

Bankruptcy Court

This is a court in which a judge or registrar will decide on the bankrupt’s application for discharge and other insolvency matters.

Co-signers

Your bankruptcy does not cancel the responsibility of anyone who has guaranteed or co-signed a loan on your behalf.  For example, if your parent co-signed a loan for you, that parent would be liable to pay the loan in full even if you decide to file for bankruptcy.

Counselling

Counselling is a process in which we will help you to evaluate your income and expenses with a view to ensuring that you are making the best use of your money.  We will point out the pitfalls of various types of borrowing and suggest cost cutting ideas.  We will also provide you with some sound ideas for rebuilding your credit rating.

Creditors

A creditor is a person, institution or business to whom money is owed.  Secured creditors are creditors who have taken some measure to protect themselves and hold a mortgage, pledge, lien or similar instrument on, or against, the property of the debtor.  If they are not paid, they can enforce their claims by recovering the assets on which they hold security.

Unsecured creditors are creditors who do not have any security for the debt owing to them.

Creditors’ Meeting

A creditors’ meeting is a process where creditors are given an opportunity to meet with a debtor and the Trustee in order for them to ask questions.  It is a formal legal process, but is rarely used in the vast majority of bankruptcy and proposal filings.

If you are asked to attend a creditors’ meeting, you are required to attend.  You will generally be asked questions relating to:

  • Your assets
  • Your debts
  • Your family income
  • Assets you may have previously owned
  • Recent disposition of assets
  • Your future prospects
  • Your business, if you were or are self-employed

The meeting is designed to provide an opportunity for a creditor to gather information.

It is not the opportunity for a creditor to harass a bankrupt.

Credit Rating

Your bankruptcy is a matter of public record and is available to any interested party (such as a credit reporting agency).  To obtain credit after your discharge you may have to demonstrate to the potential lender that you have sufficient income and the ability to handle a reasonable level of debt.

Debtor

A debtor is a person who receives a loan or an advance of goods and services in exchange for a promise to pay at a later date.

Examination Under Oath

An examination is a very rarely used formal process whereby the Official Receiver poses a series of questions to a bankrupt.  The need for an examination is decided by the official receiver and is often random.  It is far more likely in cases of repeat bankruptcy, where creditors are alleging dishonesty or if a bankrupt’s debt load is unusually high.

The process is designed to maintain the integrity of the bankruptcy system.  Information gathered from the examination will be made available to the Trustee and the Court and is considered by the Court if dishonesty is established.  See also “What does an examination with the ‘Official

Guidelines

The Superintendent of Bankruptcy provides a guideline as to what income a person or family requires in order to cover their basic spending requirements such as food, clothing, shelter and transportation costs.  The guideline is adjusted annually.  The 2016 figures are as follows:

Number of people in the Household Guideline
1 $2,089.00
2 $2,601.00
3 $3,197.00
4 $3,882.00
5 $4,403.00
6 $4,965.00
7 or more $5,528.00

The income of all members of the family are considered.  Extra ordinary expenses would be added to those figures for expenses such as Child Support/Alimony, Child Care or expenses for a Medical Condition (net of any reimbursements).

If your income is below these guidelines it is generally believed that bankruptcy would be your best option, except in situations of low expenses or perhaps if your debt load is low.

Payments to creditors in a bankruptcy are calculated utilizing these guidelines.  Any income you have above the guidelines is called “surplus” and half of this amount must be provided to the Trustee each month during your bankruptcy.  The amount is pro-rated for each person in the household who contributes to the total income.

Large amounts of surplus extend the duration of a bankruptcy by 12 months.

The amount which represents one half of the surplus will be the starting point to consider if a proposal to creditors is viable.  This amount over a period of 36 – 60 months will often form the basis for a proposal.  If this amount represents an adequate percentage of the amount of your unsecured debts, a proposal will likely be your best option.

Harassment

One of the objectives of the Act is to relieve you of pressure from your creditors.  If you receive phone calls or letters from creditors, tell them that you are bankrupt, or have made a proposal, and refer them to your trustee or administrator.

Income Tax Returns

Two income tax returns must be completed for the calendar year in which you become bankrupt.  The pre-bankruptcy return covers the period from the beginning of the year to the date of your bankruptcy. You will be required to provide details and documentation to support this return to your trustee. The post-bankruptcy return covers the period from the date of bankruptcy to the end of the calendar year.

Inspector

Inspectors are appointed by creditors to represent them before the trustee during the administration of proposals and bankruptcies.  They are expected to assist the trustee by virtue of their experience and are required to supervise certain aspects of the trustee’s administration.

Insolvent Person

A person who is unable to meet financial obligations as they become due is insolvent.

Legal Action

Although legal actions or most garnishments against you stop on the date you declare bankruptcy or file a proposal, criminal actions and some civil matters, such as actions in matrimonial matters, are not affected by the bankruptcy or proposal.  In a proposal, no creditor can, without permission of the court, start or continue any legal action until the proposal is either withdrawn, refused, annulled or until the administrator has been discharged.  In the case of a bankruptcy, no creditor may, without permission of the court, start or continue any legal action until the trustee has been discharged.

Licensed Insolvency Trustee

A Licensed Insolvency Trustee is a person licensed by the Superintendent of Bankruptcy to administer proposals and bankruptcies.  The trustee represents your creditors and is an officer of the court.  However, the trustee can give you information and advice about both the proposal and bankruptcy processes and make sure that your rights, as well as those of the creditors, are respected.

Official Receiver

The Official Receiver is a federal government employee in the Office of the Superintendent of Bankruptcy and an officer of the court with specific duties under the Bankruptcy and Insolvency Act.  The Official Receiver, among other things, accepts the documents that are filed in proposals and bankruptcies, examines bankrupts under oath and chairs meetings of creditors.

Payments

Immediately after becoming bankrupt, you should no longer be required to make payments to your creditors.  However, while you are an undischarged bankrupt, you are expected to deposit a portion of your income with your trustee for distribution to your creditors.  These payments are made according to guidelines issued by the Superintendent of Bankruptcy.  If you fail to make these payments voluntarily, the court may order you to do so, or your discharge may be affected.

Statement of Affairs

A “Statement of Affairs” is a document required in Bankruptcies and Proposals which discloses the following details to the creditors and other relevant parties:

  • A complete list of a debtor’s assets, their declared values and whether they are secured by a creditor.
  • A complete list of creditors including names, addresses and amounts owed along with details of whether they are secured, unsecured or preferred creditors.
  • Personal details about the debtor such as his employment details, marital status, number of dependants, etc.
  • The debtor’s responses to specific questions dealing with recent relevant sales of assets, seizures, etc.

This is a document which must be sworn under oath to be true and correct.

Superintendent of Bankruptcy

The Superintendent of Bankruptcy is a federally appointed official who oversees the administration of the Bankruptcy and Insolvency Act in Canada.

Tax Debtor

An individual is considered to be a tax debtor if they owe over $200,000 of income tax debt representing at least 75% of total unsecured debts.

The calculation of income tax debt includes penalties and interest owing, but does not include any liability assessed for unpaid corporate obligations to a person who acted as a director of a company.

FAQs

Poor money management isn’t always the cause of financial problems.  Sometimes situations  beyond our control happens, such as job loss, divorce, death of a spouse, health problems, or a change in household income can lead to financial problems.

Watch out for these common financial warning signs:

  • Your credit cards are always “maxed out”
  • You’re using advances from one credit card to make bill payments
  • You’ve missed one or more loan payments
  • You’ve missed a mortgage payment
  • Collection agents are calling you at home and at work
  • Collection agents are threatening you with legal action

Once you have decided to file for bankruptcy, you must do it through a qualified and licensed British Columbia bankruptcy trustee.  It is important to provide the trustee with the needed information to start the bankruptcy. The trustee will prepare the necessary government forms for you and explain what happens when you go bankrupt in British Columbia.

Once all the paperwork has been signed, the trustee will file the documents with the Office of the Superintendent of Bankruptcy—a division of Industry Canada that monitors all bankruptcies in Canada.  Within five (5) business days of filing, all of your creditors are notified that you have filed for bankruptcy.  They will be directed to the trustee to file their claim for the amount they are owed.

During the bankruptcy period you are required to do the following:

  • Provide the trustee with your tax information to file your outstanding tax returns
  • Submit each month copies of your pay stubs and other income
  • Attend two credit counseling sessions to help with budgeting
  • Make the required contribution (payment) to your bankruptcy estate
  • Surrender any non-exempt assets
  • Complete any other duties required by the trustee
  • At the end of the bankruptcy period, you are discharged from bankruptcy, and most of your debts are discharged

There are a few debts that are not discharged when you go bankrupt.

These debts include:

  • Student loans less than 7 years old (http://student-loan-bankruptcy.ca/)
  • Alimony and child support
  • Fines and most court ordered restitution payments
  • Debts that arose as a result of fraud
  • Certain government overpayments such as EI
  • Yes.  It is strongly recommended that you open a new bank account before going bankrupt
  • Opening a new bank account will ensure that none of your old creditors will attempt to take money out of your account
  • A bank cannot refuse to open a bank account for you (unless they have reason to believe the account will be used for illegal purposes).
  • It is a good idea to open a new bank account before you go bankrupt; giving you ample time to have your payroll deposit and other items transferred to your new account before the bankruptcy starts.
  • No, your creditors cannot continue to harass you when you go bankrupt in British Columbia.  Once you have filed a bankruptcy assignment, your creditors must contact your trustee, not you!
  • By law, all legal actions against you, such as collection activities, must stop once the bankruptcy documents are filed.
  • Creditors cannot begin or continue lawsuits, wage garnishees, or even contact you by telephone to demand payments.   Secured creditors, such as mortgage companies, must still be paid if you wish to keep the secured asset (such as your car or house).

Most people are a bit embarrassed or anxious when they first meet a trustee, and they often forget what questions they want to ask. Writing the questions down, and bringing them with you will ensure that all of your questions are answered.

  • You will be required to make a contribution to your bankruptcy estate to cover the government filing fees, mailing costs, court fees, and other administrative costs of a bankruptcy.
  • You are required to pay a portion of your “surplus income”, as defined by the government, into your estate. If you and your family earn over a certain amount each month, you lose a portion of your earnings over that limit. The trustee can then estimate the amount of “surplus income” payments you will need to make while bankrupt.
  • You will lose all of your non-exempt assets (http://www.bankruptcy-british-columbia.com/bColumbia_exemptions.htm)
  • You will lose any tax refunds and GST credits you would otherwise receive during the bankruptcy period.
  • You will lose any windfalls you receive, or become entitled to during the bankruptcy period. For example, if you inherit money while bankrupt, or win the lottery, that money must be surrendered to the trustee.
  • The amount you will pay while bankrupt will depend on your monthly take home pay, your family size, and your assets.

You may be filing for bankruptcy but that does not mean that you automatically lose all of your assets.

According to provincial law, in BC many of your assets are exempt from being seized, including:

    • $ 12,000.00 of the equity you hold in your home in Victoria or Greater Vancouver.
    • $ 9,000.00 of the equity you hold in your home if you live elsewhere in the province.
    • $ 4,000.00 of the equity you hold in household items.
    • $ 5,000.00 of the equity held in your vehicle (except if you are behind on child care payments, in which case the amount of equity exempt is lowered to $ 2,000.00 so that Maintenance Orders can be enforced).
    • $ 10,000.00 of the equity you hold in your work tools.
    • Unlimited equity in medical aids and essential clothing.

As your Trustee, we will be free to sell the remainder of your assets in order to pay your creditors. This includes such assets as:

      • RRSPs that have not been locked-in
      • shares
      • recreational equipment, and
      • any other of your assets which may have market value.

In addition, any outstanding tax refunds that have not yet been paid when you declare bankruptcy will be made available to us as your Trustee to pay your creditors.

According to income tax law, as a person who has declared bankruptcy you will be obliged to file two different tax returns for the year you become bankrupt. As your Trustee, these tax returns will be prepared by us in our offices.

The first, pre-bankruptcy tax return will cover the period from 1 January up until the date of the bankruptcy.

The second, post-bankruptcy tax return will provide information for the period following your declaration of bankruptcy up to 31 December. All tax rebates can be used by us as your Trustee to pay your creditors.

To find out more about your rights and the assets you are entitled to keep when you file for bankruptcy please contact our expert bankruptcy counsellors at J. Bottom & Associates.

We have had more than 40 years of experience helping people through the difficult bankruptcy process and our focus is always to act in your best interests so that you can leave your debts behind and work towards creating a more solvent and stable financial future.

Our initial consultation is free of charge and without obligation. So if you would like us to take an object look at your financial situation and discuss with you ways in which you could resolve your debts, please don’t hesitate to:

phone us on 604 540 1920 or Fax: 604 524 0187 or
email: info@personalbankruptcybc.com.

  • As a first time bankrupt, if you complete all of your duties while bankrupt, and if your trustee or your creditors do not object to your discharge, you are eligible to be discharged from bankruptcy after only nine (9) months (subject to an extension of a further twelve months “surplus income” exists.
  • If you have been bankrupt in the past, you are not eligible for an automatic discharge in nine (9) months. Your bankruptcy will be extended for a period of time with a minimum being twenty four (24) months.
  • In most cases, your debts are your debts, and nobody else’s.  Only you are responsible for them. Your husband or wife or common law spouse is normally not responsible for any of your debts.
  • Assumption that your spouse is automatically responsible for your debts generally comes from collection agents, who while collecting debts will tell you that if you don’t pay, they will go after your spouse for payment. This may be a scare tactic; they can pursue only you for your debts. Your bankruptcy does not affect your spouse unless the debts are mutual.
  • The only time a bill collector can come after your spouse, is if the spouse co-signed or guaranteed your debt. For instance, if you took out a loan, and had your spouse co-sign for it, if you do not pay, that bank could pursue your spouse.
  • It is very common for a spouse to get a supplementary credit card for their partner.  Even if the spouse never signed the credit card application form, if they have a card with their name on it, and if they have used the card, they are responsible for the whole debt.
  • It is possible for your spouse to be indirectly affected by your bankruptcy, in the sense that you might not be able to qualify as a co-signor in the future.
  • In case of separation, even if your separation agreement says you will each take care of half the debt, if one person doesn’t pay his/her half, the creditor could pursue the other person for the total amount. You do not each owe half of the debt. It is a 100% split if either of you do not pay.
  • If you feel that your concerns and questions about what happens with spouse in bankruptcy are not addressed in enough detail and would like more information on the matter, please contact our bankruptcy trustee in British Columbia today and arrange for a free, no-obligation, consultation.

How long bankruptcy stays on your credit report in British Columbia will depend on the credit bureau that is reporting. Normally the notice will remain on your credit report for at least six years after your discharge.

There are two large credit bureaus in British Columbia:

Equifax is the largest credit bureau and they keep a record of a bankruptcy on your credit report for six years from the date of discharge. In the case that you go bankrupt a second time, both bankruptcies will stay on your credit report for 14 years. A proposal is removed from your credit report three years after the final payment

Trans Union is the other large credit bureau in British Columbia. The Trans Union web site indicates that bankruptcies remain on your credit file for six to seven years from the date of discharge, or fourteen years from the filing date. The length of time will depend on provincial legislation, which in British Columbia will typically mean six years.

Bankruptcy does not mean you will be unable to borrow for six or seven years:

If you are gainfully employed and in some circumstance have a security deposit or down payment, your credit could be repaired even faster. Saving money can change how long bankruptcy stays on your credit report in British Columbia. Many people are able to buy a house or car in less than seven years following their bankruptcy. Please click he

Several factors will determine how quickly you rebuild credit after your bankruptcy in British Columbia is done and, in turn, your ability to borrow money.

First, if you are currently an undischarged bankrupt, it will be nearly impossible to get a loan. However, if you have been discharged from bankruptcy, a lender may consider your application. It will be more difficult to borrow in this case than if you were never bankrupt.  Lenders will also look at how long you have lived at your current address, your work history, your monthly income, and whether you have any security for the loan. They may require a co-signor.

Here are several suggestions for repairing your credit after bankruptcy:

  • First, begin to save money. During the time you were bankrupt you were making a contribution to your bankruptcy estate, by paying the trustee each month. Since you are now accustomed to living without that money, start putting that money in a separate bank savings account each month.
  • Next, once you have built up some cash in the bank for emergencies, you could consider using some of your savings to get a secured credit card. For example, if you give the credit card company $1,000 as a security deposit, they will probably give you a Visa card with a $1,000 limit. Your credit card works just like a regular credit card, and it even shows up on your credit report. This is a crucial step for repairing your credit.
  • Third, as you continue to save money each month, (and pay off your new credit card in full every month), you could invest your next say $700 of savings in an RRSP. With a secured credit card and money already invested in an RRSP, it is possible that your bank will lend you an additional $500 to invest in your RRSP. You now have $1,200 in your RRSP, and your tax refund may increase by $500 because of your RRSP contribution. You can use your tax refund to repay your RRSP loan!
  • Now your credit report shows a credit card in good standing, an RRSP loan that you have paid in full, and you have $1,200 in an RRSP. You are well on your way to repairing your credit.

Finally, continue saving, and once you have another $1,000 or $1,500 you can likely use that money as the down payment on a car.

You can’t repair your credit right away, but if you continue to save money, and follow the steps listed above, you can gradually rebuild your credit after your bankruptcy in British Columbia in done.

A bankruptcy trustee will assess your financial situation and determine what kind of monthly payment you can afford to make.  They will then compare that amount to your total debt, and determine how many months you require to pay.  If the numbers appear reasonable to both you and the trustee, the trustee will prepare the necessary documents to file a consumer proposal.  It is essential that you include all of your unsecured creditors.

According to the Bankruptcy and Insolvency Act (BIA), your creditors have 45 days to vote for or against your proposal. It is required to receive a majority (50% +1)  to vote in favour of your consumer proposal. Usually, creditors will realize they’d get even less if you filed for personal bankruptcy, and would rather accept your proposal.

After a further fifteen (15) days, if there are no objections; your proposal will be deemed approved by the court. From then on, you and your creditors are locked into the terms of the proposal.

You are allowed a maximum of three (3) payments throughout the duration of your consumer proposal to creditors. The consumer proposal collapses and annulled by the court. If you miss more than three (3) payments, the consumer proposal collapses and annulled by the court. Your creditors can immediately apply to the court to have your wages garnished and interest charges are applied to your debts all the way back from the day you filed.

Your credit rating will be revised to reflect your current situation. It will likely remain the way it is until the end of the proposal period. A note indicating you filed a proposal will also remain on your credit report for three (3) years beginning from the date you completed your proposal.

Everyone who files for bankruptcy is legally obliged to attend a minimum of two credit counselling sessions within the 180 day period prior to filing for bankruptcy, in addition to a debtor education course.

The aim of credit counselling is to review your financial situation with a non-judgmental counsellor whose role is to help you explore all the available options and so that you can decide on the best solution for you out of your personal financial difficulties.

The principal idea behind counselling is to educate people who are struggling with debt so that they can avoid similar financial problems from occurring in the future.

During your credit counselling session you counsellor will:

Discuss with you your debt, assets, income and expenses in order to have a clear overview of your financial position.

Help you decide if a filing for bankruptcy, enrolling in a debt management programme or other alternative is the best solution to your current situation.

Discuss with you ways to rebuild your future credit and manage your budget so that you do not have to face a similar debt crisis again.

With J. Bottom & Associates, all counselling sessions are organized individually and in complete confidence with experienced counsellors so that you can feel free to discuss in depth your

personal situation.

Your first credit counselling session will be scheduled in the first 10-60 days and your second session must be completed within the 210 days following the bankruptcy. Once you have completed the two sessions you will be eligible for an automatic 9 month bankruptcy discharge.

With J. Bottom & Associates there are no additional charges for credit counselling – all costs are included in our Trustee Fee that we quote you upfront for handling your bankruptcy.

If you would like to find out more about credit counselling and how it can help to give you peace of mind and set you on the road towards rebuilding a stable financial future, please contact J Bottom & Associates today.

Our consultations are free of charge and without obligation and may help you to see how to put your debts behind you and get off to a new start.