Several solutions are available to consumers with financial difficulties, budget reorganization, debt consolidation, consumer proposal. In situations where none of these options is possible, the solution is bankruptcy.
Bankruptcy, a proceeding made under the provisions of the South Bankruptcy and Insolvency Act, starts with a trustee and consists of equal sharing (Pro rata) of the realization of the debiler’s property to all non-creditors. In addition, it is a process whereby the consumer must return the property he or she owns to the trustee unless the property is exempt from seizure.
It is important to note that the LFI hand of goals is:
“The unlucky rehabilitation of weaker in allowing him to start a healthy financial life again”
In consequence, a trustee, that no other solutions are offered to him, he must file a bankruptcy.
What can go bankrupt?
Bankruptcy is a process that can be undertaken by a consumer or a company. We will limit ourselves today to the bankruptcy of a consumer. However, the rules for personal bankruptcy or commercial bankruptcy are generally the same.
The LFI provides certain conditions based in order to be eligible for bankruptcy, namely:
- Release of an earlier bankruptcy
- To reconfigure the insolvable person definition: Avoid a minimum of $ 1000 of debts; Have total debts greater than the total of the value of its assets free of foreclosure; Being a Canadian resident, having been in Canada for the past year or having property in Canada;
If conditions are set, a consumer may file for bankruptcy. However, if there is little debt, the trustee, unless exceptional circumstances, recommend the consumer to choose another alternative than bankruptcy.
The process after the signing of bankruptcy
When consumer signed the bankruptcy proceeding, including the list of creditors, assets personal information and budget, the trustee will send all creditors an ad of bankruptcy including the details of the consumer’s release. An assembly of creditors will be convened only on the rare occasions when a 25% more representative of all claims demands.
The trustee will now be the person who will respond to the creditors and the harassment will stop.
Consumer’s obligations during bankruptcy
The obligations of a credit card are listed in Article 157.1 and 158 of the BIA. Here are some examples of the obligations of a consumer who has gone bankrupt:
- Return to the trustee all the credit cards he has in his possession;
- Do not use or get credit;
- Attend two consultation sessions
- Must reveal all the property he owns;
- Must reveal all the debts he has;
- Notify the trustee of any material change in its financial situation;
- Having the syndic report of any change of address and place of residence;
- Make monthly payments according to the amounts indicated by the trustee.
Monthly payments (monthly contribution) may change during the period of bankruptcy, depending on the income changes of the family unit.
The duration of bankruptcy
The duration of bankruptcy is determined by four criteria:
1. The name of bankruptcy earlier;
First bankrupt, the consumer will be in bankruptcy for 9 or 21 months and will be liable to an automatic release (no presence in court if no opposition and if the obligations are all met).
Second bankruptcy, the consumer will be in bankruptcy for 24 or 26 months and be eligible for statutory release (no presence in court if no opposition and if the sound was to be met).
Third bankrupt, the consumer is not eligible for statutory release and will be present at the court after 12 months of bankruptcy related to knowing the duration and cost of his bankruptcy. In effect, a registrar or bankruptcy court judge will perform a conditional release judgment for the consumer. The case is a case in point, but when a consumer is in his third bankruptcy, he usually assures that the period of his bankruptcy will be more than 12 months.
2. The net income of the family unit;
The net monthly income of the debilitator’s family unit determines the period of bankruptcy in first or second bankruptcy situations.
3. The total of personal tax debts and the percentage that these debts represent;
A consumer who has more than 200,000. $ Of tax decks to individuals, he will not be eligible for statutory release and will be present in the court to obtain his release.
4. If he already joined opposition or not.
In all consumer bankruptcy cases, the trustee, creditors or the office of the Superintendent of Bankruptcy may object to the discharge of the bankruptcy of a debiler and in these circumstances, the consumer shall be present at the affinity court of get his release.
The myths associated with bankruptcy
1. I lose all my property when I declare bankruptcy;
No; property that is exempt from seizure remains the property of the consumer who goes bankrupt;
2. No one can go bankrupt when he is unemployed;
No; whether a consumer has a job or not he can go bankrupt.
3. The creditors can refuse my bankruptcy;
No; only the court can annul my bankruptcy.
4. I can go bankrupt only for certain creditors;
No; all creditors must be mentioned.
Cancellation of bankruptcy
Consumers who consult us had the question to know if he joined bankruptcy can be canceled. The LFI provides that a bankruptcy can always be canceled. In the first place, bankruptcy can be canceled at any time when a consumer files a proposal and this proposal is accepted by the creditors and the court.
Secondly, a bankruptcy can also be overruled for bankruptcy filing, the conditions of the BIA required for filing have not been met all according to the new information presented to the court.
Some examples are:
- The total debts of the consumer having gone bankrupt, was less than $ 1000;
- A second bankruptcy for a consumer who has not been released from his first bankruptcy;
It will be clear to the court that the cancellation of a bankruptcy if a consumer had always made his monthly payments or in the circumstances where the consumer has only one creditor.
Bankruptcy is a process of last resort when all other options have been considered. However, it is important to realize that if a consumer goes bankrupt, his financial life is not finished. As we know the ultimate goal is to make sure consumer will have the opportunity to restart their financial life.