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What is a
personal bankruptcy?

 

What is a personal bankruptcy?

In theory

it is the surrender of seizable and realizable assets to your creditors in exchange for the discharge of all debts (some exceptions prescribed by law).

In practice

We determine the assets that you will be unable to keep. As a general rule, there are very few that you will not be able to keep.

If the consequences of a personal bankruptcy would mean the loss of an asset that you want to keep, the consumer proposal would be an alternative to avoid this end result.

A good option for you if:

  • You cannot afford a debt consolidation or a viable proposal.
  • You have little or no equity in your assets.
  • You want an expeditious fresh start.

To learn more about our services:

 

WHAT ASSETS CAN I KEEP?

 

WHAT ASSETS CAN I KEEP?

  • Your home if there is little or no equity (equity = difference between fair market value and your mortgage) and provided you are not in default on your mortgage.
  • Your car if there is little or no equity and provided you are not in default on your car loan. If your car is entirely paid, it could be exempt from seizure. If not, we can make arrangements for you to keep it.
  • Your provincial income tax refund.
  • Furniture from the man residence for household use valued up to $ 7,000 (liquidation value).
  • Work tools necessary for the personal use for a professional activity.
  • Clothing.
  • In certain cases provided by law, a motor vehicle.
85%

of our clients are discharged after only 9 months.

 

My first appointment: What can I expect?

 

My first appointment: What can I expect?

The first appointment usually lasts about one hour. Other consultations may be required, depending on the complexity of your file or if you so require. These are free of charge.

The goal is to:

  • Determine the cause of your financial difficulties;
  • Calculate your income and expenses;
  • Determine and analyze your debts and assets;
  • Explain different possible solutions (pros and cons);
  • Offer our advice on the best solutions for you;
  • Answer all your questions.

After the first appointment, you will know what your options are, you will normally have resolved your concerns and worries and you will have answers to all your questions.

You will then be able to take the time to think about the path you wish to take.

What should I bring?*

Assets, income and investments
  • List your debts and recent account statements
  • Pay stub or bank statement
  • Alimony ( judgment or agreement )
House
  • Mortgage statement
  • Municipal tax bill
  • Act of purchase (if possible)
Car
  • Contract of sale / lease
  • State of recent account
  • Registrations and insurance copies

* Although it is convenient to have these documents in hand for the first meeting, they are not essential and may always be provided thereafter , as required.
 
3

steps to free yourself by filing for bankruptcy

 
3

steps to free yourself by filing for bankruptcy

  1. An initial meeting with your counsellor to discuss your options.
  2. Signing of documents and the start of the protection provided by law.
  3. Once the final payment is made, you are discharged of all your debts (some exceptions prescribed by law)

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Your questions

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The length of your bankruptcy will depend mostly on 2 factors:
- Previous bankruptcy
- Surplus income (i.e. income over the threshold as determined by law)

First-time bankruptcy:
- 9 months if no surplus income
- 21 months with surplus income

Second-time bankruptcy:
- 24 months if no surplus income
- 36 months with surplus income

Third-time bankruptcy:
The court will determine length after 12 months

To determine if you have surplus income, we must add net income from all sources (work, child benefits, child support, retirement income, bonus, income tax returns, etc) earned or received during the bankruptcy for all the members of the family unit. We can deduct the following expenses:
- Child support payment
- Child care expenses;
- Expenses associated with a medical condition (or handicap);
- Expenses permitted by the Income Tax Act that are a condition of employment;

Finally, we can deduct the following amounts considered as being essential to cover basic necessities. For example:
1 person: 2,121 $/month
2 persons: 2,640 $/month
3 persons: 3,246 $/month
4 persons: 3,941 $/month
5 persons: 4,470 $/month

The exact calculations may involve other more complex factors. The precise calculations will be done during your first information session with an administrator and you will have the necessary information to make an informed decision.

(For more details, please consult the official Office of the Superintendant of Bankruptcy Directive: https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br03249.html)

The law fixes a maximum for the trustee fees but not a minimum.

At Jean Fortin, we are proud to offer an affordable access to bankruptcy protection. If you do not have surplus income, your monthly contributions will be for a:
First-time bankruptcy: 160$/month for 9 months
Second-time bankruptcy: 125$/month for 24 months
(No opening fees or initial deposit fees)

The trustee’s fees are paid out of the sums collected. You will not have to pay any fee other than what has been contributed in your file either by monthly contributions or assets.

Yes. Often times, people with financial problems are out of work, and nothing can prevent them from declaring bankruptcy. Nevertheless, you will have to make monthly payments, to the Trustee, during the nine month period of the bankruptcy. (Please refer to the question What is the duration of a bankruptcy?

Since June 18th 1998, student loans are no longer discharged if the bankruptcy or consumer proposal proceedings are initiated less than 7 years following the end of your studies. The end of your studies is considered by the ministry as the date at which the teaching establishment declares that you have stopped studying. If you choose to, or have no choice but, to file a bankruptcy or a Consumer Proposal within seven (7) after the end of your studies, you may, after five (5) years, submit an application to the Court, asking to be discharged from the debt. Based on certain criteria, the Court may, at its sole discretion, discharge you. Should you satisfy the criteria and the court sees fit your application, a judgement may be rendered and your debt may be discharged.

No, only the court can annul a bankruptcy at the request of a creditor. This procedure is exceptional rare and hardly ever seen. However, in certain circumstances, creditors may oppose your discharge from bankruptcy for the following reasons: if the creditors can prove that, prior to your bankruptcy, you acted irresponsibly to their detriment, that you sold, disposed of, or hid some of your assets, or if you continued to increase your debts knowing that you would be declaring bankruptcy. In such cases, the court can suspend your discharge from bankruptcy and / or demand that additional amounts be paid to the bankruptcy as a condition of your discharge. These oppositions by the creditors are rare but still possible.

If your former spouse declares bankruptcy, it does not release you in any way from continuing to pay alimony, child support, or any arrears. As well, if you owe your former spouse alimony, or child support payments, you could have your wages garnished notwithstanding the bankruptcy. Alimony, child support and arrears are very well protected and these debts will live on after the bankruptcy.

The minimum amount of debt required by the Act before you can declare bankruptcy is $1,000. On the other hand, it stands to reason that with a debt of only $1,000, you should not consider bankruptcy as an immediate solution. Moreover, according to the Act, your must also be insolvent, in other words, you cannot honour your financial obligations as they generally become due. In actual practice, the first piece of advice that we give people in financial difficulty is to prepare a budget. The budget will help you to determine the monthly surplus that may be available to pay your monthly debt obligations. If you find that your expenses are greater than your income, you will have to cut out the expenses that you consider less important in order to balance your budget. To help you prepare your budget, please refer to the section – Budget under the heading Financial Health.

Yes! The first step to take when encountering financial difficulties is to prepare a budget and consider cutting certain expenses in order to create a monthly budget surplus which will allow you to respect, or better yet accelerate the reimbursement of your debts.

If this turns out to be impossible, you can consider making arrangements with each of your creditors (if they are not too numerous). The goal is to reduce the monthly payments and ideally reduce either the interest rate, or the amount of the debt, or even both. Creditors normally appreciate if a reasonable effort is made to find a solution. They will prefer that to the risk of losing everything in the event that you declare bankruptcy.

Another alternative to be considered is a debt consolidation which is a loan from a bank, a credit union or a family member large enough to reimburse the smaller creditors and propose a plan to reimburse the major loan over a longer period of time. This has the advantage of maintaining a good credit rating, regrouping all your various payments into one and it normally reduces the interest rate. Moreover, opting for the debt consolidation, you will avoid declaring bankruptcy, and you will keep your house, your car and maintain a good credit rating score.

If none of these options are possible, you can consider the possibility of filing a consumer proposal which is an effective tool to regroup your payments and to reduce it to one that corresponds to your financial capacity. As soon as you file, all interest on the debts are reduced to zero. The favourable vote of the majority of your creditors binds all creditors. Once you have respected the terms of your proposal, you will obtain a waiver of your debts (except those provided for by the law) while keeping all of your assets.

Finally, there exists the voluntary deposit, although considered somewhat archaic. Under this system, you must deposit at your local courthouse a portion of your wages (30% before income taxes, less some minor deductions) which will be distributed amongst your creditors. The yearly interest rate is reduced to 5%.

Only bankruptcies and consumer proposals must to be done through a trustee. All the other options may be done without the intervention of a professional.

In declaring bankruptcy or filing a consumer proposal, you place yourself under the “protection of the law”. All seizures or judicial proceedings are stopped except for three exceptions:

  • A secured creditor may continue his proceedings (ex. a mortgage creditor), but the proceedings are limited to the repossession the assets subject to a lien (ex. mortgage, conditional sales contract);
  • A garnishment of wages for alimony or child support payments;
  • A creditor who has obtained a judgement of the Court. This is an extremely rare exception and usually involves fraud.

Under the Act, you have the right to have or open a personal bank account even if:

  • You are unemployed;
  • You do not have money to deposit in it immediately;
  • You have declared bankruptcy.

However, the Bank is entitled to refuse to open an account if:

  • It believes that you will use the account in an illegal or fraudulent manner;
  • You have ever engaged in illegal or fraudulent activity at a bank over the past seven years;
  • You have provided it with misleading information;
  • You do not agree that it verify the information described above;
  • You are unable to present proper identification.

If you are dissatisfied with any decision or action taken by a financial institution, you can complain to the Ombudsman for the bank. His role is to analyze the situation objectively and make corrections when necessary. Here’s how to reach them:

CIBC Bank : 1-800-308-6859
Bank of Montreal : 1-800-371-2541
Laurentian Bank : 1-800-479-1244
National Bank : 1-888-300-9004
Royal Bank : 1-800-769-2542
Scotia Bank : 1-800-785-8772
TD Bank : 1-888-361-0319
Desjardins Group : 514-281-7434
Ombudsman of the Canadian Bankers Association : 1-888-451-4519
Financial Consumer Agency of Canada (FCAC) : 1-866-461-2232

The discharge from bankruptcy will erase all debts, except those listed in Section 178 of the Act which reads as follows:

  • Any fine or penalty imposed by a court in respect of an offence, or any debt arising out a recognizance or bail;
  • Any award of damages by a court in respect of bodily harm intentionally inflicted, or sexual assault, or wrongful death resulting therefrom;
  • Any debt or liability for alimony;
  • Any debt or liability under an order for the maintenance and support of a spouse or child living apart from the bankrupt;
  • Any debt or liability arising out of fraud, embezzlement, misappropriation while acting in a fiduciary capacity;
  • Any debt or liability for obtaining property by false pretences or fraudulent misrepresentation;
  • Any liability for the dividend that a creditor would have been entitled to receive on any provable claim not disclosed to the trustee;
  • Any debt or obligation in respect of a student loan guaranteed by the government where the date of bankruptcy occurred before the date on which the bankrupt ceased to be a student or within 7 years after the date on which the bankrupt ceased to be student;
  • Any debt for interest owed on any of the above noted non-dischargeable debts.

The fact that your spouse declares bankruptcy does not necessarily mean that you must also declare bankruptcy. Should the question arise, the trustee will verify whether or not you are jointly responsible for any of your spouse’s debts or obligations. In the event that you are jointly responsible for an unpaid debt or obligation, the creditors may demand, from you, full payment of the debt or obligation, unless you also file a proposal or bankrucpty.

Provincial: The Provincial income tax refunds are not seizable by the Trustee, which means that you may keep the refunds despite the fact that you filed a Bankruptcy. However, you should be aware that if there is an amount owing to the Agence du revenu du Québec (the “ARQ”) for a period prior to the date of the Bankruptcy, the ARQ may apply your income tax refunds against any amount owing for a period prior to the Bankruptcy, but not for any period subsequent to the Bankruptcy.

Federal: The Federal income tax refunds for the periods prior to the Bankruptcy, as well as for the calendar year of the Bankruptcy, will be seized by the Trustee. The Federal income tax refunds for the years subsequent to the Bankruptcy may not be seized by the Trustee.

The filing of your income tax returns: In the event that you file a Bankruptcy, you may consider this a fresh start, and you will be entitled to include any income tax debt owing up to the date of the Bankruptcy. As such, there will be two (2) income tax returns to be filed, the first for the period from the 1 st of January to the day prior to the date of the Bankruptcy, and the second, for the period from the date of the Bankruptcy to December 31. The Trustee will prepare the income tax returns, free of charge, (exceptions may apply).

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