Debt Relief. A Fresh Start.
Can You Repay Your Debts On Your Own?
Do you have assets to sell or a sufficient income to get out of debt on your own? If the answer is “no”, then bankruptcy may be right for you.
Pros and Cons
Like most things, Bankruptcy has both advantages and disadvantages.
- Pay less than you owe, as little as $1,800;
- All debts, including tax debt, are erased with a few exceptions;
- Stops wage and bank account garnishments immediately;
- Stops creditor calls immediately;
- Can take as few as 9 months;
- Bankrupts can keep their car, tools, and other personal belongings;
- No approval is required by creditors; and
- Two free counselling sessions are provided.
The not so good:
- Bankrupts can lose certain assets;
- If a bankrupt’s income exceeds certain levels, they must provide a portion to their creditors;
- Not all debts are erased, such as child support, fines, and recent student loans;
- Bankruptcy damages your credit;
- During bankruptcy you can’t sponsor family and friends wishing to immigrate to Canada; and
- Bankruptcy can affect certain memberships and licenses. A key consideration for real estate brokers, accountants, and lawyers.
How To Start
The process begins by requesting a free, no obligation consultation with one of our Federally Licensed Insolvency Trustees. We’ll meet with you in person, take the time to understand your unique personal situation and explain your options.
We never charge up-front fees, and always provide free, no-obligation consultations. You’ll be amazed by the feeling of relief that understanding your options can provide.
Questions and Answers:
What is Bankruptcy?
Bankruptcy is the legal process that an individual undertakes when they make an assignment in bankruptcy with a licensed Trustee. After making an assignment in bankruptcy an axe falls in time; the assets and debts that were accumulated before the assignment in bankruptcy are administered by the Trustee until certain legal duties are fulfilled and the bankrupt is discharged from bankruptcy. All unsecured debts are released at the time of discharge except the specific debts discussed below.
What does Bankruptcy cost?
The law requires that bankrupts surrender or repurchase their non-exempt assets, and contribute a portion of their income if above certain thresholds. As a result, the cost of bankruptcy is different for everyone. At Steve Welker and Company we can estimate the cost of your bankruptcy in person or over the phone.
What’s the process?
Becoming debt free begins with a free, no obligation initial consultation with a Licensed Insolvency Trustee where your Trustee will review your situation and explain your options.
If you decide to make an informed decision to file an assignment in bankruptcy:
- Your creditors will be notified of your bankruptcy;
- You’ll report your income to your Trustee on a monthly basis;
- You’ll attend two free credit counselling sessions with a credit counsellor registered with Industry Canada;
- You’ll provide your income tax information in the year of your bankruptcy;
- You’ll make payments to your Trustee as agreed-upon during your initial consultation; and
- You’ll be discharged from bankruptcy upon fulfilling your duties as described above. You can then focus on rebuilding your credit and enjoying your new debt free life
Is approval by my creditors required?
No. Your creditors can’t prevent you from making an assignment in bankruptcy. This is a distinct advantage that bankruptcy holds over a consumer proposal.
Which debts aren’t erased?
- Fines, penalties, and restitution orders imposed by a court in respect of an offence including speeding and parking tickets
- Any debt arising out of a recognizance or bail
- Any award of damages by a court in a civil proceeding in respect of bodily harm intentionally inflicted, sexual assault, or wrongful death therefrom
- Any debt or liability for alimony or alimentary pension
- Unpaid spousal or child support
- Debt obtained by fraud, including E.I. over payments
- Debts not disclosed to the Trustee in Bankruptcy
- Student debt relating to studies completed within seven years of the date of bankruptcy. Read more here
- Debts secured by assets which you intend to keep
- Tax debt CAN be erased contrary to popular belief
How long before my debts are erased?
- 9-36 months.
- A first time bankrupt without surplus income can be discharged after 9 months
- A first time bankrupt with surplus income can be discharged after 21 months
- Second time bankrupts without surplus income can be discharged after 24 months
- Second time bankrupts with surplus income can be discharged after 36 months
What happens to my credit rating?
Debts erased by the bankruptcy will show an R9 credit rating.
A first bankruptcy remains on your credit report for 7 years after being discharged, while a second bankruptcy remains on your credit report for 14 years after being discharged.
Does bankruptcy protect me from my creditors?
Yes. Bankruptcy legally stops:
- Wage garnishments;
- Court proceedings; and
- Creditor calls.
Making an assignment in bankruptcy is a legal process that prevents creditors from pursuing you any further. This legal process is in accordance with Federal Law known as the Bankruptcy and Insolvency Act. Once bankrupt you will refer any creditor correspondence to your Trustee in Bankruptcy who will deal with the creditor directly. Only a Licensed Insolvency Trustee can initiate and enforce this legal protection.
Can bankrupts can keep their home, car, tools, and other personal belongings?
Yes. In Ontario, the following assets are exempt from bankruptcy:
- All necessary clothing,
- A car worth less than $6,600,
- Tools of the trade worth less than $11,300,
- Furniture and other personal belongings worth less than $13,150, and
- RRSPs contributed more than 12 months ago
are not assigned to your Trustee for the benefit of your creditors. Even if your assets exceed the thresholds you can always choose to repurchase rather than surrender your assets.
For example: John is a first time bankrupt without surplus income. His 2003 Honda Accord is worth $7,500. John has two options:
- Keep the car and pay an additional $100 per month for nine months to his creditors; or
- Hand the keys to the Trustee in Bankruptcy who will sell the car and provide John with the first $6,600 of proceeds so that John can buy another car.
If John’s car was worth less than $6,600, he could keep it without making any additional payments.
What if my car is leased?
Bankrupts who lease or have cars financed by secured lenders can retain their car if they agree to make the required payments. Any decision to retain a leased or financed automobile should be discussed with your Licensed Insolvency Trustee during your initial consultation.
What if I have a car loan secured against my vehicle?
Bankrupts with debt secured by their vehicle can return their car to their lender prior to bankruptcy or keep their vehicle by continuing to pay the secured lender. Any decision to retain a vehicle that acts as security for a loan should be discussed with your Licensed Insolvency Trustee during your initial consultation as it may not be in your best interest to continue making payments.
What does a bankrupt give up? (non-exempt assets)
Be aware that bankrupts can always choose to repurchase rather than surrender their non-exempt assets. Steve Welker and Company will review your personal situation and explain how you can retain all of your assets. In short,
- RRSP contributions made during the last 12 months;
- Home equity, less selling costs;
- TFSAs; and
- Non-exempt personal belongings
must be surrendered to the Trustee or repurchased.
Can a portion of my income can be taken by my creditors? (Surplus Income)
The Canadian Government estimates what it costs for an individual or family to live. The larger the family, the larger the estimate. If your income exceeds the allowable amount, 50% of your income above the limit is paid to your Trustee for the general benefit of your creditors.
This concept is called “Surplus Income” and determining whether or not you have any involves a detailed calculation that is explained in more detail here. If you have surplus income the length of your bankruptcy will be extended by 12 months.
Can bankruptcy affect my membership and/or licenses?
Some associations overseeing professions such as accounting, law, real estate, and insurance will revoke their member’s membership or license if they declare bankruptcy. If you are a member of a professional organization or hold a professional license, speak with your Licensed Insolvency Trustee to ensure that you are aware of any potential ramifications.
The Bankruptcy Library
Listed below are some of our most commonly read blog posts on specific issues related to Bankruptcy. If you’re unable to find the answer to your question, please use our website’s search feature or give us a call. You’ll speak directly with a Licensed Insolvency Trustee who can answer your questions.
- Bankruptcy vs. Consumer Proposal
- How do Trustees get Paid?
- Car Loan After Bankruptcy
- RRSPs and Bankruptcy
- Bankruptcy and your partner
- Bankruptcy with your partner
- Can I claim bankruptcy twice?
- How Bankruptcy works
- Consequences of Bankruptcy
- Should I go Bankrupt?
- What is Bankruptcy?
- How to Claim Bankruptcy in Ontario, Canada
- Stop Garnishments Immediately
- Erasing your student loans
- Erasing your tax debt
- Am I eligible to go bankrupt?
- I can stop bill collectors from calling me?
- You can keep your home and go bankrupt?
- What is a Trustee in Bankruptcy?
- Surplus Income