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Bankruptcy Counselling in Toronto

The decision to file bankruptcy is an important one and not one that should be taken lightly. The staff at Maria Rickard & Associates can help you through this difficult time and find you the best option for your situation. Continue reading to learn more about the process of filing bankruptcy then contact us if you have any questions about our bankruptcy counselling in Toronto.


WHO CAN GO BANKRUPT?

In order to declare bankruptcy, an individual has to meet certain conditions:

  • Owe at least $1,000
  • Be unable to meet regular payments as they fall due; and
  • Own insufficient property to enable payment of all debts.


In general, bankruptcy is deemed the best solution only for those who cannot consolidate their debts at a reasonable cost over an appropriate period of time.


1. STAY OF PROCEEDINGS

The filing of a bankruptcy halts all garnishments, lawsuits, or Court proceedings initiated or that may be initiated.

Only the Court may grant permission to creditors to pursue their action in certain special circumstances.


2. DISCHARGE

If it is the first time a debtor has gone bankrupt and the debtor has complied with his duties, then the bankrupt is entitled to an automatic discharge:

1.) On the expiry of 9 months after the date of bankruptcy, if he has no surplus income as determined by the Superintendent’s Standards on Surplus Income.

OR

2.) On the expiry of 21 months after the date of discharge where the bankrupt is required to make payments under Section 68 of the BIA to the estate, as per the Superintendent’s Standards on Surplus Income.


If the debtor has filed a previous bankruptcy then the automatic discharge provisions:

1.) On the expiry of 24 months after the date of discharge if there is no surplus income.

OR

2.) On the expiry of 36 months after the date of bankruptcy if there is deemed surplus.


EXCEPTION:

Bankrupts with personal income tax debt in an amount exceeding $200,000, representing 75 percent of the debt, will not be eligible for an automatic discharge and an application to the Bankruptcy Court will be made to determine the type of discharge to be granted.


If a creditor or trustee objects to the bankrupt’s discharge or the bankrupt is not entitled to an automatic discharge, then the following discharges may be issued by the court:

  • Absolute: It applies immediately and means that the debtor is no longer responsible for the debts he had, except those covered under Section 178
  • Adjourned: Any hearing that is postponed to a later date
  • Conditional: The bankrupt may be required to pay a certain sum of money for distribution in the bankruptcy. Non-compliance could result in a harsher order
  • Suspended: Same as absolute but with a delay before coming into effect
  • Refused: Court has the right to refuse discharge


Upon obtaining the discharge, the bankrupt is released from all debts, except for:

  • Fines or penalties imposed by a court or default on bail bond
  • Alimony or support of child or spouse
  • Fraud, embezzlement, misappropriation or defalcation
  • Non-disclosure to the trustee (these creditors will be entitled to the dividend that would have been paid if a claim had been submitted in the bankruptcy
  • Any debt owed to Canada Student Loans, or Ontario Student Assistance Program, where the date of the bankruptcy occurred within seven years of the debtor leaving school


3. PROPERTY OF THE BANKRUPT

The assets of the bankrupt, whether in the possession of the bankrupt or in the possession of a third party, will belong to the trustee for the creditors, whereas assets belonging to others will be turned over to them when their claims are proven.


Where a creditor holds security against any asset, he will normally be allowed to exercise his rights.


EXEMPT PROPERTY

The trustee will not take possession of certain assets because they are exempt from seizure under the laws of the province of residence. Exempt property will vary from one province to another. In Ontario exempt assets include:

  • VEHICLE - $5650.00
  • TOOLS OF THE TRADE - $10,000
  • FURNITURE - $10,000
  • PERSONAL EFFECTS – 5,000


SALARY, WAGES AND OTHER ASSETS

When a bankrupt earns income in excess of that necessary to maintain a reasonable standard of living, the bankrupt is expected to make payments to the trustee from that excess until the date of discharge. The amount of the payment will be discussed and decided between the bankrupt and the trustee, taking into consideration the family responsibilities


Should there be any subsequent change in the situation of the bankrupt, the amount of the payment can be varied at that time.


Property acquired by the bankrupt, such as lottery winnings or inheritance received after the bankruptcy, but prior to discharge, must be turned over to the trustee, as they constitute assets divisible among the creditors.


TAX REFUNDS

The trustee will prepare a tax return for the period of January 1st to the date of bankruptcy. Any tax refund for that period as well as refunds of the previous years not yet received will have to be remitted to the trustee. Another tax return will have to be completed by the trustee for the bankrupt for the period from the date of bankruptcy to December 31st. Any refund will be remitted to the trustee and the bankrupt must pay any liability to Revenue Canada, as this is not a debt cleared in the bankruptcy.


SETTLEMENT OF PROPERTY

Gifts or transfers of property during the twelve months prior to bankruptcy (five years in certain circumstances) are subject to review by the trustee and may be reassessed by the Court. If, during the three months, prior to bankruptcy (twelve months if a related person), a creditor received preferential or special treatment, such as being paid while others were not, the trustee may demand the reimbursement from these creditors. The trustee must be informed of these payments.


4. DUTIES IMPOSED UPON THE BANKRUPT

The bankrupt must fulfill all of the following duties:

  • Reveal and turn over to the trustee all assets in the debtor’s possession or control
  • Make available to the trustee all books and records relating to assets or affairs
    • Attend at the Office of the Official Receiver, if and when requested, to be examined under oath as to the facts relating to the bankruptcy
    • Provide a complete statement of assets and liabilities including creditors’ names, addresses, account numbers, invoices and amounts. Where the bankrupt receives additional bills or legal documents, they should be forwarded to the trustee. If assets were accidentally omitted, the trustee must be informed promptly
    • Inform the trustee of the details of all property disposed of during the twelve months prior to the bankruptcy
    • Inform the trustee of the details of all property disposed of by gift during the five years prior to the bankruptcy
    • Keep the trustee advised of place of residence 
    • Pay any amounts prescribed by the Superintendent Surplus Income Guide (see attached).


5. BANKRUPTCY OFFENCES

Beside the offences under the Criminal Code which may also apply, the bankrupt is liable to imprisonment up to three years if found guilty of any of the following offences under the Bankruptcy and Insolvency Act:

  • Failing to perform the previously mentioned duties as a bankrupt
  • Fraudulently disposing of assets before or after bankruptcy
  • Omitting to answer fully and truthfully all questions when examined under oath
  • Making false declarations regarding assets or liabilities
  • Destroying or concealing books or documents relating to his property or affairs
  • Obtaining property or credit by false representation
  • Not disclosing to the person prior to obtaining credit that the debtor is an undischarged bankrupt


If you are experiencing a difficult financial time, it is best to seek the help of an experienced professional. Contact Maria Rickard & Associates for bankruptcy counselling in Toronto. We will be able to determine the best option for your unique financial situation.

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