Frequently Asked Questions
If I declare bankruptcy, what happens to my assets?
With some exceptions, your assets, whether in your possession or in the possession of a third party, will transfer to the Trustee for the benefit of the creditors. Assets belonging to others, which are in your possession, will be turned over to them once they have proven their claims to the Trustee. While you may normally keep household furniture, clothing and personal effects, the assets exceeding specified provincial exemptions must be turned over to the Trustee. These assets will be sold and the proceeds will be distributed among the creditors. If your assets were mortgaged to any creditors, such as a finance company or bank, these creditors can seize and sell the assets unless arrangements can be made by you to pay them.
What property will not be taken?
Certain assets are considered exempt from seizure under the laws of your province of residence. Contact your local BDO office for details of exemptions in your Province.
Can I still be sued?
At the time of filing an assignment in bankruptcy, all legal actions such as garnishments, seizures or law suits are halted. Child support or alimony claims are dealt with outside of the bankruptcy and therefore these actions can still continue.
What happens to my credit rating?
Once your level of debt has become so great that bankruptcy is required, your credit rating is usually at its lowest. The ability to obtain and to use credit after your discharge will depend upon your ability to convince a potential lender of your future personal financial maturity. Sometimes a bad and negative credit rating can improve after bankruptcy. Certainly no creditor will advance further funds if you are unable to pay your existing creditors. After the discharge of debt obligations, your ability to re-establish yourself may be improved.
Will other people know about my bankruptcy?
While an individual's bankruptcy and discharge are matters of public record, notice of personal bankruptcy is not usually advertised in the newspaper and your employer is not normally notified. Bankruptcy records are permanently maintained in the Court and with the Superintendent of Bankruptcy.
What happens to salary, wages and other assets?
When you earn income in excess of the Standard set by the Superintendent of Bankruptcy, you will be expected to make payments to the Trustee from that excess until the date of the discharge. This amount is called surplus income. The amount of these payments are set taking into consideration the standards issued by the Superintendent of Bankruptcy, and the bankrupt?s personal and family situation. If the bankrupt does not agree with the amount of surplus income to be paid, the trustee must request mediation. Further, if any of the creditors do not agree with the amount of surplus income to be paid, they may submit a written request to the trustee asking for mediation. Failure to make the required payments may affect your discharge from bankruptcy. Should there be any change in your financial situation during the bankruptcy you must notify the Trustee of the change. The amount of the payment may be changed as a result of the change in your financial situation.
What happens if I win a lottery or receive an inheritance while I am bankrupt?
If you receive assets, such as lottery winnings or an inheritance, after the date of bankruptcy but prior to discharge, they must be turned over to the Trustee as they are considered assets that should be shared among your creditors. The Trustee will pay your creditors and any surplus is turned over to you. Certain sources of income such as pension plan benefits, welfare and disabled persons assistance, old age or family allowances are exempt from seizure in most Provinces.
How do I handle income tax returns?
The Trustee prepares a pre-bankruptcy tax return from January 1st to the date of bankruptcy and any refund for that period, as well as refunds of previous years not yet received, will be kept by the Trustee. A post-bankruptcy tax return for the period from the date of the bankruptcy to December 31st may be completed by the Trustee. Any refund resulting from this tax return may belong to the Trustee. Any taxes payable regarding this post-bankruptcy return must be paid by you whether or not you are discharged.
GST Refunds:
Any GST cheques based on the tax returns filed by the Trustee for the period(s) up to and including the year of bankruptcy will be sent to the Trustee. Because of the way the Government calculates GST refunds, you may not receive a refund for a period of up to two years from the date of your bankruptcy. However, if the funds realized by the Trustee are sufficient to pay the Trustee?s fees, then the Trustee will turn over G.S.T. refund cheques to you.
What about special gifts, transfers of property, or special treatment?
Gifts or transfers of property by you to others during the twelve months or in some cases five years prior to your bankruptcy are subject to review by the Trustee and may be reversed by the Court. If a creditor or a person related to you received special treatment, such as being paid while others were not, the Trustee may demand repayment from them. The Trustee must be advised of any such payments or transfers made during the twelve months prior to bankruptcy.
How does bankruptcy affect co-signers of my loans?
Bankruptcy will not cancel the liability of anyone who has guaranteed or co-signed a loan on your behalf.
What do I do if a creditor sues me?
If a creditor commences a court action against you, you should immediately inform the Trustee of the action and you should send any legal documents to the Trustee who will take steps to stop the action.
