1. What is Bankruptcy? 
2. What are the major steps in Personal Bankruptcy? 
3. Who is a Trustee in Bankruptcy? 
4. Who does the Trustee work for? 
5. Do I have certain duties as a Bankrupt? 
6. What happens to my wages during Bankruptcy? 
7. Will all of my assets be assigned to the Trustee? 
8. What about my secured creditors?
9. What happens at an examination by the Official Receiver?
10. What happens at the first meeting of creditors?
11. Who prepares my tax returns?
12. When will I get my Discharge from Bankruptcy?
13. Which of my debts are not discharged by bankruptcy?
14. What about my credit rating? 
15. Are my spouse's assets included in my bankruptcy?
16. Do I require a lawyer?
17. Will legal actions continue after declaring bankruptcy?
18. What about new assets during my bankruptcy?
19. Can I maintain my bank account?
20. Should I use credit prior to discharge?
21. How are joint debt or loan co-signers affected?
22. Who will know about my bankruptcy?
23. How should I handle telephone calls or other harassment?
24. How are student loans treated in a bankruptcy?
25. What assets can I keep?

Bankruptcy is a legal method of eliminating debt and providing a means for debt-oppressed people to obtain a "fresh start." In many cases, bankruptcy means the elimination of the debt that you owe to your creditors.

• meet with a licensed Trustee for an initial assessment
• file an assignment in bankruptcy with the Official Receiver
• attend an examination by an Official Receiver, if required
• attend a meeting or meetings of creditors
• attend first and second counselling sessions
• in some cases, apply to the Court for a Discharge from Bankruptcy

3. Who is a Trustee in Bankruptcy?
A Trustee is an individual or a corporation licensed by the government to conduct the bankruptcy process. A Trustee is not a lawyer. You can ask for advice about certain bankruptcy matters but you are not a "client" of the Trustee. A Trustee is paid by the bankrupt and from the assets of the estate. If there are no available assets, the Trustee looks to the bankrupt for payment of fees and costs. An estimate of fees and costs can be given only after reviewing your file. The Bankruptcy and Insolvency Act sets out the Trustee's fees for both a summary administration and a consumer proposal. A Trustee cannot be discharged without approval from the Court or the Official Receiver, who reviews the statement of receipts and disbursements, including the Trustee's fees and costs.
 

4) Who does the Trustee work for?
The Trustee is chosen by the bankrupt. However, the Trustee remains an officer of the Court, with an obligation to look after the creditors' rights and to investigate the affairs of the bankrupt as required. The Trustee also ensures that the rights of the bankrupt, as defined by the Bankruptcy and Insolvency Act, are not abused. The Trustee's primary duties are:

• review your situation and counsel you on the alternatives available
• administer the proposal, or liquidate your non-exempt assets and turn them into cash for distribution to creditors

administer the bankrupt estate or proposal from beginning to end according to the Bankruptcy and Insolvency Act

5)Do I have certain duties as a bankrupt?
The bankrupt's duties are listed in Section 158 of the Bankruptcy and Insolvency Act. Read the section carefully and comply with its requirements. You must confirm in writing that you clearly understand your duties as a bankrupt.

The bankrupt's primary duties are:

• disclose all of your assets and liabilities to the Trustee
• advise the Trustee of any property disposed of in the past year
• surrender all credit cards to the Trustee
• attend an examination before the Official Receiver, if required
• attend the first meeting of creditors (if a meeting is requested by the creditors)
• advise the Trustee in writing of any address changes

generally assist the Trustee in administering the estate

7)Will all of my assets be assigned to the Trustee?
The only assets not assigned to the Trustee for distribution to your creditors are those exempted by provincial law. Discuss this matter with the Trustee. Be sure that all of your assets declared under oath to the Trustee are fully disclosed and properly valued.
Your assets include all existing assets as well as those that may be acquired prior to your discharge. Once you have filed an assignment you cannot dispose of any assets assigned to the Trustee.
A list of provincial exemptions is included in the section Bankruptcy Rules by Province.

8)What about my secured creditors?
In most cases, bankruptcies and consumer proposals do not affect the rights of secured creditors. If a creditor has a valid security against your property (i.e., car or house), consult with the Trustee about surrendering the asset and obtaining a receipt. If you can afford monthly payments, financial arrangements may be made with the secured creditor. 

9) What happens at an examination by the Official Receiver?
Shortly after filing for bankruptcy, you may be examined under oath by an Official Receiver, who is a Deputy of the Superintendent of Bankruptcy. The purpose of this examination is to determine the causes of your bankruptcy, the disposition of any past assets and the status of present assets. Your conduct is also reviewed.

10) What happens at the first meeting of creditors?
A meeting of creditors may be called if requested by your creditors.
The purpose of this meeting is to:

• confirm the appointment of the Trustee
• appoint up to five inspectors who supervise the administration of the bankrupt estate, including approval of the Trustee's statement of receipts and disbursements
• allow creditors to obtain information about the bankruptcy
• allow creditors to give directions to the Trustee

11) Who prepares my tax returns?
You must supply the Trustee with documents to complete two income tax returns during the year in which a bankruptcy occurs. A pre-bankruptcy income tax return must be filed for the period from January 1 to the date of bankruptcy. A post-bankruptcy income tax return must be filed for the period from the date of bankruptcy to December 31.
Income tax refunds from prior years are an asset of the bankrupt estate and must be sent to the Trustee. The Trustee may request that refunds from the post-bankruptcy return be paid to the creditors. Income taxes owing prior to the bankruptcy are discharged. Any amount owing on the post-bankruptcy tax return must be paid by the bankrupt.

12) When will I get my Discharge from Bankruptcy?
A first-time bankrupt is automatically granted a discharge nine months after filing bankruptcy unless a creditor, the Trustee, or the Official Receiver objects. If you are granted an automatic discharge, there is no court hearing and the Trustee sends you a copy of the discharge.

If this is not your first bankruptcy or if your discharge is opposed, the Trustee sends a discharge application to the Court. You will be advised by the Trustee if you are required to appear in Court for the discharge hearing. At the hearing, the Trustee's report informs the Court of the circumstances surrounding your bankruptcy. The Court will choose one of the following discharge alternatives:

 Absolute Discharge:You are no longer responsible for unsecured debts incurred prior to bankruptcy except for those in Section 178 of the Bankruptcy and Insolvency Act.

Conditional Discharge: You may be required to pay a certain amount of money to your creditors through the Trustee for a specified period (e.g., $100 per month for 24 months). Your discharge is subject to fulfilling the terms and conditions of the order. An absolute discharge will be granted when the specified conditions are fulfilled.

Suspended Discharge: This could be an absolute discharge but there is a delay before it comes into effect or is reviewed again by the Court.

 Discharge Refused: The Court has the right to refuse a discharge in unusual circumstances. A discharge application may be refused if any of the following are reported to the Court:

• your assets are less than 50% of the amount owed to unsecured creditors
• you continued to obtain credit while unable to pay all of your existing creditors
• you failed to account for any disposal of assets
• you contributed to bankruptcy by rash speculation, extravagant living or gambling
• you gave preferential treatment to any creditor within three months preceding the date of bankruptcy
• you failed to perform any duty imposed by the Bankruptcy and Insolvency Act

13) Which of my debts are not discharged by bankruptcy?
Debts that are not discharged by bankruptcy are outlined in Section 178 of the Bankruptcy and Insolvency Act.
These include:

• student loans, if it is less than two years since your schooling finished
• fine or penalty imposed by the Court
• alimony
• liability for dividend to an undisclosed creditor
• debt obtained by fraud
• liability for support or maintenance of spouse or child under an agreement or Court Order

14) What about my credit rating?
Usually, once your level of debt becomes so great that bankruptcy is required, your credit rating is poor in any event. Your ability to obtain and use credit after discharge depends on convincing lenders of your personal financial maturity. Your credit rating can only improve after bankruptcy. Send a copy of the Discharge Order to the Credit Bureau so that your credit record can be updated. All documents relating to your bankruptcy should be saved for reference by future lenders.

15) Are my spouse's assets included in my bankruptcy?
No. Only assets owned by the bankrupt are included in the bankruptcy. If assets are jointly owned with a spouse, then the bankrupt's portion may have to be sold and distributed to the creditors. It is important to make the Trustee aware of joint assets so that each case can be reviewed individually.

16) Do I require a lawyer?
Generally, you do not require a lawyer to go bankrupt. If you feel the need for legal advice and cannot afford a lawyer, legal aid is available.

17) Will legal actions continue after declaring bankruptcy?
All legal actions by unsecured creditors halt when the assignment is filed. If you receive any writs, garnishments or other legal documents after the date of bankruptcy, contact the Trustee immediately.

18) What about new assets obtained during my bankruptcy?
In some cases, assets acquired prior to your discharge should be used to pay creditors. Lottery winnings and inheritances are considered assets even if they are acquired after filing the assignment in bankruptcy.

19) Can I maintain my bank account?
Yes. However, if you are indebted to the same bank it may be prudent to move your account elsewhere.

20) Should I use credit prior to discharge?
Under Section 199 of the Bankruptcy and Insolvency Act, an undischarged bankrupt must advise a creditor that they are in bankruptcy, if they are seeking credit. You must deliver all of your credit cards to the Trustee upon filing an assignment in bankruptcy.

21) How are joint debt or loan co-signers affected?
Bankruptcy does not stop the liability of anyone who guaranteed or co-signed a loan on your behalf. Even your spouse may be accountable for liabilities incurred jointly with you. It is important to make the Trustee aware of joint liabilities so that each case can be reviewed separately.

22) Who will know about my bankruptcy?
Your bankruptcy and discharge are matters of public record. Bankruptcy documentation is stored with the Superintendent of Bankruptcy. Statutory documents and discharge records are avail-able to all Credit Bureaus. Employers are not normally notified of personal bankruptcies and notices of summary bankruptcies are not published in newspapers.

23)How should I handle telephone calls or other harassment?
The bankruptcy process offers a chance to rehabilitate yourself and to relieve the pressure from creditors. Any telephone calls received from creditors after bankruptcy should be referred to the Trustee. If the calls are distressing, threatening or verbally abusive make careful notes of each incident and consider contacting the police. Harassment is against the law.

24)How are student loans treated in a bankruptcy.
In a general sense student loan debts are treated exactly the same as all other unsecured debts, in that they are stayed from taking collection action during a bankruptcy, will receive their share of any distribution and have the same rights as other creditors.

 Recent amendments to the Act (June 98)) now mean that an individual filing bankruptcy within ten years (formerly two years) of last attending school will not be eligible to have their student loans discharged at the end of the normal nine-month bankruptcy term. Rather, that individual must make a separate application to the court to have the student loans discharged after the ten year period has passed.

Individuals who find that they are unable to service the required student loan payments may wish to consider making a Consumer Proposal. Some student loan authorities have accepted consumer proposals and have even agreed to forgo the balance owing on the completion of the proposal.

25)What Assets Can I Keep?
 What personal property is exempt from seizure in a personal bankruptcy?  The
rules vary by province, and we've provided them here in summary form.
(Caution: be sure to discuss your personal situation with a Trustee in
Bankruptcy!)

 
Note to users: This information is of a general nature. Although we endeavor to ensure its accuracy and timeliness, no one should act upon it without appropriate professional advice after a thorough examination of the facts of the particular situation.

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