F.A.Q. About Bankruptcy Claims
How do I file for bankruptcy?
Do I lose everything I own?
If I declare bankruptcy will I lose my house?
What happens to my wages while I am in bankruptcy?
Who files my tax returns while I am bankrupt?
What are my responsibilities while bankrupt?
What meetings do I have to attend?
How long will I be in bankruptcy?
What happens to my credit rating?
Will bankruptcy eliminate all my debts?
While I am bankrupt can I operate a business?
If one spouse files for bankruptcy, how does this affect the other
spouse?
Who pays for the Trustee's services?
Do I have to list all of my debts?
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How do I file for bankruptcy?
To file for bankruptcy you will need the services of a Trustee. We provide a free
initial consultation. We will review your financial situation and discuss all of
your options. If you decide that bankruptcy is the best option, we will prepare
the documents and file the bankruptcy.
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Do I lose everything I own?
When somebody files for bankruptcy they assign their assets to a Trustee to liquidate
or sell. The proceeds are then distributed to creditors in a fair and equitable
manner. There are certain assets in which the Trustee has no interest. These are
either exempt assets or secured assets.
In Alberta you may keep the following exempt assets if they are not specifically
pledged as collateral for a loan:
- Clothing of a *value up to $4,000.
- Household furnishings and appliances of a *value up to $4,000.
- Equity in one motor vehicle not exceeding $5,000.
- Medical and dental aids that are required.
- The maximum exemption available for equity in a principal residence is $40,000.
If the debtor is a co-owner of the home the amount of the exemption is pro-rated.
- $10,000 worth of personal property used to earn income in the bankrupt's occupation.
- Life insurance policies where the beneficiary is the spouse, parent, child or
grandchild of the debtor.
- RRSP's may be exempt. If they are held with a life insurance company and the designated
beneficiary is the spouse, parent, child or grandchild of the bankrupt, they will
be exempt. Rollovers from company pension plans may also be exempt.
- Bona fide farmers whose principal occupation is farming are entitled to keep 160
acres if their principal residence is located on the land and the land is part of
the debtor's farm. They are also entitled to an exemption on all personal property
required to maintain farming operations for twelve months.
*The value is considered to be liquidation value not replacement value.
Bankruptcy does not prevent a secured creditor from taking back assets that have
been pledged. If you want to keep the asset, you must make payment arrangements
with the secured creditor.
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If I declare bankruptcy will I lose my house?
The laws of Alberta allow a very generous exemption with respect to equity in a
principal residence in which you are actually residing. The exemption is a maximum
of $40,000 per residence. If your mortgage payments are up to date and you can afford
to maintain them, it will be possible to keep your residence. It is important that
the mortgage does not come up for renewal during the course of the nine months of
the bankruptcy. Some banks will refuse to renew the mortgage if the renewal comes
up in this time frame. If the equity in your residence exceeds $40,000, you will
have to make arrangements to pay our office the amount over and above the exemption
for the benefit of your creditors.
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What happens to my wages while I am in bankruptcy?
You will keep receiving your pay cheques but will have to report your family income
to the Trustee on a monthly basis.
When you file for bankruptcy, you are no longer required to make payments to your
unsecured creditors. However you may be required to make payments to your Trustee.
The payments are based on standards established by the Superintendent of Bankruptcy.
The standards are based on family size. One-half of any income over the standard
must be paid to the Trustee.
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# in Family
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1 |
2 |
3 |
4 |
5 |
6 |
7 |
|
*standard |
$1,926 |
$2,398 |
$2,948 |
$3,579 |
$4,059 |
$4,578 |
$5,097 |
*The standard is based on net income after deducting income tax, CPP, EI and non-discretionary
expenses for childcare, maintenance payments, employment and medical expenses.
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Who files my tax returns while I am bankrupt?
Leon Miller Group Inc. will normally file two tax returns for the year in which
the bankruptcy is filed; one from January 1st to the date of bankruptcy and one
from the date of bankruptcy to December 31st.
If you have not filed your tax return for the previous year, Leon Miller Group Inc.
will also file that return.
Any refunds will be payable to Leon Miller Group Inc. on behalf of the creditors.
If there is an amount owing for the period prior to the bankruptcy date, it will
be discharged in the bankruptcy.
What happens to the GST credits and Child Tax Benefit I receive from the government?
Your GST credits will be paid to the Leon Miller Group Inc. on behalf of the creditors.
We will receive an average of four GST cheques.
The Child Tax Benefit will continue to be paid to you. It must be included in family
income for the purpose of calculating your monthly payment to your Trustee.
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What are my responsibilities while bankrupt?
Some of your duties include:
- Advising us of all your assets and debts
- Disclosing assets disposed of in the past year
- Disclosing land or buildings disposed of within the past 5 years
- Disclosing gifts made of over $500 within the past 5 years
- Filing monthly income and expense statements while in bankruptcy
- Making monthly payments during your bankruptcy
- Providing Leon Miller Group Inc. with income tax information to file all required
income tax returns
- Keeping Leon Miller Group Inc. advised of any change of address
- Attendance at any meetings which are requested of you
- All your credit cards must be given to Leon Miller Group Inc.
What meetings do I have to attend?
First Counseling Session
This is a one-on-one session dealing with money management that takes place within
sixty days after the date of bankruptcy. Information is provided on spending and
shopping habits, warning signs of financial difficulty and obtaining and using credit.
The session will take approximately one hour and is usually conducted at Leon Miller
Group Inc.'s office.
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Second Counseling Session
This session will follow up on the first session. The counselor will discuss non-budgetary
causes of financial difficulty. Referrals will be made to outside agencies if necessary
and assistance will be given in developing a financial plan for the future. The
session will take place approximately six months after the date of bankruptcy.
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First Meeting of Creditors
This meeting will only take place at the request of creditors and is very rare.
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Official Receiver Examination
The Official Receiver is an employee of the Superintendent of Bankruptcy. The Official
Receiver will select certain files for review. An examination is held under oath
which deals with the causes of bankruptcy, the disposition of property prior to
the bankruptcy and the debtor's conduct prior to the bankruptcy. Because of the
volume of bankruptcies being filed, examinations are not common in Northern Alberta.
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How long will I be in bankruptcy?
If this is the first time you have filed for bankruptcy and there is no opposition
to your discharge, you will be out of bankruptcy nine months after the date of filing
for bankruptcy. This is called an automatic discharge.
However, if there is opposition to your discharge or if you are a repeat bankrupt,
Leon Miller Group Inc. will apply to court for a decision on your discharge. The
court can grant various orders of discharge. These are:
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Absolute Discharge
This order takes effect immediately.
Conditional Discharge
This type of order requires the bankrupt to do something or pay something. Once
the bankrupt complies with the conditions he or she is discharged.
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Suspended Discharge
A suspended order will postpone the discharge until some future date. It is the
same as an absolute order except there is a delay until it comes into effect.
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Refusal of Discharge
The court may refuse a discharge but it rarely exercises this power. A refusal is
reserved for bankrupts that have abused the process through dishonesty or repeatedly
filing for bankruptcy.
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"sine die"
The court has the option of adjourning the application for the discharge indefinitely.
This happens when you have not cooperated with Leon Miller Group Inc. and have neglected
to complete your duties.
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What happens to my credit rating?
By the time most people have to resort to filing for bankruptcy their credit rating
is not good. A bankruptcy will result in a credit rating of R9. In Alberta, your
bankruptcy will be recorded on your credit bureau record for six years after you
are discharged if it is your first bankruptcy.
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Will bankruptcy eliminate all of my debts?
Bankruptcy eliminates most debts. The bankruptcy will relieve you from all debts
except: alimony and maintenance and support; debts resulting from fraud; fines,
penalties and restitution orders imposed by the court; civil judgments for assault
causing bodily harm, sexual assault and wrongful death; and most student loans.
If you wish to keep secured assets you must reach an agreement with the creditor
to continue to make payments. If your debt has been co-signed, the co-signer will
still be responsible for paying the debt. Any debts you incur after the date of
bankruptcy are your responsibility.
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While I am bankrupt can I operate a business?
Yes, but there are limitations on your ability to continue to operate a business.
You may not act as an officer or a director of a limited company while in bankruptcy.
If you conduct business, as a sole proprietor, you are obligated to inform people
you do business with that you are an undischarged bankrupt.
You must also disclose the fact that you are an undischarged bankrupt to all potential
creditors where the credit involved totals $500 or more. Non-disclosure is an offense
under the Bankruptcy and Insolvency Act and may jeopardize your discharge. It may
also result in a court imposed fine or a period of imprisonment.
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If one spouse files for bankruptcy, how does this affect the other spouse?
The bankruptcy of one spouse will not be reflected on the credit record of the other
spouse.
However, the bankruptcy may have some negative impact on the other spouse. If the
non-bankrupt spouse has co-signed any loans with the bankrupt spouse, he or she
will become solely responsible for those debts. This also applies to credit card
debts when supplementary credit cards have been issued to the non-bankrupt spouse.
The bankrupt spouse is expected to make payments to the Trustee throughout the bankruptcy.
These payments are based on the family situation. The non-bankrupt spouse will be
required to supply their income information for the period of bankruptcy so that
the Trustee can determine the appropriate payment requirement.
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Who pays for the Trustee's services?
The Trustee's fees are based on the Superintendent's Tariff (and are taken from
payments made by the bankrupt) or from the realization of assets. The Trustee withdraws
fees as set out under the Tariff of Costs in the Bankruptcy and Insolvency Act.
The fee covers all services provided by the Trustee including the two financial
counseling sessions, goods and services tax and the registration fees.
There is usually a minimum fee that should be discussed with your Trustee prior
to filing for bankruptcy. If there are not sufficient assets to cover the fee you
may be required to make monthly payments. Leon Miller Group Inc. charges a minimum
fee of $1800, payable at $150 a month for twelve months.
The Superintendent of Bankruptcy approves the payment of fees to the Trustee prior
to the final distribution of the funds received.
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Do I have to list all of my debts?
You must list all of your creditors including debts that you have co-signed or guaranteed
for other people.
Certain secured creditors, such as your mortgage holder, can continue to be paid.
You will make no further payments to any of your unsecured creditors.
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