Personal Bankruptcy

The easiest way to describe a personal bankruptcy is that it brings you back to a starting point with no realizable assets and no liabilities, essentially debt free. Of course, there are always exceptions.

Assets

Your Licensed Insolvency Trustee must realize on any assets you own that have a value. This means that the Trustee will sell investments, vehicles, shares, etc. You may be able to settle with the Trustee to retain these assets.

When analyzing your assets, the Trustee will compare the value of the asset to any debt secured against the asset. Thus, if you own a home worth $100,000.00 and have a mortgage secured against the house for $100,000.00, there is no equity in the house and your Trustee would not sell your home.

There are also certain assets that are exempt from seizure by your Trustee. These are:

  • Household furniture up to a liquidation value of $11,300.00;
  • Personal belongings up to a liquidation value of $5,650.00;
  • Personal automobile up to a liquidation value of $5,650.00;
  • Tools of the trade (required to perform your work) up to $11,300.00;
  • RRSP’s (except for contributions in the preceding twelve months) and life insurance policies.

Your Licensed Insolvency Trustee will explain these in full at your initial assessment.

Debts

A bankruptcy will relieve you of all debts owing at the filing of your documents except those under Section 178 of the Bankruptcy and Insolvency Act as follows:

  • fines or penalties imposed by a court;
  • award of damage with respect to intentional bodily harm, sexual assault or wrongful death;
  • debt for alimony, child support or maintenance;
  • debts arising from illegal activity such as fraud, embezzlement, misappropriation;
  • fraudulent misrepresentation;
  • false pretenses;
  • dividend for an undisclosed creditor; and
  • student loans if less than seven years from completion of your studies.

Amounts owing to Canada Revenue Agency for personal income taxes and other tax liabilities are discharged in a bankruptcy or proposal.

Surplus Income

The governing body of bankruptcies in Canada, the Superintendent of Bankruptcy, has set a minimum level of income that is required for living expenses. If your family income exceeds this level, you may be required to make monthly payments to the Trustee. Your Trustee will explain this in detail at your initial assessment in our Hamilton, Burlington or St. Catharines offices.