Personal Bankruptcy Terms
While many people are aware of the personal bankruptcy process, there are a number of aspects of the process that remain unfamiliar to many. If you are considering personal bankruptcy, you will want to know as much about the process as possible. The more information you have, the more likely you will be to make the right choice for your financial future.
An excellent way to learn everything you need to know about personal bankruptcy is to speak with a licensed bankruptcy trustee.
A bankruptcy trustee (or trustee in bankruptcy) is an individual who has studied and is licensed and registered by the federal government to administer the bankruptcy and consumer proposal processes. Trustees are required to study and pass an examination in order to be registered. Therefore, bankruptcy trustees understand all laws and rules surrounding bankruptcies, consumer proposals and other debt relief options.
Trustees in bankruptcy ensure that the rights of debtors and creditors are respected during the bankruptcy and consumer proposal processes and that these processes are fair and carried out according to the law.
In addition to administering legal processes, a trustee is also trained to review your financial situation and inform you of the options that are available. This allows you to understand more about the various options and make an informed choice for your financial future. Trustees are bound by a strict code of ethics and therefore must explain all available options to you, not just those that they can assist you with.
Most trustees offer the initial consultation for free.
When you file a consumer proposal or a bankruptcy, only unsecured creditors may be included in the list of people you owe money to. Unsecured debts are debts such as credit card debt, unsecured lines of credit, personal loans, department store cards, bank overdrafts and other such charges. These processes do not include secured debts such as mortgages or automobile loans.
Student loans may be included in a bankruptcy or consumer proposal only if you have been out of school for more than seven years.
When you file bankruptcy or a consumer proposal, you must include all unsecured creditors. However, these processes do not eliminate payments such as child support, alimony or court ordered fees, you are still obliged to make them.
It’s a common misconception that you lose everything you own when you file for bankruptcy. This is not true. The goal of bankruptcy is not to punish you by leaving you with nothing. For this reason, each province maintains lists of assets that are considered necessary to live a basic lifestyle and earn income and the values for each category that is exempt. These assets are called exempt assets and you are able to keep them even if you file for bankruptcy.
While each province maintains different lists of exempt assets, in general, you will likely be able to keep reasonable amounts of personal goods, home furnishings, clothing and tools of the trade. Most provinces also allow you to keep one personal vehicle up to a certain amount as long as you continue to make payments on the car as required. In most cases, you will be able to keep your home as long as you continue to make mortgage payments. If you have excess equity in your home, you may be required to make some additional payments to your trustee in order to keep your home. In order to find out which of your assets will be considered exempt, speak with a trustee.
The federal government sets limits for how much various family sizes can earn under personal bankruptcy without having to make additional payments. If you earn less than the threshold for your family size, you do not need to make what are called “surplus income payments.” If you earn more than the amount listed for your family size, you will need to make these payments. Your trustee will inform you if you need to make surplus income payments after reviewing your monthly income and expense statements. These surplus payments are part of the amount your trustee will distribute to your creditors.
At the end of the bankruptcy process, if you have fulfilled all of your duties and no creditors oppose your bankruptcy, you will be discharged and your debts will be eliminated. If it is your first time filing for personal bankruptcy, you could be discharged automatically in nine months (or 21 months if you are required to make surplus income payments.) The bankruptcy process will last longer if you have filed for personal bankruptcy in the past.