Bankruptcy is a legal process that allows individuals and businesses facing major financial challenges to gain debt relief and begin a fresh financial future. In Canada, the Bankruptcy and Insolvency Act (BIA) is the primary legislation that governs bankruptcy law. It defines all elements of how to file for bankruptcy, as well as the duties and responsibilities of both debtors, creditors, and Licensed Insolvency Trustee during the bankruptcy process. The Bankruptcy and Insolvency Act also sets out offences in bankruptcy, and the consequences if these are committed. It is important to understand clearly what you need to do in bankruptcy to ensure you are discharged successfully and can begin life after bankruptcy. In this article, we share the key duties in bankruptcy law in Canada and how they play a crucial role in the process.
What are the duties in bankruptcy law?
As a debtor filing bankruptcy, you need to complete the following duties in bankruptcy law. At Spergel, we will always explain the bankruptcy process to you in detail before you file so that you know exactly what is to come. Unlike other bankruptcy firms, you will be assigned your very own Licensed Insolvency Trustee to walk you through each step of the process, instead of passing you from person to person.
- Disclose your financial information. When filing bankruptcy in Canada, you need to share complete and accurate financial information to your Licensed Insolvency Trustee. You need to share all assets, liabilities, income, and expenses so that they have a clear and accurate picture of your finances.
- Cooperate with your Licensed Insolvency Trustee. You will need to work closely with your Licensed Insolvency Trustee throughout the bankruptcy process. You will need to share all documents and information, attend any meetings where you are required, and cooperate with your trustee’s requests.
- Attend credit counselling sessions. A key duty in bankruptcy law is attending two credit counselling sessions. The purpose of these is to educate debtors on responsible financial management, how to budget, and how to use credit. This will ensure you are better equipped for when you are discharged from bankruptcy.
- Declare assets and liabilities. You must be honest about your assets and liabilities, whether they are in Canada or overseas. This includes any bank accounts, real estate, vehicles, any other possessions of value. Being honest about these also means your assets will be distributed fairly among your creditors.
- Surrender any non-exempt assets. Non-exempt assets are not protected by bankruptcy law, and so need to be surrendered to your Licensed Insolvency Trustee. They are then liquidated in order to pay off creditors. You will need to work with your Licensed Insolvency Trustee to identify and surrender these assets.
- Make your payments. You will likely need to make payments to your Licensed Insolvency Trustee, although the amount depends on your financial situation. These payments go towards repayment of your creditors. If you fail to make your payments, you could face legal consequences. This includes surplus income payments.
- Attend a creditors’ meeting. If required, you may need to attend a creditors’ meeting, where you will be asked questions by your Licensed Insolvency Trustee and creditors regarding your financial circumstances and how you have ended up filing bankruptcy.
What are the benefits of filing bankruptcy?
Given the duties in bankruptcy law, you may be wondering if bankruptcy is worth it, or if it is right for you. It may help to understand the advantages of filing bankruptcy so that you can understand what the process is trying to achieve:
- Peace of mind, safe in the knowledge that you no longer have to take on financial burden alone
- Protection from creditors, and an immediate end to any legal action like wage garnishment or frozen bank accounts
- Financial freedom. Bankruptcy is a countdown to a fresh financial future
- The cost of bankruptcy is not associated to the amount of debt you have, making it ideal for those without surplus income but a lot of debt
- A legal obligation for your creditors to comply with the bankruptcy process
- Inclusion of almost all unsecured debts
- The ability to keep some personal assets, up to a certain threshold
What are you not able to do in line with bankruptcy law?
There are a few things not to do when filing bankruptcy. Generally speaking, aside from your duties, your life will likely be fairly unaffected. One thing not to do is to deal with your creditors or continue to make your debt payments. Your Licensed Insolvency Trustee will be able to handle your creditors on your behalf, and your unsecured debt will be cleared without the need to make any more payments. Until you have been discharged from bankruptcy, you will not be able to apply for credit of a value any more than $500 without informing your prospective lender that you are an undischarged bankrupt. This can make it very challenging to obtain credit until you are discharged from bankruptcy. At Spergel, we will help you to rebuild your credit.
What does a Licensed Insolvency Trustee need to do during bankruptcy?
We have covered a debtor’s duties during the bankruptcy process, but what does a bankruptcy trustee need to do? The Bankruptcy and Insolvency Act lays these duties out too. At a top level, a bankruptcy trustee needs carry out the administrative processes of a bankruptcy or a consumer proposal. They make sure that all parties involved are handled fairly, and that everyone involved is following the rules. Here are their key duties:
- Carrying out a review of your finances. Bankruptcy is not a default form of debt relief – your trustee should first meet with you to review your finances and walk you through each of your options. At Spergel, we offer a free consultation to do just that.
- Filing documents. Your trustee will prepare important bankruptcy documents including an Assessment Certificate, Statement of Affairs, Monthly Statement of Income, and Expense and Bankruptcy Assignment. Once you have signed the documents, your trustee will then file them with the Office of the Superintendent of Bankruptcy.
- Handling your creditors. A stay of proceedings triggered when you file either bankruptcy or a consumer proposal means that creditors can no longer contact you. Your trustee will let your creditors know that you have filed, and will work with them accordingly.
- Administrative tasks. Your trustee will lead on bankruptcy operations. This includes collecting payments, making sure your bankruptcy duties are complete, and distributing funds to your creditors.
- Issuing your discharge. Once you have reached the end of your bankruptcy process, your bankruptcy trustee will apply for you to be discharged. They will also issue a Certificate of Discharge to ensure it is official. At this point, you are free to enjoy life after bankruptcy.
At Spergel, we know that understanding the duties in bankruptcy law and the bankruptcy process can be confusing. Our experienced Licensed Insolvency Trustees can ensure you understand your options and the bankruptcy process before you file. Book a free consultation with Spergel for an idea of your debt relief options to understand how you can get on track for a fresh financial future.
