A Summary of the Canadian Bankruptcy System?


The Canadian Bankruptcy process is legal process designed to allow the honest but unfortunate debtor the opportunity to get out from under insurmountable debt and make a fresh financial start. It is a process where a debtor assigns or surrenders everything you own, except assets that are considered Exempt Assets, in exchange for the elimination of your debts..

To go into Canadian bankruptcy in Canada, a person must live or do business in Canada, and must be insolvent. To be insolvent means:

To owe at least $1,000. and/or;

Not to be able to meet your debts when they come due.

Bankruptcy trustees are federally licensed. Their fees are regulated under the Bankruptcy and Insolvency Act and monitored through the Supreme Court of British Columbia.

Because bankruptcy is a legal process, there is a Stay of Proceedings that prevents on-going legal actions such as a garnishment of your wages or any new legal actions from your creditors commencing.

You may be entitled to an automatic discharge from bankruptcy in 9 months, the minimum time set by the Court to be bankrupt, provided you have never been bankrupt before and you complete various Duties and responsibilities.

A secured debt such as a car loan or mortgage, although listed in your bankruptcy Statement of Affairs, is not a debt that is erased in your bankruptcy. Since you have given an asset as collateral, your creditor does not need the bankruptcy process to recover the amount owing to them.

Some unsecured debts have special rules and are also not discharged in a bankruptcy such as Student Loans and any alimony or child support obligations..

The length of your bankruptcy will be nine months, unless one of the following is true:

  • You fail to perform all your Duties, such as regular payments of surplus income to the trustee.
  • You have Surplus Income
  • You have been bankrupt before

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