Bankruptcy FAQs-Toronto

At our firm, if your situation is a simple one, and your income is borderline to low, and you have few assets, and there is no court involvement (which is typically the case), then your payments can be reduced to $75 / month (or even less) for 9 months.

If your income is high, then we must use a government-issued calculator to determine your payment requirements. (We do not charge a fee for our services; we get paid from the creditors’ share).

The exempt or protected property is covered under the Execution Act (Ontario). The list of exempt property (that you keep) includes:

1. Household furniture under $14,180
2. Automobile where the value or equity is less than $7,117
3. RRSPs/RDSPs (except for amounts contributed in the prior 12 months)
4. Term life policies (these have no value while living)
5. Cash surrender value of whole life policies if there is a ‘preferred’ beneficiary
6. Tools of trade (for sole proprietors) if value is less than $14,405
7. House if equity is less than $10,783
8. Lawsuits if you’re suing another party for pain and suffering (general damages)
9. Pensions

But no need to worry, we can arrange for you to keep non-exempt property in a bankruptcy.

An RESP is treated differently than a RRSP. An RESP is not exempt (protected) in bankruptcy. If you want to keep the RESP, you would have to pay the value of the RESP. Fortunately, the value is much less than what shows on your statement, because a portion of the plan is made up of government contributions.

The administrator of the RESP can advise you of the ‘cash-out’ value. We would use this amount to base your settlement to keep the plan.

All debts must be listed when filing bankruptcy. That said, this type of debt survives bankruptcy.

Student loans will be discharged in bankruptcy unless you went to school (or returned to school) within the last seven (7) years. If you are close to the seven year mark, you should verify with the institution / school the actual final date of your program to make sure seven years have elapsed or you will be stuck with this debt.

You can expect to be able to qualify for mortgage financing as early as 2-3 years after discharge from bankruptcy. That said, in the majority of cases, it is not the bankruptcy itself that prevents qualifying for a mortgage, but is other factors, like insufficient savings and / or low or inconsistent earnings that are the major barriers.

No. But if your wages are subject to garnishment (seizure) then we have to write to your payroll department to stop the garnishment. The only other time your employer may find out about a bankruptcy is if your employment contract requires you to let them know about such changes in your personal financial situation.

No. Unless debts are cosigned, or your assets and property are jointly held, there is no impact on your spouse. That said, we will need to know your spouse’s income to assemble a family budget and to determine your required bankruptcy payments. (Your spouse can refuse to provide income information without facing any consequence).

If the sponsorship process started before filing a bankruptcy, then there should be no issue in continuing the sponsorship process, but it is best to verify this with an immigration lawyer or with Immigration, Refugees and Citizenship Canada given how rapidly policies can change. If you are undischarged from a bankruptcy, then you will not be able to start the sponsorship process.

For the majority of personal bankruptcies filed with our office, first-time bankruptcies lasts 9 months for low income earners and 21 months for those with higher income.

For second-time bankruptcies at our office, the majority last 24 months if income is low, and 36 months if income is high.

The Federal Government uses the low-income cutoffs referenced by Statistics Canada to base their definitions of low and high income.

Transunion and Equifax will show the bankruptcy on their reports for 6-7 years after your discharge from bankruptcy. If this is not your first bankruptcy, then the credit bureaus will show the bankruptcy on the reports for approximately 14 years.

You can continue to earn as a sole-proprietor. And you can claim an exemption for your tools of trade in order that you can continue earning income throughout your bankruptcy. You will have reporting requirements while undischarged. For example, you will have to advise people with whom you’re engaged in business that you are in bankruptcy.

Yes. But only if it was issued to another person or company and you have their written authorization to retain it after filing bankruptcy. Otherwise, all credit cards–without exception–must be handed over to the trustee when you file bankruptcy.

Some debts that won’t be discharged in a bankruptcy include:
1. Court fines, parking tickets, restitution orders
2. Debts for goods or services obtained through misrepresentation
3. Child and spousal support
4. Some Student Loans (see Q&A #5)
5. Civil damages awarded by the court if you caused bodily harm to another
6. Debt that arose through fraud or ‘theft’ while acting in a position of trust (fiduciary).
7. If you do not disclose all creditors to the trustee, you will be responsible to pay the dividend that any undisclosed creditor or creditors would have received in the bankruptcy.

Yes. If the equity in the house is less than $10,783, it is fully protected in bankruptcy. You will have to continue making mortgage payment, of course!

If the equity in the property is more than $10,783, you will have to make an arrangement (settlement) with the trustee to keep the property based on the equity in the house.

Most, if not all, mortgages will automatically renew when the term is up, even if this occurs during bankruptcy. So filing a bankruptcy should not create any issue for you regarding your mortgage. But you will not be able to negotiate a better rate or shop for a better mortgage elsewhere until you are discharged from bankruptcy.

You asked two questions, but there may be a single answer to address both concerns. We get these questions every once in a while and have a tried and true solution that may work for you, depending on the specifics of your situation. Contact us directly to learn more! (It’s a free call).