Bankruptcy Information in Canada

The Facts

• Bankruptcy is governed by federal law in Canada. To claim bankruptcy, you must live or do business in Canada, owe at least $1,000 to creditors and be able to prove that you can't pay your debts. A bank trustee sells your assets and divides the resulting funds among the creditors owed. Assets that must be given to the trustee include registered retirement savings plans (RRSPs), registered education savings plans (RESPs), investments and owned properties. Individual provinces and territories determine which types of property are exempt from seizure.
  
  

Cost

• The cost to claim bankruptcy includes administrative costs, court fees, counseling fees, mailing fees, and government fees for filing. The simplest of cases can cost $1,500 plus GST (government sales tax). The cost to file is determined by the size of your family and how much you earn; the more you earn per year, the higher the cost of the bankruptcy. The amount owed to the trustee usually is paid from the amount gained from the sale of your assets.
  
  

Time Frame

• The bankruptcy can end in nine months if you have met your required duties, which include making regular payments, turning over any surplus income to the trustee and attending two counseling sessions. If the court determines you have excess income, it can last up to 21 months. If you have filed for bankruptcy before, it can take two to three years for your debts to be discharged, depending on your income.
  
  

Effects

• Your ability to obtain credit can be affected for years after claiming bankruptcy. A bankruptcy stays on your credit for six to seven years from the date of discharge. If this is your second bankruptcy, it stays on your credit report for 14 years.
  
  

Considerations

• As soon as you claim bankruptcy, you must hand over all credit cards and non-exempt assets to the trustee. You also must meet with the trustee each month and provide bank statements and documentation regarding your household income until the discharge. Any money that remains after paying for necessary expenses must be applied to the debt.
  
  Also, alimony and child support are not discharged at the time of bankruptcy. You are required to make those payments under all circumstances.