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NB Bankruptcy FAQs.
NB Bankruptcy Questions and Answers.
If your bankruptcy questions are not answered here or elsewhere on our site you can use our "Ask a bankruptcy trustee" feature. It's confidential.
Bankruptcy is a legal process that is available to anyone, who is hopelessly burdened with debt, to get a fresh financial start. To go into bankruptcy you must be insolvent, which means:
You are not able to pay your debts as they are due;
Your debts exceed the value of your assets;
You are not already bankrupt and;
You owe at least $1,000.
Yes. By law, all actions against you must cease once the bankruptcy documents are filed with the Superintendent of Bankruptcy or once a proposal has been filed. This does not apply to secured creditors such as banks, holding a mortgage on a house or a lien on a car, nor does it apply to a debt for alimony or maintenance.
If you have minimal assets, your creditors are notified by mail only. There is no advertisement placed in the local newspaper. However, all bankruptcy filings are public and the general public may access the documents. In a bankruptcy, where there are significant assets, a notice is placed in the legal section of the newspaper notifying creditors of the date of the meeting of creditors. When the documents are filed with the Superintendent of Bankruptcy, the Credit Bureau is notified and the bankruptcy is recorded and will remain on your credit record for six years from the date of your discharge.
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There are two ways a person can become a bankrupt. The first and most common way is to make an assignment in bankruptcy (voluntary bankruptcy). The second and rarely used way is for creditors to ask the court to make an order that a person is bankrupt (involuntary bankruptcy). In both cases a Trustee in Bankruptcy is required to administer the process.
Usually, you complete an application form and provide it, along with all related information and documentation, to the Trustee. The Trustee will meet with you to ensure that bankruptcy is the most appropriate option in your circumstances. The Trustee then prepares the bankruptcy documents for you to sign. Once they are signed and filed with the Superintendent of Bankruptcy, you are officially bankrupt.
An individual in NB or PEI is allowed to to keep equity in specified assets, as set by the province:
When you make an assignment in bankruptcy all your assets (or equity in assets) in excess of the allowed exemption, vests in the Trustee for the benefit of your creditors. This includes inheritances received or to which you might become entitled by the death of someone during the time of the bankruptcy as well as lottery winnings earned during your bankruptcy. All cash assets you have at the time of your bankruptcy, such as RRSP's, are generally not exempt, no matter the amount.
Not directly. Husbands and wives are separate individuals. Therefore, unless the spouse also files bankruptcy, the spouse's assets and liabilities are not affected. However, where assets are owned jointly, e.g. a house or car, it is the Trustee's responsibility to liquidate the one-half interest owned by the bankrupt. Also, if both spouses signed a debt, then the bankruptcy of one spouse means the other is now liable for the full debt.
You must report your income to the Trustee each month. However, earnings after the start of a bankruptcy, such as wages, salaries or commissions, belong to the bankrupt person and are not normally interfered with by the Trustee. There are standards supplied to the Trustee by the Superintendent of Bankruptcy, which instruct the Trustee to collect funds, for the benefit of creditors, from any earnings above what is reasonable for the number of people in the family and the bankrupt's personal situation.
All debts are erased when a person is discharged from bankruptcy except for the following:
Fines imposed by a court;
Debt incurred by misrepresentation or fraud;
Alimony or maintenance payments;
Debt for damages imposed by a Civil Court for intentional bodily harm, sexual assault or wrongful death;
Student loans, if bankruptcy occurs within 7 years of ceasing to be a full or part time student.
Also, bankruptcy does not generally interfere with secured debts (i.e. a mortgage or vehicle lease) if there is no equity in the secured asset.
In most cases the cost of a bankruptcy is less than $200 a month for each of 9 months.
The amount you are required to pay will depend upon your particular circumstances. The Trustee will explain to you the amount you are required to pay once your situation has been assessed. In the simplest cases it usually amounts to $1,650, which includes all necessary filing fees, disbursements, taxes and counselling fees. Our firm will allow you to pay these fees over time.
The majority of people are out of bankruptcy in 9 months, at which time most of the debtor's debts are erased.
- 9 month automatic discharge for 1st. time bankrupts who fulfill all their duties and who do not have excess income. e.g. less than $3,062.00 a month take home pay for a family of 3. (Note: 1)
- 21 months (or more at the court's discretion) for 1st. time bankrupts who fulfill all their duties. and who have excess income. e.g. more than $3,062.00 a month take home pay for a family of 3. (Note: 1)
-24 months for 2nd time bankrupts who do not have excess income.. e.g. less than $3,062.00 a month take home pay for a family of 3. (Note: 1)
-36 months for 2nd time bankrupts who have excess income. e.g. more than $3,062.00 a month take home pay for a family of 3. (Note: 1)
-Bankrupts with personal income tax debt of $200,000.00 or more representing 75 percent or more of total unsecured claims, are not eligible for an automatic discharge. They must go to court for an adjudication.
Note: 1 Surplus Income Standards for 2009/10
Information on how the calculations are made is at this link.
Contact Your Creditors
Explain why you cannot make your payments and suggest an arrangement that could work for both of you. You may be surprised that many creditors are more than willing to co-operate.
You can approach a bank or financial institution about combining or "consolidating" your debts into one loan. This creditor pays off all your debts and, in return, you make a monthly payment to that creditor. Make sure you shop around - interest rates vary. Avoid further credit purchases; this could make your debt load too great for you to handle.
Credit counselors will contact your creditors and attempt to work out a repayment plan that is satisfactory to both you and your creditors. In some cases they can work with you and your creditors to set up a payment plan that will allow you to pay your creditors in an orderly way and thus help preserve your credit rating. This operates similar to a debt consolidation loan except you do not borrow the money to pay off your creditors.
Under the Bankruptcy and Insolvency Act, a Trustee or an administrator files a Proposal or an arrangement between you and your creditors to have you pay off only a portion of your debts, extend the time you have to pay off the debt, or provide some combination of both. To be acceptable, your creditors must be better off under a Proposal than if you go bankrupt.
There are two types of Proposals an individual can file:
Consumer Proposal - A person is eligible if his aggregate debts, excluding debts secured by a principal residence, do not exceed $75,000. The consumer proposals cannot be for more than five years. If the creditors do not accept the Proposal the debtor is not automatically bankrupt. Counselling is required;
Other Proposal - There is no restriction on the amount a person owes. If the creditors do not accept the Proposal the person is automatically bankrupt effective as at the date of the creditors' meeting. Counselling is not required.
A diligent and persistent debtor can rebuild his credit in as little as two years.
Yes, you will get credit again. In fact, you will be a better credit risk after bankruptcy because then you will have less debt. For more information please refer to this page.