Bankruptcy

What is Bankruptcy

Once a bankruptcy is filed unsecured creditors cannot file or continue lawsuits, wage garnishees, or even contact you to request payment.

The Bankruptcy Process

When you file for bankruptcy, you assign a trustee to be your administrator (the person in charge) of the bankruptcy proceedings.

The trustee explains and guides you through the bankruptcy process including filing of all appropriate forms and paperwork.

The bankruptcy trustee will electronically file your bankruptcy with the government through the Office of the Superintendent of Bankruptcy within five (5) days.  Each month the Bankruptcy Superintendent’s office sends a report to all credit agencies notifying them of your bankruptcy.

Bankruptcy | Filing for Bankruptcy

After a Bankruptcy is Filed

Once the bankruptcy is filed there is an immediate “stay of proceedings“, in which all proceedings against you will be stopped.  The people you owe money to and unsecured creditors cannot:

  • contact or harass you for payments or money,
  • garnishee your wages,
  • file any lawsuits against you,
  • collect any money from you.

Secured creditors can still seize property that was put up as co-lateral but only if you fail to make payments on those particular loans e.g. cars and mortgages.

★★★★★ Although filing for bankruptcy was the last thing we wanted to do, YanchDey made this process very smooth, they did all the paperwork and dealt with our creditors.  The garnishee was stopped and we can sleep at night, we now have a fresh start. Many thanks, Debbie S. Ajax

Dealing with Your Creditors

Within the five (5) days the trustee will send a copy of the filed bankruptcy to each of your creditors.  It is the job of the trustee to speak and deal with the creditors so that you do not have to.

The creditors may if they wish, file a claim with the trustee to try to recoup any of their losses from the assets that you surrendered.

Tax Returns in Bankruptcy

Filing for bankruptcy affects the way in which tax returns are filed.

The trustee helps you with the Canada Revenue Agency and creditors.

There are four (4) types of income tax returns that the trustee must file for you when declaring bankruptcy.

  • previous year’s tax returns (if it was not filed),
  • pre-bankruptcy return,
  • in-bankruptcy return, and,
  • a post-bankruptcy return

Upon filing for bankruptcy the trustee will assist with dealing with the CRA .

The pre-bankruptcy return is a tax return for the beginning of the tax year to the day before you filed for bankruptcy.  This would be from the 1st of January to the day before your filing date.

The in-bankruptcy tax return reports any income you received from the liquidation of your assets, which goes to any creditors.

The post-bankruptcy tax return is for your income reporting, from the date of bankruptcy to the end of the tax year, Dec. 31.

The trustee files the bankruptcy returns up to the date of bankruptcy. The bankrupt (you) files the returns from the date of bankruptcy to the end of the tax year.

★★★★★ After years of struggling with debts, I knew I had to get some help.  YanchDey was a local company and I just walked into the office one day.  They were very open and answered all my questions.  It wasn’t always easy but they helped me and my husband and we’re now rebuilding our credit.  I know it’s hard but give these people a call, they helped me and I know they will help you.  Jo-anne D. Oshawa

Tax Refunds

Where you have previous tax years that were not filed, the trustee will complete these for you.  Should there be a refund or tax credit for previous years, the funds become the property of the bankruptcy estate and will be forwarded to the trustee.

Any funds that are forward to the trustee from previous tax years will be used to pay creditors.

Tax refunds received from the pre-bankruptcy, in-bankruptcy or post bankruptcy are sent to the trustee directly.  Tax refunds in the years following your bankruptcy are sent to you and are yours to keep.

Your Duties as a Bankrupt

When you file for bankruptcy you are responsible to surrender all of your credit cards, non-exempt property and:

  • if a creditor meeting is held you must attend
  • provide any tax information to the trustee, e.g T4 slips
  • each month report your income,
    • living expenses and any material budgetary charges
  • where you have surplus income,
    • make payments to the trustee
  • attend credit counselling sessions
  • provide any information required by the trustee
  • where you borrow more than 500 dollars,
    • advise the lender that you are a bankrupt
  • you may not be a director of a company

Where you have not filed for bankruptcy before, or have no surplus income the bankrupt is eligible to be discharged from bankruptcy in nine (9) months.

The discharge means that your debts are canceled.

After the Bankruptcy

A record of your bankruptcy is placed on your credit report for a minimum of six (6) years after the date of the discharge.

Even though there is a record of your bankruptcy, a bankrupt may still be able to receive credit.

As well you should take action to gradually rebuild your credit rating and put this part of your life behind you.

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