in the cases of fraud, misrepresentation, or with respect to the enforcement of a support order or in the case of a motor vehicle claim where there is insurance coverage. Bankruptcy does not stop or stay criminal investigations or contempt proceedings.
Secured creditors can enforce their security against the bankrupt. They do not need the court’s permission to repossess the person’s property after bankruptcy. For example, a secured creditor could seize the bankrupt’s vehicle if payments are in arrears or a secured creditor could foreclose on the bankrupt’s home for arrears of mortgage payments or taxes.
Therefore, the bankrupt can be assured that the sheriff or bailiff will not seize his or her assets or take garnishment proceedings without a special court order being made.
5.1 Wage assignments
Many consumer bankrupts give creditors a wage assignment as security for loans. A wage assignment is an agreement between the debtor and the employer which gives the employer the right to deduct amounts from the debtor’s wages to pay a creditor who has a judgment. When a consumer debtor goes into bankruptcy, the wage assignment does not continue. Instead, the bankrupt is now required to pay a portion of his or her surplus income to the trustee in bankruptcy for distribution to all the creditors.
5.2 Licences
Sometimes, a consumer debtor may hold a licence under legislation that regulates the industry. For example, a consumer debtor may require a real estate broker’s licence, a licence to sell securities, a licence to sell used vehicles, and other types of licences that are issued by provincial and federal governments. Each type of licence has to be reviewed under its applicable legislation to see what happens on bankruptcy. The consumer debtor should consult the governing body that issues and regulates the licence before making an assignment into bankruptcy. Some legislation allows an undischarged bankrupt to continue earning a living while other legislation prohibits the bankrupt from using the licence until there is a discharge. In some cases, a consumer debtor who files an assignment may not be able to obtain a fidelity bond. This may also affect any renewal of the licence. In such a case, the consumer debtor should consider filing a consumer proposal so that the licence can be preserved.
For example, a lawyer who goes bankrupt in Ontario may continue to practise, but an undischarged lawyer in Ontario cannot maintain a trust account. The lawyer must therefore work with another lawyer as such trust accounts are monitored by the Law Society of Upper Canada. However, if a public accountant goes bankrupt, the accountant loses his or her licence during bankruptcy.
Therefore, it is necessary for the consumer debtor to review the legislation governing the licence that is held before making an assignment in bankruptcy as without a licence the consumer debtor may lose his or her job temporarily, and may have some difficulty in getting the licence back after discharge.
6. Costs
In 2000, there were 75,137 consumer bankruptcies in Canada and 12,392 consumer proposals. In 2010, there were a total 135,008 consumer bankruptcies in Canada of which 42,314 made proposals. In 2011, there were a total of 122,999 consumer bankruptcies of which 45,006 made proposals. In most of these consumer bankruptcies, the trustee’s fees ran about $1,800 and up. Under the Bankruptcy and Insolvency Act, there is a prescribed tariff for trustees in performing services for little- or no-asset bankruptcy estates. If the consumer debtor needs a lawyer, the costs will usually be based on an hourly rate. A consumer debtor should be able to get good competent legal advice on bankruptcy matters for less than $1,500. Of course, if there are special problems, the costs are likely to be higher. Therefore, most consumer debtors should have or be able to raise about $3,300 if they want to use the services of a lawyer and a trustee to go bankrupt.
If the consumer debtor has any doubts about bankruptcy or its effects, it is advisable to see a lawyer first before filing as once the consumer debtor files for bankruptcy, it is virtually impossible to annul or reverse its effect.
If the consumer debtor does not have any assets to pay the trustee or a lawyer, then it is possible that the trustee may obtain a guarantee or a cash retainer from a family member or from a friend of the consumer debtor. The guarantee operates only if the trustee is unable to recover property or realize any monies from the property that the bankrupt earns after bankruptcy up to the time of discharge. The guarantee should be in writing and the guarantor, the family member or friend, should read the guarantee very carefully so that it is understood at what is being signed. Trustees usually require that their money be paid before formal proceedings take place.
It is also possible for the consumer debtor to access the Bankruptcy Assistance Program supervised by the Office of the Superintendent of Bankruptcy if the consumer does not have a family member or friend to assist. However, the consumer must first make attempts to retain the services of two private licensed trustees, not be involved in any commercial businesses, and not have any surplus income. If the consumer debtor qualifies, the consumer debtor can contact the local office of the Superintendent where a bankruptcy analyst will designate a participating trustee to administer the bankruptcy or proposal.
7. Information You Will Need to Share at a Bankruptcy Interview with a Trustee or Lawyer
Bankruptcy laws generally provide that transactions entered into by a debtor within five years of the date of bankruptcy require review by the trustee on behalf of the creditors. The trustee is concerned about property that the consumer debtor had, what the consumer debtor received for it when it was transferred, and where it is today. It is improper, generally, for a consumer debtor to give away property or transfer property at less than its fair value at a time when the consumer debtor is having financial difficulties and cannot readily pay his or her creditors. If the consumer debtor does not have sufficient assets at the time of the transfer or gift, then it is possible that the trustee or the creditors may move to set aside that transfer. If the transfer is set aside, the property re-vests in the name of the consumer debtor and thereafter the trustee or creditors can force its sale. Accordingly, a careful review of all assets should be made within five years of the projected date of bankruptcy. This would include the following:
• Full particulars about the consumer debtor including:
• surname, given names, nicknames
• address including postal code
• telephone and fax numbers, email addresses
• driver’s licence number
• social insurance number (show card)
• date of birth, with birth certificate
• passports, citizenship, or landed immigrant papers
• marital status, and where appropriate, separation agreement, divorce order, support order
• dependents’ names, relationship, and ages
• occupation
• name of employer including telephone and fax numbers, email address, and postal address
• salary, wages, or other remuneration
• full particulars of spouse, partner, or friend including names, date of birth, and social insurance number
• income tax returns for the last five years
• Full particulars of all assets in Canada and elsewhere,
