Major Steps in Filing for Bankruptcy

1. Contact a Licensed Insolvency Trustee

Janes and Noseworthy, Licensed Insolvency Trustees, handles more personal bankruptcies and consumer proposals than any other firm in Newfoundland and Labrador.

The first step in the bankruptcy process is to contact a Trustee or Personal Debt Counsellor at one of Janes and Noseworthy’s seven offices across the province.

A Trustee is an individual who is licensed by the Superintendent of Bankruptcy, Government of Canada to administer bankruptcies. The bankrupt is NOT a client of the Trustee, rather the Trustee is an intermediary who has a responsibility to both the bankrupt and the creditors.

2. Consultation with Trustee/Personal Debt Counsellor

In your consultation with one of our Trustees/Personal Debt Counsellors, they will inform you of the effects of bankruptcy and will prepare the necessary documents to file the assignment in bankruptcy with the Office of the Superintendent of Bankruptcy. The act of filing an assignment in bankruptcy stays (stops) the actions of your creditors but does not release you from your debts. The release is achieved by getting a “discharge” from bankruptcy.

3. Meetings

If required by at least 25% of your creditors, the Trustee will notify the creditors and organize a creditors’ meeting which the bankrupt has a duty (if required) to attend. In most cases it is not necessary to arrange a meeting with creditors. Similarly, a bankrupt has a duty (if required) to meet with a representative of the Office of the Superintendent of Bankruptcy called an Official Receiver, but this is rarely required in consumer bankruptcies.

4. Counselling during bankruptcy

The Trustee will arrange for counselling during your bankruptcy. The counselling will help you to create a budget and understand the causes of your bankruptcy, which may be non-budgetary, and look at possible solutions. You must take part in two counselling sessions, which in the case of remote areas is provided by telephone.

5. Duties imposed upon the bankrupt

As an individual filing for bankruptcy, you must fulfill all of the following duties:

• reveal and turn over to the Trustee any assets in your possession or control that are not exempt from seizure;
• deliver for cancellation all credit cards issued to you and in your control;
• make available to the Trustee all books and records relative to your assets or affairs;
• report income and expenses to the Trustee on a monthly basis during the period of bankruptcy, and make payments to the Trustee as required;
• meet with the Official Receiver, if requested, to be examined under oath as to the facts relating to the bankruptcy;
• provide a complete statement of assets and liabilities including creditors names, addresses, account numbers, invoices and amounts. Where additional bills or legal documents are received by you, they should be forwarded to the Trustee. If assets were accidentally omitted, the Trustee must be told promptly;
• inform the Trustee of the details of all assets disposed of during the twelve months prior to the bankruptcy and real estate disposed of or any other assets disposed of as gifts during the five years prior to the bankruptcy;
• if required and unless excused, attend the meeting of creditors and any other meetings when called upon by the Trustee;
• keep the Trustee advised of your place of residence and any changes in income until discharged;
• generally comply with all reasonable requests from the Trustee to assist in the bankruptcy administration.

6. Other Duties

Other duties that a bankrupt must comply with are detailed in the Bankruptcy Process section. Generally speaking, bankrupts who do not have excessive income and co-operate with the Trustee throughout the process are discharged (released from responsibility) from most or all of their debts nine months after filing for bankruptcy.

7. Bankruptcy offenses

Besides the offenses under the criminal code, which may also apply, you are liable for imprisonment for up to three years if found guilty of any of the following offenses under the Bankruptcy and Insolvency Act:

• failing to perform the previously mentioned duties as a bankrupt;
• fraudulently disposing of assets before or after bankruptcy;
• failing to answer fully and truthfully all questions when examined under oath;
• making false statements regarding assets or liabilities;
• destroying or concealing books or documents relating to your property or affairs;
• obtaining property or credit by false representation during the period of twelve months prior to the bankruptcy and until the date of discharge;
• not disclosing to the person(s) with whom you are dealing, prior to obtaining credit in excess of $1,000, that you are an undischarged bankrupt.

8. Discharge Process

The vast majority of people who file for bankruptcy are discharged in nine months.

Either an automatic discharge will be granted or the Trustee will apply to the Court for a discharge hearing date, i.e if there is an opposition filed by an interested party who feels that the discharge should not happen “automatically”.

Sample Letter of Discharge From Bankruptcy

Automatic discharges

You will be automatically discharged from bankruptcy nine months from the date of the assignment provided that:

• you do not have, on average, “surplus income” as calculated based on standards established annually by the Office of the Superintendent of Bankruptcy;
• you do not have personal income tax debts in excess of $200,000 and representing more than 75% of total unsecured liabilities;
• you have never been bankrupt before; and
• neither the Superintendent of Bankruptcy, the Trustee, nor any creditor opposes the discharge.

Changes to Canadian insolvency legislation effective September 18, 2009, means that a second-time bankrupt is also eligible for an automatic discharge as soon as twenty-four months from the date of filing the second bankruptcy. In both cases, if a bankrupt’s income is, on average, above the “surplus income” standards, the timing of the automatic discharge is postponed by 12 additional months. Therefore, a first-time bankrupt with “surplus income” can obtain an automatic discharge in 21 months, while a second-time bankrupt with “surplus income” can obtain an automatic discharge in 36 months.

In simple terms, a single person with average monthly take home pay of approximately $2,400 would not be required to make “surplus income” payments during their bankruptcy. For more information on how these standards work, you may wish to speak to one of Janes & Noseworthy’s debt professionals.

If you do not qualify for an automatic discharge in nine months, the Trustee may need to prepare a report for the Superintendent of Bankruptcy – which then forms part of the information considered by the Court in hearing an application for discharge. See Bankruptcy Process section for additional information on discharge from bankruptcy