I received the following email today.

“Hi Mark, When do you decide you can’t do it anymore and you need to file for Bankruptcy?

My credit is so low that I can’t even get a loan to consolidate my debts!.

So Mark what do I do?”

Great Question and one that requires a bit of of an explanation.

Let me start by saying, I’m not a trustee and the following is meant for information purposes only.

What does it cost to declare Bankruptcy?

Fees and Disbursements are Government regulated. However, the fee charged varies between Trustees. When inquiring as to price, make sure you get an apples to apples quote i.e. includes all filing fees, disbursement costs, taxes, and the two required counseling sessions. (The fee can be paid in installments over the term of the bankruptcy.)

Will my creditors stop calling me?

What about garnishee orders?

YES! Typically as soon as the creditors are notified of the bankruptcy, they will stop their collection actions including the harassing telephone calls. They MUST now deal directly with the Trustee. This includes garnishee orders, which are lifted upon bankruptcy.

One caveat here, if you have a secured loan such as a mortgage, they still have the ability to act. This inevitably plays out with a foreclosure.

Who will know?

Your creditors are informed, BUT there is NO requirement to contact your employer. The bankruptcy does become a matter of public record, but one would have to go to the trouble of accessing it to find out. The bankruptcy does appear on your credit report for 6 years from the date of your discharge. However, this is ONLY seen by individuals YOU authorize to view your credit.

What can I keep?

In British Columbia certain property is exempt from seizure:

– Equity in a home in Greater Vancouver and Victoria = $12,000.
– Equity in Household items = $4,000
– Equity in a Vehicle = $5,000
– Equity in work tools = $10,000
– RRSP contributions from the last 12 months
(no cap & no need to lock -in)
– Equity in essential clothing and medical aids is unlimited
– Life Insurance (Check with trustee)

For example, if you owned a home worth $300k with a mortgage of say $275k, if you factor in real estate fees to list & sell the place plus your $12,000 equity allowed, you would likely be allowed to keep the home. (if you want). If you did decide to keep the home, the mortgage would stays as is.
**Certain rules change if this is not your first bankruptcy
(Be sure to ask your trustee)

Other assets may be sold by the Trustee for the benefit of the creditors of the bankrupt. This would include shares, RRSP’s, recreational equipment or other assets which have market value.

How long does the Bankruptcy last?

Typically, a first-time bankrupt is eligible for an automatic discharge at the end of 9 months. Check with your trustee as excess income scenarios may differ.

During that 9 months you are required to:

– Attend two counseling session
– Complete monthly income and expense statements
– Provide information to complete the necessary tax returns
– keep the trustee informed of your current address
– Where applicable, pay excess income into the estate

Are student loans included?

If the last day you attended school was more than ten years before your date of bankruptcy, the debt may discharged with your bankruptcy. If the bankruptcy occurs less than ten years from your last day at school, the debt will not be discharged but because of the stay of proceedings the creditor will not pursue the debt during the course of the bankruptcy.The Bankruptcy does remain on your credit bureau for 6 years from the discharge date (which is typically a 9 month process). So more like 6 years and 9 months.

This is just a brief explanation of the process. Email me and I will refer you to a great trustee. They will consider your BEST options and advise you accordingly.

I hope you found this helpful.You can reach me at 604-273-2002

PS – You may want to email me for my secret tips “QUICK Credit Recovery Post Bankruptcy”

Please leave your comments below.

Mark Fidgett
Vancouver Mortgage Broker
Owner www.NotaPennyDown.com