I owe about $19,500 to the bank and my wages are about to be garnished.  I’m not sure what to do now, any suggestions you have would be great, the sooner the better.

Answer:

You should file a proceeding under the Bankruptcy and Insolvency Act.  You could file a consumer proposal or a bankruptcy.  Once you do so, a “stay of proceedings” is put in place under Section 69 of the Bankruptcy and Insolvency Act.  This means “no creditor has any remedy against the insolvent person or the insolvent person’s property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy.”

By filing a consumer proposal or a bankruptcy, the creditor can not garnish your wages.

My estranged husband was ordered to pay $2500 a month in child support payments.   He has not paid me in 18 months.   I hear he is going to file bankruptcy.  How does this affect me?

Answer:

Should your estranged husband file bankruptcy, the child support payments will survive bankruptcy under Section 178 (1) (c).  In a bankruptcy situation, if there are dividends payable in his bankruptcy estate, you will be considered a “preferred creditor” under Section 136 (1) (d.1).  What this means is before creditors such as creditor card companies get paid, you would receive up to one year in support payments as a preferred creditor. 

You stated in your question your estranged spouse was ordered to pay $2500 per month.  Therefore your preferred claim is $2500 X 12 months or $30,000.  The other $15,000 would be considered an unsecured claim just like creditors such as credit card companies. 

If the total dividends in the bankruptcy estate was less than $30,000,  you would receive all of these dividends before other unsecured creditors like credit card companies.

My dad lent me $10,000 about two years ago to get out of credit card debt.  Unfortunately, I think I have to go bankrupt now.  Do you publish my name in the paper?  I do not want my father to know.

Answer:

Generally speaking, the majority of personal bankruptcies do not have to be published in the newspaper.  If your realizable assets at the time you file bankruptcy exceed $15,000, then the Trustee must publish your name in the newspaper. 

If you declare bankruptcy, your father is owed money and he must be listed as one of your creditors.  You can not pick and choose what creditors you would like to list, they must all be listed. 

My son filed for banrkuptcy about a month ago in Calgary.  The Trustee asked him to give  a list of all creditors who he owed money to.  He signed some legal documents under oath showing all his assets and liabilities.  He just received notice from a collection agency for a debt that he completely forgot about for $383.00.  He is afraid to tell the Trustee about it as he does not want to get into any trouble.   Should he just pay this bill?

Answer:

No he should not pay this bill.  When he signed his “Statement of Affairs” he was probably overwhelmed by the whole process and did honestly forget to list the creditor.  He should contact the Trustee and give the Trustee all the details so the Trustee can give official notice of the bankruptcy to this creditor.

I am thinking of filing for bankruptcy in Calgary Alberta as I owe $40,000 in credit card debt.   I heard you are only allowed to make so much money while you are in Bankruptcy.   Is this true?  (I am single and my net take home pay is around $3000 a month.)

Answer:

This is not true.  There is no restriction on the amount of money you can make  while you are going through bankruptcy.  The theory around bankruptcy is the more money you make, the more you can afford to pay your creditors and the longer you pay your creditors.

If you go bankrupt in Calgary and this is your first bankruptcy, given the amount of your income,  you will be considered to have “surplus income”.  There is a Directive issued by the Superintendent of Bankruptcy called “Surplus Income”, it is Directive 11R2 issued March 20, 2012.

In your case, the Superintendent’s Standard for a single person with no dependents is $1980 a month.  What that means is if you make over the standard of $1980 per month, you are considered to have surplus income.  For every dollar over and above this amount, you keep 50% and your creditors get 50%.

If your net monthly income was $2980, you are $1000 over the standard, ($2980 – $1980) therefore you would pay 50% or $500 to your trustee for the benefit of your creditors each month.

One of your duties is to report your monthly income and expenses and pay your surplus income payment to your Trustee.   Assuming your income stays about the same each month , your bankruptcy period in this example would be 21 months.

I filed for Bankruptcy in Calgary Alberta.  What happens if I have not followed all of my duties for bankruptcy…do I need a lawyer now?

Answer:

The Trustee will object to your discharge if you have not completed 100% of your duties.  You will receive a notice of objection in writing from your Bankruptcy Trustee stating a Court hearing has to take place giving you the date, time and place.  You do not need a lawyer to attend.

The Trustee in his/her report to Court will outline the outstanding duties you need to complete.  We strongly encourage you to perform your duties now before your actual Court discharge hearing.  If all of the outstanding duties are completed before the date of your discharge hearing, this will give you an opportunity for you to receive your absolute discharge.

If you can not possibly perform all your Bankruptcy duties in Alberta before the hearing date, the Bankruptcy Registrar who hears your case may allow you an additional period of time to perform all of your duties if you sincerely want to complete your bankruptcy.

My ex-husband is threatening to claim bankruptcy and I am wondering does this effect child or spousal support that is owed?

Answer:

If your ex-husband claims bankruptcy and his child support payments were up to date, he would have to continue to make these payments until otherwise amended by court order. 

Any  arrears he owes at the date of bankruptcy is a non dischargeable debt.  Any amounts realized by the trustee from his assets or income are available for distribution to his creditors based on a scheme of distribution stipulated in the Bankruptcy and Insolvency Act.  Maintenance or child  support are preferred claims to the extent of 12 months arrears and if there are realizations and distributions to creditors your  claim is a preferred claim payable in advance of other creditors.

If the total arrears exceed 12 months, the portion over and above will rank only as a claim equal to those other unsecured creditors and shared on a pro rata basis if there are any available funds.

What happens if only my spouse declares bankruptcy and we own a home together? Will we lose our house?  We have about 50k in equity in the home.

Answer:

Typically No!  Your husband’s share of the equity would be $25,000.  In a bankruptcy in Alberta he is entitled to retain $20,000 as an exemption leaving equity of $5000 for his creditors.

The Trustee would expect to receive the $5000 excess before your husband’s bankruptcy is over.  Most Trustees would enter into payment agreement to allow an individual to essentially redeem the excess equity from the bankruptcy estate.

Your equity would be unaffected and you would continue to pay your mortgage as before.  If the excess equity is not paid your husband’s discharge may be adversely affected and the Trustee may have to consider an application to force a sale.  We recomend that you or your husband speak to the Bankruptcy Trustee and see what payment arrangements can be made.  The equity will be based on the home’s current fair market value.

If I claim a particular asset as exempt when I file bankruptcy (i.e. when I sign the documents) and I decide that I would like to change my exemption, is it possible?

Here is the situation. I filed bankruptcy believing (and explaining to my trustee) that the bank held my 2 vehicles as collateral on a loan. I claimed one of the cars as my exempt asset and the other as non-exempt. My focus was to keep both vehicles and continue paying on the whole loan. The trustee has contacted me and said that the bank only had security against one of the vehicles (the one I claimed exempt). Well, there is no equity in that vehicle as the loan against the car is $22K and the car is worth $16K. The other vehicle has been determined to be worth $4K that the bank didn’t have on the loan. The trustee says that I have to give up the $4K car to them as I claimed it “non-exempt”! Can’t I change my exemption? I am sure this has happened to people before and that someone in the government or whomever allows the change. I would really like to hear what the bankruptcy law says about this case. I am not trying to get away with something, it’s just that, had I known that the bank only had the one car, I would have claimed the other one exempt and apparently had I done that, it would not be an issue.

Answer:

While it would be advantageous to claim the free and clear $4000 vehicle as your exemption,  the Courts have determined that an exemption is a matter of fact, not a matter of election. 

In declaring bankruptcy you would have had to file a Sworn Statement of Affairs.  In that statement you declared that the leined vehicle was your principal mode of transportation and that statement will be the predominent factor in deciding  which vehicle will be considered exempt.

We have experienced with an exact case on point.  The Court perceived that the bankrupt’s attempt to amend the exemption was motivated by money and the bankrupt’s first representation was the prevailing factor.

If I file for bankruptsy in Alberta and the only debt I have is to Revenue Canada, will that debt be wiped out, or are they not included in a filing of bankrutsy?

Answer:

In Canada tax debts for the non payment of taxes are dischargeble debts.  In most cases Revenue Canada cannot influence your discharge and their debt is written off in a bankruptcy.

The exception to this statement is that if you are not tax compliant while bankrupt and don’t look after your tax obligations after you file bankruptcy, a court will not forgive the pre-bankruptcy debt.  If you pay your taxes while in bankruptcy everything should be fine.  Once you are in bankruptcy Revenue Canada’s focus is not so much on, having  you pay the old debt but rather on ensuring that you pay your taxes on a go forward basis.