Is there a minimum debt before I can declare Bankruptcy?
Yes. You can only file for a voluntary bankrupt if your total debts owing are over $1,000 and be unable to pay your debts. A creditor will not force you into bankruptcy unless the debtor owed is $1,000 or more. However, you are advised to discuss your financial difficulties and schedule a consultation or credit counselling to get the proper information and discuss your options. Bankruptcy should be a last resort and it is important to know your rights and responsibilities.
What happens to secured debts e.g. My Car Loan or House?
Car loans, mortgages, and furniture credit cards are loans which are taken in order to purchase an asset. That asset is given as security for the loan, so that if payments are not made, the lender can retrieve the asset for which you borrowed the money in the first place.
In general, creditors are more interested in receiving payments than in dealing with the used asset. If your payments are up to date, and you keep them current, it is unlikely (though not guaranteed, depending on the situation) that the creditor would take your house, your car, or your furniture.
If, on the other hand, you can no longer afford the payments on the car, furniture or house loan, you may be able to include those debts in a bankruptcy or a proposal, in exchange for returning the asset you borrowed the money to buy. Before taking this step, speak to a Trustee in Bankruptcy to make sure the decision to keep or return the asset is the right one for you.
That depends on what type of business you are operating. If you are self-employed in Ontario and your business is a sole proprietorship, you can operate as usual. Any business-related debts in your bankruptcy are also personal debts, so suppliers that were included in your bankruptcy may be cautious about extending credit to you while in bankruptcy. You may need to re-negotiate payment terms with them.
If your business is a corporation in Ontario, you must first take steps to remove yourself as a director, as an undischarged bankrupt cannot be a director of a corporation in Ontario. Your suppliers would not necessarily be aware of your bankruptcy, but you should not sign personally for any credit, business or otherwise, while undischarged. Otherwise, you may run your business as usual.
Upon declaring bankruptcy assets ‘that are not exempt or otherwise secured to a lender ( eg. car loan, mortgage on house,etc.) vests to the Trustee. Other assets acquired during the period of bankruptcy, such as lottery winnings or inheritance from a deceased estate, also vests to the Trustee.
The law, however, provides that you may retain certain property, including personal effects, such as necessary clothes and household furniture; property used in earning income, provided the value of the property is less than an indexed amount; property used as a primary means of transportation, provided the value of the property is less than an indexed amount (i.e. car or motorbike); property held in trust for another person, such as a child’s bank account (Note that it is not enough that you consider the account to be for your children – the name on the account MUST have the words ‘in trust’ on it); life insurance and endowment insurance policies and proceeds thereof; retirement funds and pensions; compensation from damages due to personal injury for pain and suffering only are an exempt asset.
Moreover, if you are earning an income that is more than the value of a threshold amount, you are required to make regular income contributions of 50 cents after every tax dollar above the indexed amount.
Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.
Is there a minimum debt before I can declare Bankruptcy?
What happens to secured debts e.g. My Car Loan or House?
Can I operate a business while I am bankrupt?
What happens to my assets in Bankruptcy?