Bankruptcy

In order to qualify for bankruptcy, you must

• Owe at least $1,000 and
• Not be able to meet your obligations as they generally become due, or
• Not own sufficient property to pay all of your debts.

Although you may meet the above criteria, it does not mean that bankruptcy is the right option for you. You should contact an insolvency professional to review your financial situation.

Yes, an unsecured creditor who is owed more than $1,000 can file a court application (a “petition”) to force you into bankruptcy.

The creditor must prove that you have committed an act of bankruptcy, such as a fraudulent transfer of property, or that you have not paid your bills as they became due. Both you and the creditor who has filed the petition will make representations in court and if the petition is allowed, a receiving order shall be issued. The receiving order is the Court’s order placing you into bankruptcy. The Trustee is usually named by the creditor who applies to court for a receiving order.

Your first step in considering a bankruptcy assignment is to meet with a licensed Trustee, such as the firm of Cameron • Okolita Inc. for an “initial assessment”. The Trustee is required to review your financial situation including transfers of property and evaluate the extent and nature of your financial problem and the potential solutions. After answering any questions that you may have, you would select an appropriate course of action which the Trustee will administer for you.

You may wish to complete and forward a Financial Assessment Worksheet to our office so that we can assess your financial situation. At Cameron • Okolita Inc. we offer free – no obligation consultations, with flexible appointments also available on evenings and weekends to meet your schedule.

The intention of the Bankruptcy and Insolvency Act is to rehabilitate individuals who are overburdened with their debts and provide them with a fresh start.

Subsequent to filing a bankruptcy assignment, you are required to attend two financial counselling sessions. These sessions are provided by the Trustee’s office who is administering your bankruptcy assignment.

The first counselling session is held within 90 days following the effective date of your bankruptcy assignment. The second counselling session is to be held not earlier than 30 days after the first counselling session prior to the discharge from bankruptcy.  The purpose of the counselling sessions are to provide the debtor with advice in the following areas:

• budgeting
• achieving financial goals
• spending habits
• responsible use of credit, and
• other information which may be beneficial to the debtor 

The duties of a bankrupt are set out in section 158 of the Bankruptcy and Insolvency Act. However, some of the more common duties are as follows:

• Disclose all of your assets and liabilities to the Trustee.
• Advise the Trustee of any property disposed of in the past year by sale, gift or redemption.
• Surrender all credit cards to the Trustee, even if at a zero balance.
• If requested, attend an examination before the Official Receiver.
• Attend the first meeting of creditors, if required.
• File monthly reports of your income and expenses including verification of your income and child & spousal support payments (as applicable).
• Attend the first and second counselling sessions.
• Advance such payments to the bankruptcy estate as may be required under Income Standards set out by the Superintendent of Bankruptcy.
• File all outstanding income tax and GST returns, as applicable.
• Advise the Trustee in writing of any changes in home address
• Generally assist the Trustee in administering the estate.

We suggest that you carefully review section 158 of the Act in order to be aware of its requirements.

A Licensed Insolvency Trustee is an officer of the court with an obligation to protect the rights of a bankrupt individual while ensuring that the interest’s of creditors are also protected. The Trustee’s duties are defined by the Bankruptcy and Insolvency Act and in general terms would include the following:

• Provide you with an initial assessment and financial counselling.
• File the assignment in bankruptcy with the Official Receiver.
• Ensure the stay of proceedings protecting you from your creditors is enforced.
• Review your financial affairs as required by legislation.
• Realize/sell those assets which are not free from seizure as set out under provincial legislation. See the Enforcement of Money Judgements Act (Saskatchewan) to review which assets you can claim exempt (being free from seizure).
• Receive and review the claims of creditor’s.
• Provide a due accounting of the estate administration to the Official Receiver, the bankrupt, creditors and the court.
• Apply for your discharge from bankruptcy, as appropriate.
• Apply for the Trustee’s discharge.
• And all such other matters more specifically defined in the Act.

The Official Receiver is a Deputy of the Superintendent of Bankruptcy and has the responsibility of supervising the overall bankruptcy process. In this regard, the Official Receiver will supervise the actions of Trustees to ensure their compliance with the Bankruptcy and Insolvency Act as well as investigate the conduct of bankrupts, both before and during their bankruptcy administration.

With respect to investigating the conduct of the bankrupt, the Official Receiver may examine a bankrupt individual under oath. Typically, the examination, if any, is held within one month from the date of the bankruptcy assignment. The purpose of the examination is to determine the causes of bankruptcy, review the disposition of property, the nature of one’s debts and review your conduct as it relates to the bankruptcy assignment.

After your bankruptcy assignment has been filed with the Official Receiver, you may be required to attend a first and possibly subsequent meetings of creditors. Creditors have 30 days to request a meeting and if requested, it would be held within 60 days after filing the assignment. The meeting provides creditors with the opportunity to:

• Consider the financial affairs of the bankrupt
• Affirm the appointment of the Trustee
• Appoint up to five inspectors (typically creditor representatives) who supervise the administration of the bankruptcy estate, and
• Allow the creditors to give direction to the Trustee with respect to the estate administration

Failure to attend the creditor’s meeting without sufficient cause is considered an offence under the Act. Rarely do creditors request a meeting with the bankrupt.

The Bankruptcy and Insolvency Act together with the Enforcement of Money Judgements Act (Saskatchewan) provides the bankrupt with the ability to claim certain assets (or the equity in certain assets) to be exempt or free from seizure.

Below are a list of assets which are exempt in a Saskatchewan bankruptcy administration:

• Equity of $50,000 ($100,000 if jointly owned) in your personal residence. The equity represents the difference between the value of your home and the mortgage balance outstanding.
• Household furnishings and appliances.
• Personal effects (clothing and jewelry) to a maximum liquidation value of $7,500 per spouse.
• Equity (difference between the value of the vehicle and debt against it) of $10,000 in one motor vehicle. If the equity is in excess of $10,000, the bankrupt can still keep the vehicle and “buy” out the excess equity from the estate on monthly payment terms.
• Tools of trade.
• Money and property received as compensation for physical or mental injury.
• Most RRSP’s and pension plans.
• Funds contributed to a Registered Disability Savings Plan (RDSP) more than 12 months prior to the filing date ( for filings after November, 2019).
• Certain life insurance policies.
• Other special exemptions for farmers – As set out under the Saskatchewan Farm Security Act

You may wish to review the Enforcement of Money Judgements Act (Saskatchewan) to further understand what assets you are entitled to keep if you were to file a bankruptcy assignment.

Included with your bankruptcy assignment is a document called a “Statement of Affairs” which reports all of your assets, declared under oath to the Trustee. You should ensure that all assets are fully disclosed and properly valued.

You should note that exempt assets pledged as collateral may be seized by a secured creditor depending on the nature and type of the loan. For example, if a vehicle qualifies for an exemption but the secured creditor financed the purchase of the vehicle, the secured creditor can still seize the vehicle for non payment. The rules concerning exemptions can be somewhat complicated and as such, they should be discussed with the Trustee prior to proceeding with a bankruptcy assignment.

The bankruptcy assignment will suspend or stop creditor’s collection actions including pending lawsuits and garnishees (with the exception of certain debts which survive bankruptcy under Section 178 of the Act). The creditors will receive notice of your bankruptcy assignment and thereafter will be required to correspond directly with the Trustee. Your debts will be discharged after you have received an “absolute” discharge from bankruptcy.

Student loan debts can be discharged if you have been out of school as either a part time or full time student for more than 7 years. The debts can also be discharged if you file an assignment in bankruptcy within the 7 year time period, however, you will have to file a separate court application after the expiry of the 5 year time period since you were out of school as a part-time or full-time student and satisfy a “means” test for the court in order to discharge the debt. With respect to a “means” test, the debtor would have to satisfy the court that:

• you have acted in good faith in connection with the liabilities under the debt; and
• you have and will continue to experience financial difficulty to such an extent that you will not be able to pay the debt.

This process should be discussed with your trustee.

Lastly, if you file an assignment in bankruptcy and currently have student loans and are enrolled in school, you may be eligible to obtain further student loan funding for a maximum of 3 years in order to complete your education. However, you must remain in the same program of study and continue in full-time student status.

Personal income tax, GST and payroll source deduction debts with the Canada Revenue Agency (“CRA”) can normally be discharged/extinquished by the filing of a bankruptcy assignment or consumer proposal, but there are exceptions. For example, a CRA garnishee on a debtor’s paycheque can be terminated and the debt extinquished for a personal income tax or GST debt. However, if CRA has filed or registered a writ against your tangible property prior to the filing of your assignment, that debt may now be secured by that property. The operative word is “may”, as depending on the fact situation there is a possibility that even a writ on property can be discharged.

Depending on the circumstances, the CRA has been known to enforce collection of payroll source deduction debts even after the filing of a bankruptcy assignment or consumer proposal.

Furthermore, if your personal income tax debt is more than $200,000 and that debt represents more than 75% of the proven unsecured claims in your bankruptcy estate, then a formal discharge hearing must be held before the Registrar in Bankruptcy (bankruptcy judge). At the hearing, the Registrar will determine appropriate terms of discharge which may include the requirement to pay more money to your bankruptcy estate or suspend (delay) your discharge from bankruptcy.

Lastly, a formal discharge hearing may also occur if the CRA has filed a specific opposition to your discharge from bankruptcy. Again, the Registrar will determine appropriate terms of discharge after giving consideration to numerous factors, including your payment and compliance history with income tax filings, size of debt, age, income and income prospects, etc. In summary, in view of the statutory powers held by CRA and the sometimes complicated nature of CRA debts, we suggest you contact a trustee as soon as possible to discuss your income tax debt.

Yes. Bankruptcy cannot be applied selectively. You are required to list all of your debts regardless of the source, including monies owed to friends and relatives. If you fail to disclose certain debts, you will be liable for the dividend otherwise payable to that creditor, even after the completion of your bankruptcy administration. The dividends payable are those monies paid to creditors resulting from assets collected in your bankruptcy estate.

Yes. Certain debts are not eliminated with your discharge from bankruptcy. For example:

• Fines or penalties imposed by Court.
• Alimony, maintenance or child and spousal support
• Debts obtained by fraud or misrepresentation
• Student loans which are less than 7 years old

No. If your assets available for distribution to creditors (ie: those assets which are not exempt from seizure) do not exceed $15,000, you will qualify for a “summary” administration. A “summary” administration under the Act is for those debtors whose affairs are not complicated and have few assets.

However, if your non-exempt property available for distribution exceeds $15,000, your bankruptcy will be considered an “ordinary” administration which will require the Trustee to place an advertisement notice in the newspaper. The vast majority of bankruptcy administrations are “summary” in nature and will therefore not be advertised. If you have questions on your type of administration, please discuss this with the trustee prior to proceeding with a bankruptcy assignment.

Your bankruptcy assignment will not release a debt for an individual who has co-signed or personally guaranteed that obligation for you. For example, a spouse or other party who has incurred joint liabilities with you, or has personally guaranteed debts for you, will remain liable for the debt. The Trustee should be made aware of all joint debts so that each situation can be assessed.

For the year of bankruptcy, the Trustee will typically file two income tax returns on your behalf. One return is required for the period from January 1 to the date of bankruptcy (the pre-bankruptcy period). A second return is subsequently filed for the period from the date of bankruptcy to December 31 (the post-bankruptcy period).

The income tax refunds for both the pre and post-bankruptcy periods will be forwarded to your Trustee’s office as an asset for distribution in accordance with the Bankruptcy and Insolvency Act. Income taxes owing up to the date of bankruptcy are discharged or extinguished while any balances outstanding on the post-bankruptcy tax return must be paid by the bankrupt.

It should be noted that the Canada Revenue Agency (“CRA”) may have a secured charge against your assets for those income taxes owing up to the date of bankruptcy where they have obtained a writ and registered a charge prior to the date of your bankruptcy assignment. In view of the statutory powers held by the CRA, we suggest you contact a trustee as soon as possible to discuss your income tax debt.

No. Immediately upon the filing of your bankruptcy assignment, a stay of proceedings suspends (stops) creditor’s collection actions. However, a creditor may obtain an order from the court to continue an action for the recovery of those debts which are not discharged from bankruptcy as set out in section 178 of the Act.

If you inadvertently receive telephone calls from creditors after your bankruptcy assignment, you should confirm with them that you have filed a bankruptcy assignment and refer them to the Trustee’s office, as necessary. In addition, although it is very rare, if a creditor commences court action after you have filed your bankruptcy assignment, notify your Trustee as soon as possible and provide him with copies of the court documents.

Depends on your circumstances. When you declare bankruptcy, one of your duties will be to prepare and submit a monthly statement to the Trustee detailing your income and expenses. The Trustee will use this information and income guidelines set out by the Superintendent of Bankruptcy to determine your payments, if any, that will be required to the bankruptcy estate. The applicable Superintendent’s income standard is determined by your family net take home pay (income after statutory and mandatory deductions) and the number of dependents in your family unit. If your net family income is below the Superintendent’s income guidelines, no payment is required. You may wish to contact a trustee to determine the payment, if any, applicable in your circumstance.

Any property acquired by you prior to receiving an absolute discharge from bankruptcy (being your completion of the bankruptcy process) will become property available for the estate’s creditors. This would include windfalls such as lottery winnings, inheritances, insurance proceeds, etc.

Only those assets owned by you form property of your bankruptcy estate. However, if assets are owned jointly with your spouse, then your portion may have to be liquidated and the proceeds distributed to the creditors. The realization of this property is subject to your exemptions which are claimed under the Enforcement of Money Judgements Act (Saskatchewan). If property is jointly owned, the trustee cannot unilaterally force the sale of the jointly owned property. The Trustee should be made aware of all joint assets so that each case can be uniquely assessed and discussed with you prior to filing a bankruptcy assignment.

Yes. However, if your bank is also a creditor in your estate, it may be wise to open an account elsewhere to ensure that subsequent deposits are not accidentally set off against your debt with that bank. Any overdrafts should be included as a debt in your bankruptcy estate.

If a bank refuses to open an account for you, you may contact our office for a telephone number to The Financial Consumer Agency of Canada.

After filing the assignment in bankruptcy, the Trustee is required to notify all creditors. In addition, information regarding your bankruptcy will be kept on file by credit reporting agencies, the Court, Canada Revenue Agency and the Superintendent of Bankruptcy. Your employer will not be notified of your bankruptcy assignment unless a garnishee had been served upon your employer prior to filing your assignment and the trustee needs to contact the employer to stop the garnishee.

Typically, most people who are considering bankruptcy already have a poor credit rating and encounter difficulty in obtaining further credit. For an individual filing bankruptcy for the first time, the credit bureau will report a R9-bankruptcy rating for 6 years after the discharge date. If an individual files a second bankruptcy assignment, the credit bureau will report a R9-bankruptcy rating for 14 years after the absolute discharge date from the second bankruptcy.

However, after your absolute discharge from bankruptcy, with the exception of those debts not discharged by bankruptcy and secured debts that you may have chosen to retain, you will be debt free and should therefore be considered a better credit risk. You may wish to discuss how to rebuild your credit rating with your trustee’s office.

If you are considering filing a second bankruptcy and credit rating is a concern, then perhaps filing a consumer proposal may be a good alternative. For more information, go to the consumer proposal section of this website. The credit bureau will report a consumer proposal as an R7 rating for 3 years after its completion, or 6 years from the date the proposal is filed, whichever is earlier.

If you have not been previously bankrupt and have performed all the duties imposed upon you by the Bankruptcy and Insolvency Act, you will be discharged either nine months or twenty-one months after filing your bankruptcy assignment.

The length of time is determined by your average net monthly income above the Superintendent’s Income Standards. In summary, if a first time bankrupt is “low” income, then a discharge could occur in 9 months, or 21 months if “high” income. “Low” versus “high” income is determined by income standards set out by the Superintendent of Bankruptcy which are uniform across Canada.

In the case of a second time bankruptcy, the applicable time periods are 24 months or 36 months, depending again on the bankrupt’s income level (“low” versus “high” income) and the Superintendent’s Income Standards. These time periods will vary in the case of a third or fourth time bankruptcy. Understanding the Superintendent’s Income Standards and the applicable bankruptcy durations can be difficult. We therefore encourage you to contact a trustee to determine the appropriate time duration in your particular circumstance.

In addition, on certain grounds, the Superintendent of Bankruptcy, creditors or the Trustee can also object to your discharge, which could extend your bankruptcy duration.

If your discharge has been opposed, the Trustee is required to provide a report on your bankruptcy administration to the Court, the Superintendent of Bankruptcy and to any creditors who requested it. You will be advised by the Trustee if you are required to appear in Court for the discharge hearing. The Trustee’s report informs the Court of the circumstances surrounding your bankruptcy, conduct during the administration, assets realized, creditors claims filed and the Trustee’s recommendation. If the discharge has been opposed, evidence will be given by both the bankrupt and the opposing creditor at the hearing to refute or support the allegations. The Court will issue an absolute discharge or alternatively, may refuse, suspend or grant a conditional discharge. The implications of each order are as follows:

Absolute discharge:

You are discharged from those debts incurred prior to the date of bankruptcy expect for those debts detailed in section 178 of the Act.

Conditional discharge:

Your discharge may be granted conditional on fulfilling the terms and conditions of a court order. This may require you to pay a sum of money or perform some duty. An absolute discharge will be granted when the specified conditions are fulfilled.

Suspended discharge:

An absolute discharge has been suspended pending the expiry of a time period before it comes into effect or until it is reviewed again by the Court. This type of order may occur if the bankrupt is being penalized for his conduct either before or during his bankruptcy, or the consequence of a third bankruptcy filing etc.

Discharge refused:

The court may refuse a discharge when it considers that the bankrupt does not deserve a discharge. An order of this type is extremely rare.

If you have not co-operated with the Trustee in order to complete the estate administration, the Trustee may eventually be obliged to apply for his discharge as Trustee for the estate leaving you without a discharge.

The implications of being an undischarged bankrupt after the Trustee has been discharged would include the following:

• the stay of proceedings against your creditors is lifted and they are free to resume their collection actions against you.
• property acquired by you continues to be property available for your creditors.
• you continue to be subject to the bankruptcy offences under the Bankruptcy and Insolvency Act. For example, obtaining credit without advising the creditor that you are an undischarged bankrupt.

Cameron • Okolita Inc. offers an “all inclusive” fee agreement which includes registration costs to the Superintendent of Bankruptcy, counselling fees, mailing and photocopying costs, professional time and G.S.T. Various payment plans are available to suit your budget. These will be discussed with you during your initial consultation.

The offences under the Bankruptcy and Insolvency Act are detailed in sections 198 and 199 of the Act.

If you believe that you may have committed an offence under the Bankruptcy and Insolvency Act, you may wish to discuss this with a trustee for further advice.

Obtaining credit after filing a bankruptcy assignment is possible. However, there are various factors that a creditor considers when lending money including cash flow (net take home pay), collateral, current debt ratio, previous bankruptcy and numerous other factors. Below are some tips on how to rebuild your credit.

• Pay monthly bills on time.
• Maintain a positive balance in your bank account.
• Apply for a secured credit card and maintain monthly payments.
• Apply for a small loan (co-signer may be required) and ensure payment schedule is maintained.
• Invest in RRSP’s

Regardless of what type of credit you obtain, it is important to advance the required payments according to your agreement with the creditor. This will suggest to creditors that you are in control of your financial situation.

If you require a copy of your credit report, you can contact one of the two main credit bureaus listed below and request your report. You will be required to verify your identity.

Equifax Canada Inc.
Consumer Department
Box 190 Joan Talon Station Montreal, Quebec
Phone: 1-800-465-7166
Fax: 1-514-355-8502

Website: 1-800-888-4213
Fax: 1-905-527-0401
Website: www.transunion.ca