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Bankruptcy, Debt, Creditors, Trustees, Financial Counselling, Winnipeg, Manitoba, Canada, Kenora, Ontario

Frequently Asked Questions
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What is Bankruptcy?

Bankruptcy is a legal process regulated by the Bankruptcy and Insolvency Act by which you may discharge all or most of your debts. The purpose of the Act is to permit the honest but unfortunate debtor to be released from their debts and to get a fresh start.

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What is a Proposal?

A Proposal under the Bankruptcy and Insolvency Act is a formal offer from you to your creditors, where you propose to pay part or all of your debt to them over a specific period of time. Unlike a Bankruptcy, where the creditors have no choice as to whether or not you go bankrupt, in a proposal the creditors get to vote for or against the proposal. If they vote for it, you then proceed with fulfilling the terms of your proposal. This is done by making payments in the amount outlined in your proposal, to the Trustee, who distributes the money to the creditors. Once you have fulfilled the terms of the proposal you are discharged of any remaining debt. Proposals vary a great deal, because they are designed on an individual basis to meet the specific needs of each individual debtor. Minimally, a proposal must offer the creditors more money than they would get if you went bankrupt.

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How much will it cost?

What a bankruptcy will cost you will depend on your income and family size. There are standards set out by the government that give guidelines as to how much a person should pay based on their income and family size. If your income is low your payment could be as low as $125 per month.

The cost of a proposal is determined entirely by what you propose to your creditors. Whatever amount you proposed to pay your creditors will be your total cost. Just remember that the creditors must agree to the proposal in the first place.

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How do I stop a Garnishment?

Upon filing an assignment in bankruptcy or a proposal under the Bankruptcy and Insolvency Act there is an immediate Stay of Proceeding which prevents creditors from suing you, garnishing your wages, or taking any further collection practice against you.

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What can I keep in a Bankruptcy?

A bankrupt is allowed to keep any property that qualifies as exempt under provincial or federal legislation and that has not been given as collateral to the creditors.

Some Typical Manitoba Exemptions
  • Household furnishings not exceeding a total value of $4500 (note: this is resale value, not replacement value)
  • Tools of the trade not exceeding a total value of $7500, includes
  • One motor vehicle not exceeding the value of $3000, if necessary as a tool of the trade. This includes a vehicle used to get to and from work.
  • Equity in a home owned by the bankrupt to a maximum of $1500 each if in joint tenancy $2500 if not in joint tenancy
  • Locked-in pension plans
  • Life insurance where the beneficiary is an immediate family member
Manitoba Farmers
  • Animals necessary for farming operation for 12 months
  • Farm machinery and equipment necessary for ensuing 12 months of operation
  • One motor vehicle if required in agricultural operations
  • One quarter section of land.

For a more detailed list of exemptions if necessary. Exemptions vary from one province to another. For Ontario exemptions, please contact our office.

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How long am I bankrupt?

A first time bankrupt is bankrupt for 9 months and at the end of 9 months if no one opposes the bankrupt’s discharge the debts are erased. If a creditor, the Trustee or the Superintendent of Bankruptcy opposes the discharge, then the bankrupt must attend court. The court will determine what conditions must be met before the debts are erased.

A second time bankrupt is not entitled to an automatic bankrupt’s discharge but must attend court to determine what conditions must be met before the debts are erased.

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Are all debts erased in bankruptcy?

Section 178 of the Bankruptcy and Insolvency Act includes a list of debts NOT erased in bankruptcy. A summary of the more common debts that are not erased are as follows:

  • Fines and penalties of the courts (including awards for intentional bodily harm, sexual assault and wrongful death)
  • Alimony, maintenance and child support
  • Debts resulting from fraud or misrepresentation
  • Student loans (if it is less than 10 years since you stopped attending school)
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How is my credit rating affected?

Information concerning your bankruptcy or proposal could show up on your file at the credit bureau for a period of 6 to 7 years after your bankrupt’s discharge. If you have been bankrupt before this period could be extended to as much as 14 years. This only means that potential lenders will know that you have been bankrupt. It does not mean that they will refuse you credit. It is the lender’s individual credit scoring system that determines access to credit.

Should you wish to improve your credit record after obtaining your discharge from bankruptcy you may wish to talk to your bank or credit union to find out what steps they would suggest that you take. If you have saved up a down payment, you are borrowing money to purchase something on which the lender can take security, and you have not had credit problems since the bankruptcy, it is unlikely that obtaining credit again will be a significant problem.

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How do I go about filing a bankruptcy or proposal?

The best way to get detailed information about filing an assignment in bankruptcy or a proposal is to contact us. There is no cost for this and there is no obligation to proceed with bankruptcy, you may contact us.

When you contact us we will arrange to set up an appointment to speak with you to review your financial situation. We can do this either by telephone, if you live in a remote community, or in person at our office in either Winnipeg, Manitoba or Kenora, Ontario. We will review any options we see available to you including options other than those offered under the Bankruptcy and Insolvency Act. We will ensure that all of your questions are answered and that you have a clear understanding of what the various processes would be.

Once we have spoken with you, you are free to either take further time to think about your options or to make arrangements to proceed with the filing of a bankruptcy or proposal.