Having the LIT designation means that we are the only professionals authorized to handle insolvency proceedings, including bankruptcy and consumer proposals. There are several reasons to consult an LIT:

• Qualified and licensed by the Government of Canada and Office of the Superintendent of Bankruptcy
• Federally regulated by the OSB and adhering to the Code of Ethics
• Fees charged are regulated by the federal government

Insolvency is generally defined as a situation where your liabilities exceed your assets and, accordingly, the inability to settle your obligations in the ordinary course of business.

If you are facing a situation where creditors are demanding payment but you find that there is simply no reasonable prospect of repaying them given your current financial situation, you should get in touch with a Licensed Insolvency Trustee to review your options.

LIT’s can help you in many ways. We can:

• Make an assessment of your current financial situation by reviewing your assets, liabilities, income, expenses and cash flow;
• Review both informal and formal options available for dealing with your debt;
• Assist you in negotiating an informal arrangement with your creditors;
• Advise you as to formal restructuring options in situations where informal proceedings are not possible or advisable;
• Prepare and file the necessary documents to initiate either a proposal to your creditors or, if the situation is more dire, to effect an assignment in bankruptcy;
• Guide you through your duties under the proposal or bankruptcy process;
• Administer the proposal or bankruptcy process from start to finish; and
• Get you the fresh financial start you need.

The costs of filing for bankruptcy with minimal assets is set out by a tariff under the Bankruptcy and Insolvency Act. Essentially this means that the government sets a prescribed rate.

The prescribed rate for a first-time bankruptcy is $1,900. For those going bankrupt for a second time, the cost is $2,050.

Generally, in bankruptcy proceedings, all of your assets are assigned to a Trustee for the benefit of creditors. These assets include cash, investments, retirement savings plans, antiques, works of art, valuable collections, personal effects, cars, tools and real estate, subject to the exemptions outlined below. You may know someone who has gone into bankruptcy and didn’t seem to lose anything. That is likely because they do not have anything except assets that are exempt from seizure or assets that are fully encumbered.

You are entitled to retain assets that are exempt from seizure. This means that creditors, through a Sheriff’s seizure or a Trustee cannot take those assets from you.

In the Province of B.C., you are entitled to keep:

• Personal Effects to a garage sale value of $4,000. In the case of a married couple, that means $4,000 each.
• Motor Vehicle: You are entitled, as exempt from seizure, to a motor vehicle to a value of $5,000. If you happen to be in arrears under the Family Maintenance Enforcement Program, then the $5,000 is reduced to $2,000 as exempt from seizure.
• Tools of Trade: Persons in business for themselves, such as mechanics, contractors or accountants, are entitled to retain from seizure tools of the trade to a value of $10,000. This would be, in the case of the mechanic who is in business for himself, a service vehicle and tools. The accountant would retain computers, etc.
• Home: You are entitled to keep equity in your principal residence at the date of bankruptcy to a value of $12,000 in the Vancouver and Victoria Regional Districts. In the case of a married couple where the home is owned jointly, the equity retained would be $24,000. Outside of Vancouver and Victoria Regional Districts, the equity exempt from seizure is $9,000 individually or $18,000 where the home is owned jointly.

If there is no equity in your car, but you owe approximately its value (the same would apply to your residence), the Trustee will not deal with the car. It will be released to the secured lender. You may be able to make an agreement with the secured lender whereby if you continue your payments, they will not seize your vehicle or commence foreclosure proceedings against your home. This would be negotiated on an individual basis because, under most contracts, bankruptcy is a breach of the contract, which would allow repossession.

Medical devices, pension plans and certain life insurance policies are exempt, as well as RRSPs, with the exception of contributions made within the 12-month period preceding the bankruptcy.

Yes, a bankrupt person is required to deliver to the Trustee all credit cards issued to and in possession or control of the bankrupt. If you require a credit card for business travel, then you can hold a credit card in another person’s name. Perhaps your spouse can get a credit card with you as an authorized user. Alternatively, your employer may provide you with a credit card.

A first-time bankrupt with no surplus income is eligible for an automatic discharge in nine months. A first-time bankrupt with surplus income is required to contribute part of the surplus income to their estate for 21 months, after which they are eligible for an automatic discharge.

A second-time bankrupt with no surplus income is eligible for an automatic discharge in 24 months. A second-time bankrupt with surplus income is required to contribute part of the surplus income to their estate for 36 months, after which they are eligible for an automatic discharge.

If no one, including your creditors, the Trustee, or the Superintendent of Bankruptcy, opposes your discharge, then you will receive your automatic discharge and will no longer owe the money. If, however, somebody does file an objection to your discharge, then there will be an application to the Court for the discharge.

If there is a Court application for discharge, the Court will consider all circumstances, including your conduct, family responsibilities, and your income. It will also consider your responsibility to creditors and the request from a creditor that you not be discharged. The Court will then make one of three Orders:

• Conditional Order: a Conditional Order is an Order from the Court whereby you are discharged upon satisfying the terms of the Order. The Order might provide that you should pay a sum of money either in a lump sum or monthly for a set period of time. We can only recommend the terms of such an Order but bear in mind that your family obligations will be the first consideration of the Court.
• Suspended Order: the Court may suspend the Order for a set period of time. This means that you will not be required to make payments, but for whatever reason, the Court believes that you would benefit by remaining in bankruptcy. This could go on for a period of months or a year or more.
• Order Absolute: this is where the Court Orders that, despite any objections from creditors, you are discharged. At this point you no longer owe your creditors anything.

Yes, as soon as a bankruptcy or proposal is filed, all Garnishing Orders are stopped. The garnishee creditors are stopped from taking action just like all other creditors and they will deal with the Trustee.

Unless you completed your studies or left the education institution more than seven years from the date of your proposal or bankruptcy, your student loans will survive and you will have to repay them.

Individuals who file an assignment in bankruptcy are required to attend two counselling sessions. The sessions deal with causes of insolvency, budgeting, and dealing with credit. Each counselling session takes approximately one hour.

There will be no creditors’ meeting unless sufficient creditors (25% of proven claims) request one. In the vast majority of cases, there is no creditors’ meeting. However, if one is requested, you will have to attend.

Bankruptcy may not be the only option for you. The sooner you take steps to regain control of your finances, the wider your options are. A Licensed Insolvency Trustee can help review all your options with you, including debt management programs, consumer proposals and debt consolidation. Please contact our office for a free initial consultation.