What happens during the bankruptcy process?

Here is a description of the bankruptcy process in Canada.

Once you’ve signed the legal paperwork to voluntarily put yourself into bankruptcy, your Licensed Insolvency Trustee will file an electronic version of these documents with the Office of the Superintendent of Bankruptcy (“OSB”). The documents are filed electronically through the internet directly to the OSB, which will instantly send to your trustee a Certificate of Appointment.

The Certificate of Appointment indicates that your trustee has been appointed by the OSB as the trustee of your bankruptcy estate, as well as the date and time the bankruptcy was filed. Once the Certificate of Appointment is issued, you are legally bankrupt.

It is important to note that filing for bankruptcy does not extinguish your debts – it only prevents your creditors for continuing any legal action against you to collect their debts. Your debts are legally extinguished only when you obtain your discharge. And you will only obtain your discharge upon fulfilling your obligations under your bankruptcy proceedings, which are described below.

Notice of bankruptcy

Upon being appointed, your trustee will send to your creditors a notice of your bankruptcy. Upon receiving the bankruptcy notice, your creditors cannot commence or continue any actions to collect their debts from you.

Counselling sessions

You will be required to attend two credit counselling sessions. The first session will take place about 2 months into your bankruptcy. The purpose of that session is to explore the following topics:

In the first stage, the qualified counsellor shall present information to provide the bankrupt and/or relative, or a consumer debtor, with consumer advice in the areas of:

  • money management;
  • spending and shopping habits;
  • warning signs of financial difficulties; and
  • obtaining and using credit.

The second counselling session will take place about 7 months into your bankruptcy. The purpose of that session is to follow-up on what you’ve learned in the first session to assist you to better understand  your strengths and weaknesses with regards to money management and budgeting skills.

Verifying your income and household budget

You will be required to present your paystubs or other proof of income to your trustee so she can verify your monthly income. This is necessary so that she can calculate your monthly surplus income obligation, if any. You will also be required to present to your trustee monthly income and expense reports so she can verify that you are living within your means.

Attend meeting of creditors

You may be required to attend a meeting of your creditors if requested by either the trustee, a representative of the Office of the Superintendent of Bankruptcy or your creditors. This will happen if there are any issues raised with respect to suspicious events that happened before or during your bankruptcy.

Please note that your trustee shall be required to call, and you shall be required to attend a meeting of creditors if the assets your trustee is required to realize exceeds $15,000.00. The meeting is mandatory because the trustee needs permission from your creditors to realize on those assets.

Attend an examination under oath

You may be required to attend before the Office of the Superintendent of Bankruptcy for an examination under oath. You would be asked a series of questions about your financial affairs before and during your bankruptcy. This may occur if there are any issues raised with respect to suspicious events that happened before or during your bankruptcy.

Obtaining your discharge from bankruptcy

Once you’ve fulfilled the obligations described above, you will be discharged from bankruptcy. Upon receiving your discharge, your debts (with certain exceptions) are legally extinguished and you are debt free.

What debts are unaffected by bankruptcy? »