Bennett on Consumer Bankruptcy. Frank Bennett
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a discharge. In some cases, a consumer debtor who files an assignment may not be able to obtain a fidelity bond. This may also affect any renewal of the licence. In such a case, the consumer debtor should consider filing a consumer proposal so that the licence can be preserved.
For example, a lawyer who goes bankrupt in Ontario may continue to practise, but an undischarged lawyer in Ontario cannot maintain a trust account. The lawyer must therefore work with another lawyer as such trust accounts are monitored by the Law Society of Upper Canada. However, if a public accountant goes bankrupt, the accountant loses his or her licence during bankruptcy.
Therefore, it is necessary for the consumer debtor to review the legislation governing the licence that is held before making an assignment in bankruptcy as without a licence the consumer debtor may lose his or her job temporarily, and may have some difficulty in getting the licence back after discharge.
6. Costs
In 2000, there were 75,137 consumer bankruptcies in Canada and 12,392 consumer proposals. In 2010, there were a total 135,008 consumer bankruptcies in Canada of which 42,314 made proposals. In 2011, there were a total of 122,999 consumer bankruptcies of which 45,006 made proposals. In most of these consumer bankruptcies, the trustee’s fees ran about $1,800 and up. Under the Bankruptcy and Insolvency Act, there is a prescribed tariff for trustees in performing services for little- or no-asset bankruptcy estates. If the consumer debtor needs a lawyer, the costs will usually be based on an hourly rate. A consumer debtor should be able to get good competent legal advice on bankruptcy matters for less than $1,500. Of course, if there are special problems, the costs are likely to be higher. Therefore, most consumer debtors should have or be able to raise about $3,300 if they want to use the services of a lawyer and a trustee to go bankrupt.
If the consumer debtor has any doubts about bankruptcy or its effects, it is advisable to see a lawyer first before filing as once the consumer debtor files for bankruptcy, it is virtually impossible to annul or reverse its effect.
If the consumer debtor does not have any assets to pay the trustee or a lawyer, then it is possible that the trustee may obtain a guarantee or a cash retainer from a family member or from a friend of the consumer debtor. The guarantee operates only if the trustee is unable to recover property or realize any monies from the property that the bankrupt earns after bankruptcy up to the time of discharge. The guarantee should be in writing and the guarantor, the family member or friend, should read the guarantee very carefully so that it is understood at what is being signed. Trustees usually require that their money be paid before formal proceedings take place.
It is also possible for the consumer debtor to access the Bankruptcy Assistance Program supervised by the Office of the Superintendent of Bankruptcy if the consumer does not have a family member or friend to assist. However, the consumer must first make attempts to retain the services of two private licensed trustees, not be involved in any commercial businesses, and not have any surplus income. If the consumer debtor qualifies, the consumer debtor can contact the local office of the Superintendent where a bankruptcy analyst will designate a participating trustee to administer the bankruptcy or proposal.
7. Information You Will Need to Share at a Bankruptcy Interview with a Trustee or Lawyer
Bankruptcy laws generally provide that transactions entered into by a debtor within five years of the date of bankruptcy require review by the trustee on behalf of the creditors. The trustee is concerned about property that the consumer debtor had, what the consumer debtor received for it when it was transferred, and where it is today. It is improper, generally, for a consumer debtor to give away property or transfer property at less than its fair value at a time when the consumer debtor is having financial difficulties and cannot readily pay his or her creditors. If the consumer debtor does not have sufficient assets at the time of the transfer or gift, then it is possible that the trustee or the creditors may move to set aside that transfer. If the transfer is set aside, the property re-vests in the name of the consumer debtor and thereafter the trustee or creditors can force its sale. Accordingly, a careful review of all assets should be made within five years of the projected date of bankruptcy. This would include the following:
• Full particulars about the consumer debtor including:
• surname, given names, nicknames
• address including postal code
• telephone and fax numbers, email addresses
• driver’s licence number
• social insurance number (show card)
• date of birth, with birth certificate
• passports, citizenship, or landed immigrant papers
• marital status, and where appropriate, separation agreement, divorce order, support order
• dependents’ names, relationship, and ages
• occupation
• name of employer including telephone and fax numbers, email address, and postal address
• salary, wages, or other remuneration
• full particulars of spouse, partner, or friend including names, date of birth, and social insurance number
• income tax returns for the last five years
• Full particulars of all assets in Canada and elsewhere, including:
• cash, bank accounts
• insurance policies for life and property, and names of beneficiaries and relationship
• furniture and furnishings
• securities including stocks, guaranteed investment certificates (GIC), shares of public and private companies
• bonds, over the last five years including brokerage statements
• vehicles, licence plates, ownership, and insurance particulars
• real estate
• leasehold
• equipment
• receivables and IOUs
• personal assets including collections having a value of more than $500, collections of silver, crystal, gold, coins, liquor, guns, art, and artifacts
• credit cards
• copies of net worth statements provided to any bank, lender, or other creditor
• copies of pass books or bank statements in the consumer debtor’s name alone or jointly with others
• copies of all credit card statements in the consumer debtor’s name
• Full particulars of all debts including names of creditors in alphabetical order, addresses, and amounts outstanding.
• RRSP, RRIF, and other pension statements for the last five years including documentation with respect to any change in the names of beneficiaries. The trustee and creditors cannot attach RRSPs except for monies invested within one year of bankruptcy.
• Full particulars of all dispositions and transfers of property within 12 months of taking protection and within 5 years of taking protection.
• Delivery of all credit cards, ownership registrations, mortgages, title deeds, guarantees, insurance policies, tax returns, and all other documents evidencing ownership and debt.
Chapter 2
Who Are the People Involved in a Bankruptcy?
As discussed in Chapter 1, a debtor can be an individual person, partnership, or a corporation that is unable to pay debts in the ordinary course. In this chapter, we discuss the other people who are involved in the bankruptcy