Fresh Start Solutions to your personal financial difficulties
Contents Introduction...3 Proposal to creditors...5 Personal bankruptcy...7 Glossary...17 Debt solutions worksheet...19 2
Introduction Are you experiencing a difficult financial situation? Do you owe money that you don t know how to repay? Deloitte & Touche Inc., as a Trustee in Bankruptcy, may be able to assist you in resolving your financial problems. While there are a number of possible alternatives available to you in dealing with money problems, this booklet has been prepared as a basic guide designed to assist you in understanding the services of Deloitte & Touche Inc., and our responsibilities as a Trustee. This guide outlines some of the possible solutions available to you, discusses their implications, and contains the forms necessary to provide the information you will need to get started. For more specific information, please contact us at one of the offices listed at the end of this booklet. Perhaps through a series of unfortunate circumstances or poor financial management, you find yourself in financial difficulty. What are the possible solutions? Proposals to creditors under the Bankruptcy & Insolvency Act A formal proposal usually provides for payment of a percentage of the total debt. A Trustee in Bankruptcy administers the proposal which could involve regular payments over a period of time and result in a partial payment to creditors. Creditors vote on whether or not they wish to accept the proposal. Refer to page 5 for further details. Personal bankruptcy Bankruptcy is a formal proceeding under the Bankruptcy and Insolvency Act that is available to an insolvent debtor to obtain relief from a financial crisis. Generally speaking, an insolvent debtor is one who owes at least $1,000 and is unable to pay his/her debts as they become due. The process is intended to provide financial rehabilitation and a new start in life for the debtor, as well as an equitable and orderly distribution of the debtor s assets amongst the creditors by a Trustee in Bankruptcy. Refer to page 7 for further details. Orderly Payment of Debts (O.P.D.) This program is available in Alberta, Saskatchewan, Prince Edward Island, and Nova Scotia only and provides for payment in full of all debts within 3 5 years. There are income and other qualifications which must be met before an insolvent person is accepted into this program. 3
Non-Legislative debt settlement arrangements Informal proposal Rather than entering into a formal proposal to creditors under the Bankruptcy and Insolvency Act, the insolvent debtor enters into a private agreement(s) with his/her creditors, usually in writing, where the debtor settles or defers payment of some or all of the debt. If an insolvent debtor does not proceed with any of the above options, creditors may continue to demand payment through collection agencies or more formal legal proceedings. If court action is pursued, normally a Statement of Claim could be issued which, if not defended, results in a formal judgment being issued by the Court. Once a Creditor obtains a Judgment, it can attempt to collect its account by obtaining Court orders to garnishee a debtor s wages or bank accounts and seize non-exempt assets. How do I know what is the right solution for me? There are a variety of possible solutions to an insolvent debtor s money problems. The starting point is a private, in-office assessment with a Trustee which will provide you with an opportunity to gain an understanding of the bankruptcy process and other restructuring and credit work-out alternatives available to you. To obtain the information necessary to advise you on the alternatives best suited to your circumstances, a worksheet is provided at the back of this booklet, which should be completed prior to the assessment session. The Worksheet will provide the Trustee with listings of your assets and liabilities as well as personal data, income tax and other information needed to assess your current financial status. Once the Worksheet has been completed, you must contact the Trustee to arrange for an appointment time for the assessment session. All property and all debts must be listed on the Worksheet. A creditor cannot be left out for any reason. In Bankruptcy or Proposal proceedings, all creditors are entitled to be notified and to share in the distribution of funds, if any. If a creditor is not disclosed, then the debtor may be responsible for payment of the amount of dividend which the creditor would have received if the creditor had been notified. It is also imperative that the Trustee have all the information necessary to provide you with the most appropriate advice. What kind of counselling is available? As part of the Bankruptcy or Proposal process, a debtor will be provided with an assessment meeting and two counselling sessions. These are provided at various stages: Assessment stage This is a private in-office meeting provided by the Trustee at no charge, prior to the commencement of the Bankruptcy or the Proposal. During this session, the Trustee will obtain information on the debtor s financial affairs, review the debtor s immediate financial concerns, and identify and discuss the merits of possible solutions to resolve the financial difficulties. First counselling stage Consumer and credit education The first counselling session is provided approximately 2 8 weeks after the commencement of the Bankruptcy or the Consumer Proposal. Deloitte & Touche Inc. conducts these sessions in a group or on an individual basis. The purpose of this session is to assist the debtor to improve money management and budgeting skills. The debtor will also be provided with relevant consumer education information on such subjects as money management, spending and shopping habits, recognizing warning signs of financial difficulties, obtaining and using credit, and the implication of credit reporting services for debtors. Explanations are provided to assist the debtor in budgeting and monitoring monthly income and expenses. Second counselling stage Identification of the roadblocks to solvency and rehabilitation The second counselling stage may be completed any time after the first month and must be completed prior to the end of the seventh month. The purpose of this session is to help the debtor discover and understand the contributing causes of the debtor s insolvency, including non-financial causes that might include such matters as gambling, substance abuse, compulsive behaviour, unemployment, marital or family difficulties. It will also reinforce money management and budgeting skills. Debtors are encouraged to seek remedies for the identified non-financial causes of the bankruptcy. The debtor will be provided with reference information and referrals to agencies, organizations or professional advisors on both financial and non-financial matters. 4
Proposal to creditors In many instances it may be possible for insolvent debtors to make proposals to their creditors for a reduction or extension of their debts, rather than just going bankrupt Proposals, under the Consumer or Commercial Restructuring provisions of the Bankruptcy and Insolvency Act can be drafted in a variety of ways and can be tailored to suit a particular debtor s individual circumstances. Proposals can be limited to dealing with a debtor s unsecured or general creditors, or can include provisions which require certain concessions from secured creditors as well. A Proposal which provides for monthly payments will normally run for a maximum period of five years. What is a Consumer Proposal? A Consumer Proposal is a streamlined Proposal process that is available to debtors whose total debts do not exceed $250,000 excluding any mortgage indebtedness on their personal residence. This type of proposal does not require a creditors meeting, unless requested by the creditors and there is no automatic bankruptcy if the creditors turn down the debtor s proposal. When an individual makes a Consumer Proposal the creditors are offered a percentage of what is owing to them, over a specified period of time, not to exceed five years. Once the majority of the creditors accept the Consumer Proposal, it is legally binding on all parties. How do I qualify for a Consumer Proposal? The debtor must be insolvent, must be a resident of Canada and owe a minimum of $1000. For a Proposal to be acceptable to a debtor s creditors, it must clearly provide the creditors with a greater return or payment on their outstanding accounts than they would receive in Bankruptcy proceedings. On the other hand, the Proposal must be achievable. There is no advantage to preparing a Proposal if it is too "rich" or so onerous that the debtor cannot possibly hope to comply with its terms. For a Proposal to succeed, it will generally have to be in a situation where one of the following is applicable: The debtor has steady employment which provides a level of income above that necessary for normal living requirements (surplus income) A third party is prepared to provide funding or guarantee for the proposal settlement Certain assets which may not be available to the creditors in a bankruptcy proceeding are voluntarily offered as part of the proposal What is the purpose of a Consumer Proposal? The purpose of a Consumer Proposal is to give a debtor (or a bankrupt) an opportunity to make a settlement with his/her creditors while avoiding bankruptcy. Executions, garnishees, and other actions by creditors will be stopped once the Consumer Proposal is filed. 5
What are the advantages to making a Consumer Proposal? The debtor gets to keep his/her assets; however, they must be taken into consideration when determining the amount offered to the creditors The debtor makes one manageable monthly payment to the Trustee/Administrator and the Trustee/Administrator distributes the funds to the unsecured creditors on a periodic basis The debtor participates in two mandatory financial counselling sessions. These sessions will help the debtor to understand the reasons for the financial difficulties and will also provide the debtor with the tools needed to avoid financial problems in the future The debtor s financial difficulties are resolved without having to go bankrupt The successful completion of the Consumer Proposal will be recorded on the debtor s credit rating What kind of counselling is available to help me choose the best alternative? Page 4 of this booklet contains an overview of the initial counselling available as part of the Bankruptcy and Proposal process. If a Proposal is the best available option, the Trustee/Administrator will work out the details during the Initial Assessment. Subsequent to the making of the Proposal the First and Second Counselling stages are mandatory. What happens if the Consumer Proposal is rejected? If the creditors reject the Consumer Proposal, the debtor is no longer protected by the Act and the creditors will again be able to take steps to recover their debts. The debtor cannot file another Consumer Proposal, although, under certain circumstances, the original Proposal may be amended. If this is unsuccessful, the debtor may wish to consider other alternatives, such as bankruptcy, with the assistance of the Trustee/Administrator. How much does a Proposal cost? The Trustee s fees for a Consumer Proposal are set by tariff under the Bankruptcy and Insolvency Act and are based upon the amount of funds paid to the Trustee under the Proposal. Division One Proposals Where a Division One Proposal is filed under the Commercial Restructuring provisions, there is usually more substantial work for the Trustee to do and the Trustee s fee is normally based upon the number of hours spent by the Trustee s staff at normal billing rates. Costs will vary depending upon the complexity of the Proposal proceedings, and can be paid for out of funds paid to the Trustee under the Proposal or by way of separate arrangements with the debtor. A Division One Proposal is available to businesses and individuals. There is no limit to the amount of debt owing. If the proposal is not accepted by the creditors then you are automatically declared bankrupt. 6
Personal bankruptcy Bankruptcy is a formal proceeding under the Bankruptcy and Insolvency Act that is available to an insolvent debtor to obtain relief from a financial crisis How do I enter into personal bankruptcy? There are two ways a debtor can become bankrupt: Voluntary A voluntary bankruptcy is initiated by the insolvent debtor. The formal documentation necessary to start the bankruptcy process is prepared by the Trustee and is based upon the information contained in the Worksheet and other information obtained by the Trustee during the Initial Assessment Session. A voluntary bankruptcy is referred to as Filing an Assignment in Bankruptcy. Involuntary A creditor(s) asks the Court to make an Order stating that a debtor is bankrupt and to appoint a Trustee in Bankruptcy. This Order is called a Bankruptcy Order. What is an Assignment in Bankruptcy? An Assignment in Bankruptcy is a legal document where an insolvent debtor assigns or transfers all of his or her nonexempt assets to a Trustee in Bankruptcy for the general benefit of the preferred and unsecured creditors. An Assignment in Bankruptcy, when filed with the Official Receiver (the Superintendent of Bankruptcy s representative in the province), is the starting point of the bankruptcy. The date of filing of the assignment is the effective date of bankruptcy. What does an Assignment in Bankruptcy do? The Assignment in Bankruptcy serves to transfer title to all assets and the rights to any kind of asset to a Trustee. The bankrupt person no longer has any right to deal with these assets. Certain assets, however, are EXEMPT from seizure and therefore are not transferred to the Trustee. The Assignment in Bankruptcy also causes a Stay of Proceedings to be effective, which prohibits all creditors from or continuing taking legal action against the bankrupt, with the exception of spousal or child support actions and certain other proceedings. Most credit collection procedures are terminated and creditors cannot continue with garnishees or lawsuits. Creditors must make their inquiries through the Trustee. Exempt assets In a personal bankruptcy certain assets ("exempt assets") may be retained by the debtor. These exempt assets are determined by provincial statutes and therefore vary from province to province. Please refer to the insert at the back of the book for a detailed list of exemptions allowed in your province. G.S.T. rebates may or may not be retained by the Trustee, depending upon whether a dividend is available for your creditors. Your Trustee will advise you in this regard. Where provincial legislation exempts RRSPs from execution, the provincial legislation will apply. Where provincial legislation is silent regarding the treatment of RRSPs, they will be exempt subject to a claw back on any contributions made during the 12 months immediately prior to bankruptcy. 7
Should I continue to pay any creditors? Once a debtor becomes bankrupt, they must not make any further payments to any unsecured creditors. Payments to secured creditors should only be continued after consultation with the Trustee. It should be noted that if a bankrupt has pledged assets which are exempt from seizure by a Trustee, this exemption may not stop a secured creditor (a creditor to whom the bankrupt has pledged assets) from taking possession of these assets if the security documents held by the secured creditor are properly prepared and registered. However, a bankrupt must never release pledged assets to a secured creditor without the Trustee s prior permission. May I keep assets which I have pledged if I continue to pay the secured creditor? In certain circumstances, it may be possible for a bankrupt to keep pledged assets (e.g., house, car, furniture, etc.) provided that: The Trustee has determined that the security is valid The Trustee has determined that there is no equity in the asset for unsecured creditors and has released its interest in the asset The Trustee and the secured creditor have agreed to leave the asset in the possession of the bankrupt and the secured creditor has agreed to accept payments from the bankrupt The current value of the asset approximates the amount owing to the secured creditor (i.e. the bankrupt should not be paying more to the secured creditor than the asset is worth) The bankrupt can afford to make the payments and the payments are reasonable in the bankrupt s circumstances What is the difference between a summary administration and an ordinary administration? A summary administration is a bankruptcy in which the estimated realization of assets by the Trustee is less than $15,000. Where the estimated realizable value of assets by the Trustee is more than $15,000, the bankruptcy is referred to as an ordinary administration. The majority of personal bankruptcies are summary administrations. In summary administrations, the Trustee is not required to advertise the bankruptcy in the newspaper. How long am I bankrupt? An individual is a bankrupt from the time of filing an assignment in bankruptcy until a Certificate of Discharge is issued. First time bankrupts without surplus income are eligible for an automatic discharge after nine months. First time bankrupts with surplus income are eligible for an automatic discharge after twenty-one months. Second time bankruptcies will last between 24 and 36 months depending on whether there is surplus income. What happens to my wages during bankruptcy? The wages of a bankrupt, including salaries and commissions, etc. are monitored by the Trustee. Each month the bankrupt is required to complete an income and expense statement and forward it to the Trustee. This statement shows the amount of monthly income for the bankrupt s household family unit as well as amounts spent on rent, food, clothing, etc. The Trustee will provide the bankrupt with a blank income and expense statement for this purpose. The Superintendent of Bankruptcy publishes standards as to the normal maximum amounts required as living expenses for a bankrupt s household family unit. A portion of any income earned in excess of these standards is to be paid by the bankrupt to the Trustee, for the general benefit of the creditors. 8
These payments, if applicable, are referred to as Surplus Income Payments and must be paid to the Trustee each month during the period of the bankruptcy. At the commencement of the bankruptcy, the Trustee will review and determine the Surplus Income Payment requirements with the bankrupt. This will be determined by using the Superintendent of Bankruptcy standards, taking into consideration family obligations and extraordinary circumstances. The Surplus Income Payments agreed upon by the Trustee and the bankrupt may be challenged by the Superintendent of Bankruptcy, at which point, the amount of Surplus Income Payments may have to be adjusted. If the Trustee and bankrupt cannot agree as to how much of the bankrupt s income is surplus, or if any of the creditors do not agree with the amount of the surplus income payment, mediation will be used to resolve the quantum of the surplus payments. Failure to make the required Surplus Income Payments may result in the Trustee obtaining a Court Order to seize a portion of the bankrupt s wages or self-employed income, a Conditional Order of Discharge being issued by the Court, or a Conditional Order of Discharge being issued by the Trustee, with the bankrupt s consent. Who will know about my bankruptcy? In all bankruptcies, the creditors receive a notice of the bankruptcy. The bankruptcy is reported in the Canada Gazette, which is an official publication of the Government of Canada, and sometimes in publications of local credit granting associations. Credit bureaus maintain a record of all bankruptcies for several years. The length of time varies from one area to another. If the bankruptcy is an ordinary administration, the Trustee will publish the notice of bankruptcy in the local newspaper in the area of the bankrupt s residence. If the bankruptcy is a summary administration, the Trustee is not required to publish the notice of bankruptcy in the local newspaper. The Office of the Superintendent of Bankruptcy maintains a permanent record of all bankruptcies. Normally, employers are not notified of the bankruptcy, however, it may be necessary for the Trustee to communicate with the employer to stop a garnishee order or to obtain information required for the filing of the bankrupt s income tax returns. It is at the discretion of the bankrupt whether to inform his or her employer of the bankruptcy. In some cases the employer may be aware of the employee s financial difficulties, and will likely look upon the bankruptcy as a beneficial solution to the employee s problems. 9
What happens at the meeting of creditors? In a summary administration bankruptcy a meeting of creditors will not be called unless the creditors request one. The Trustee in Bankruptcy will send Notice of the bankruptcy to all creditors disclosed to the Trustee by the bankrupt. The creditors have 30 days to request a meeting. The bankrupt must attend this meeting. The purpose of the first meeting of creditors is to: Consider the financial affairs of the bankrupt Affirm the appointment of the Trustee Appoint inspectors Give directions to the Trustee with regard to the sale of assets, investigations to be conducted, actions to be taken, etc. The Trustee will provide the creditors who attend the meeting with a report, either verbal or written, on the administration of the bankruptcy including an estimate of the realizations for the unsecured creditors. The unsecured creditors can either affirm the appointment of the Trustee or substitute the Trustee. Trustees are substituted in very rare circumstances. An Inspector(s) may be appointed to represent the creditors and assist the Trustee with the administration of the bankruptcy. It is possible, but very unlikely, that there may be other meetings of creditors. If so, the bankrupt may be requested to attend. Creditors meetings are conducted in a business-like manner and are not held for the purpose of harassing the bankrupt or conducting extensive questioning of the bankrupt. The bankrupt s presence at these meetings is required for the purpose of answering proper questions which may be asked and which are permitted by the chairman. Do I have any other duties and responsibilities? A bankrupt s duties and responsibilities are detailed in the Bankruptcy and Insolvency Act. In summary, the bankrupt is required to: Reveal and turn over to the Trustee all assets in their possession or control Make available to the Trustee all relevant books and records Attend any examination called by the Official Receiver Assist the Trustee with making an inventory of assets Disclose to the Trustee the details of all property disposed of by sale, gift or settlement Attend the first meeting of creditors and any other meetings that may be scheduled Attend a minimum of two Counselling Sessions Provide the Trustee with all information necessary to file pre-bankruptcy income tax returns Generally assist the Trustee Keep the Trustee advised of place of residence, phone number and employer Submit monthly income and expense statements to the Trustee accompanied by monthly payments and/ or surplus income payments Resign any corporate directorships. Provincial and federal legislation prohibits an undischarged bankrupt from being a corporate director Turn over all credit cards to the Trustee for cancellation It is the bankrupt s responsibility to become familiar with these duties prior to filing an assignment in bankruptcy. 10
Who files my income tax returns? The Trustee will file the prior year s income tax return, if outstanding, plus a pre-bankruptcy income tax return (for the period from January 1 to the date of bankruptcy). The bankrupt must provide the Trustee with the information required to file these returns. Income tax refunds from prior years and the pre-bankruptcy refund are assets of the bankrupt s estate and will be forwarded to the Trustee. Amounts owing on prior years returns and the pre-bankruptcy return are debts that are discharged by the bankruptcy. The bankrupt is required to file a post-bankruptcy income tax return (for the period from the date of bankruptcy to December 31). This return must be filed by April 30th of the following year. Amounts owing, if any, on the postbankruptcy return must be paid by the bankrupt. Postbankruptcy income tax refunds will be forwarded to the Trustee and will become part of the bankruptcy estate. Does the Trustee conduct any investigations? The bankrupt may be required to attend at the Office of the Official Receiver for an examination under oath, as to the facts relating to the bankruptcy. The examination, if required, is usually conducted prior to the first meeting of creditors. The Trustee will also investigate any transactions prior to bankruptcy involving circumstances where the bankrupt transferred assets to any person(s) for other than fair value, or where any creditor(s) received preference over other creditors by payment or by the giving of security. The Trustee may commence legal action to reverse these transactions. What happens if I acquire assets during my period of bankruptcy? Non-exempt assets acquired or purchased by the bankrupt during the period of bankruptcy may be taken by the Trustee for the general benefit of the unsecured creditors. These assets include inheritances, lottery winnings and any other non-exempt assets acquired or purchased. The bankrupt should consult with the Trustee before acquiring any non-exempt assets during bankruptcy. What are bankruptcy offenses? The Bankruptcy and Insolvency Act provides for penalties for bankrupts who commit certain bankruptcy offenses. The following are some examples of bankruptcy offenses: Failure to comply with duties as defined by the Act Fraudulent disposition of property. Refusal to answer questions at any examination held pursuant to the Act Falsifying a statement or accounting Concealing, destroying or falsifying books or records Obtaining credit by false representation Concealing or removing property Selling property obtained on credit and not paid for Engaging in a trade or business without disclosing to all persons involved in any business transaction that he or she is an undischarged bankrupt Obtaining credit while an undischarged bankrupt without disclosing the fact of being an undischarged bankrupt Persons convicted of bankruptcy offenses may be fined or imprisoned for up to 3 years. 11
What is a bankrupt s discharge? One of the major purposes of the bankruptcy process is to provide the insolvent debtor with a fresh financial start. This is accomplished through an application for discharge, at which time, an absolute discharge will normally be granted. If this is the first bankruptcy of an insolvent debtor, then the Bankruptcy and Insolvency Act provides a procedure for an automatic discharge. To qualify for an automatic discharge a bankrupt must: Have complied with duties under the Bankruptcy and Insolvency Act and cooperated with the Trustee, as requested, and The discharge must not be opposed by any creditor(s), the Trustee or the Superintendent of Bankruptcy Not have personal income tax debt which exceeds $200,000 and represents 75% or more of the total unsecured proven claims, in this case a Court Order will be required to be discharged from their debts One month prior to the end of the bankruptcy period, the Trustee will prepare a report recommending whether or not a bankrupt should receive a discharge, and whether the discharge should be subject to conditions. In preparing this report, the Trustee takes into consideration the bankrupt s conduct and the ability to make payments. This report is sent to the Superintendent of Bankruptcy, the bankrupt and any creditors who request a copy. If the bankrupt does not agree with the Trustee s recommendations, the bankrupt may request mediation. The Trustee will either request mediation or recommend a conditional order of discharge on the grounds that: 1. The debtor chose bankruptcy where, in the Trustee s opinion, a viable proposal could have been filed; or 2. The bankrupt failed to comply with the requirement to make surplus income payments Where the bankrupt disagrees with the Trustee s recommendation for a conditional order of discharge and mediation is unsuccessful, or if a creditor files a notice of opposition the Trustee will arrange for the bankrupt s discharge application to be heard by the Court. The bankrupt may attend the court hearing in person, or may be represented by legal counsel. The bankrupt will be responsible for the legal fees incurred. After reviewing the Trustee s report and the bankrupt s affidavit, and after hearing the Trustee and possibly the bankrupt and any creditors in attendance, the Court will issue one of the following types of Orders: Absolute Order of Discharge This type of Order absolutely discharges a bankrupt from obligations to pay the debts owing at the date of bankruptcy, with certain exceptions (see below). An Absolute Order of Discharge does not apply to any debts incurred by the bankrupt after the date of bankruptcy. Conditional Order of Discharge This type of Order states that the bankrupt will receive an Absolute Order of Discharge when a certain condition is met. The condition is usually payment of a certain amount of money to the Trustee for the general benefit of the unsecured creditors. The amount of the payment can be set by the Trustee with the bankrupt s consent. If a consensus cannot be reached between the Trustee and the bankrupt, the amount of the payment will be at the Court s discretion. Payments are usually based on the bankrupt s ability to pay, as indicated by the bankrupt s income potential in the future and the net income of the bankrupt s household family unit. When the Court grants a Conditional Order of Discharge, the Bankrupt may apply to the Court after one year to have the condition changed if it can be shown that there is a reasonable probability that the condition cannot be met. Facts for which the Court may order a conditional discharge include: Failure to pay the surplus income payments to the Trustee; and Filing an assignment in bankruptcy where, in the Court s opinion, a viable proposal to the creditors could have been filed 12
Suspended Order of Discharge This type of Order states that the bankrupt will receive an Absolute Order of Discharge at some specific date in the future. This type of Order is usually issued when the Court considers it appropriate for the bankrupt to be penalized due to his or her conduct. Facts for which the Court may order a suspended discharge include: The bankrupt has on any previous occasion been bankrupt or made a proposal to creditors The bankrupt has brought on, or contributed to, the bankruptcy by gambling Refused Order of Discharge This type of Order is not common and is issued when the Court considers that the bankrupt does not deserve a discharge. The bankrupt may attend the court hearing in person or, if he or she wishes, may retain independent counsel. If legal counsel is retained, the bankrupt will be responsible for legal costs. Liability for the dividend that a creditor would have been entitled to receive on any provable claim NOT disclosed to the Trustee, unless the creditor had notice or knowledge of the bankruptcy and failed to take responsibility Any debt or obligation in respect of a loan made under the Canada Student Loans Act & the Canada Student Financial Assistance Act or any enactment of a province that provides for loans or guarantees of loans to students where the Date Of Bankruptcy Occurred: A. before the date on which the bankrupt ceased to be a full or part time student B. within seven years after the date on which the bankrupt ceased to be a full or part time student Any debt for interest owed in relation to an amount referred to in any of the above paragraphs In some cases, if a credor wishes to pursue a bankrupt for the collection of any of the debts mentioned above, then the creditor must first obtain approval of the Court. Which debts are not discharged? The following debts are not discharged pursuant to Section 178(1) of the Bankruptcy and Insolvency Act: Any court fines or restitution orders Any award of damages by a court in civil proceedings in respect of intentionally inflicted bodily harm, or sexual assault, or wrongful death resulting therefrom Any debt or liability for alimony and/or child support Any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity Any debt or liability arising from obtaining property by false pretenses or fraudulent misrepresentation What if I don t get a discharge? If the bankrupt cannot be located or has not co-operated with the Trustee in ensuring that the administration of the bankruptcy is complete, the Trustee may be obliged to ask the Court to delay the bankrupt s application for discharge indefinitely. The Trustee will then proceed to close the file and apply to the Court for the Trustee s Discharge. Once the Trustee has been discharged, and if the bankrupt has not received an Absolute Order of Discharge, the bankrupt may be in a worse position than before the bankruptcy. The reasons for this include: Once the Trustee has closed the file and has been discharged, the Stay of Proceedings is over and the creditors may resume collection efforts against the bankrupt 13
A bankrupt remains a bankrupt until an Absolute Order of Discharge is issued. Consequently, each time a bankrupt obtains credit without advising the creditor that he or she is an undischarged bankrupt, a bankruptcy offense is committed. Any assets acquired, such as lottery winnings, inheritances, savings, etc., can be seized until an Absolute Order of Discharge is obtained. Consequently, it is extremely important to the bankrupt that the matter of discharge be resolved before the Trustee closes the file. Who pays for the Trustee s services? In summary administration bankruptcies, the Trustee s fee is prescribed by the Bankruptcy and Insolvency Act as a tariff and is based on the amount of funds received by the Trustee. The basic fee covers all services provided by the Trustee including both mandatory counselling sessions and registration fees. Monthly installments or payment in full at the outset of the bankruptcy will be discussed during your initial consultation. Your monthly or lump sum payment to the Trustee would be included in any Surplus Income Payment requirements. In ordinary administration bankruptcies where there are significant assets and substantial work for the Trustee to do, the Trustee s fee is based on the number of hours spent by the Trustee s staff at the normal billing rates. All Trustee s fees are reviewed by the Office of the Superintendent of Bankruptcy and, if applicable, are approved by the Inspectors and the Court. Do I hire the Trustee? It is a common misconception that an insolvent person hires a Trustee. This attitude is quite often reinforced by the fact that the bankrupt: Chooses the Trustee Perceives to be paying the Trustee Is guided through the bankruptcy process by the Trustee Has all questions answered by the Trustee Provides the Trustee with detailed information If required, assists the Trustee in selling non-exempt assets One of the Trustee s main responsibilities is to maximize the amount of funds available for distribution to the unsecured creditors. What do I do if a creditor sues me? If a creditor commences a Court action against a bankrupt, the bankrupt should immediately inform the Trustee of the action and send any legal documents to the Trustee. If a creditor commences a Court action against a person who has been discharged from bankruptcy, the person will usually only have to provide the Court and the creditor with a copy of the final discharge documents. What is a Trustee s discharge? When work on a bankruptcy file is complete, the Trustee must file a formal report with the Office of the Superintendent of Bankruptcy and, depending on the type of file, the Court. This report includes an accounting of the liquidation of the assets of the bankrupt, the various costs of the administration of the bankruptcy, details of the Trustee s fee and a listing of the funds distributed to the unsecured creditors. The Trustee notifies the bankrupt and the creditors who have proven their claims of the time and place of the Trustee s discharge hearing. Anyone who takes exception to the Trustee s administration may make their objection to the Court, in which case a Court hearing will be scheduled to review their concerns. When the Court finds the Trustee has satisfactorily completed the administration of the bankruptcy, the Court will grant the Trustee a discharge and the Trustee s duties are concluded. 14
Notes 15
Notes 16
Glossary Assets Property (cash, furniture, automobile, etc.) available to meet debts or having a useful value to its owner. Exemptions from seizure of certain assets by creditors is provided for under provincial legislation. Co-signer A person signing jointly with others to guarantee the payment of a debt or obligation. Each co-signer may be responsible for payment in full of the total obligation. Credit rating A record of an individual s historical credit worthiness and payment record. Various credit bureaus maintain and update such records, providing this information to financial institutions and other businesses. Surplus Income Payments Immediately after declaring bankruptcy, an insolvent debtor will no longer be required to make payments to creditors. However, as long as a bankrupt remains undischarged, he or she may be expected to pay to the Trustee a portion of any income that exceeds reasonable living expenses. The payments are based upon guidelines issued yearly by the Superintendent of Bankruptcy. If a bankrupt has surplus income and fails to make voluntary payments to the Trustee, the Court may order such payment or delay the discharge from bankruptcy. Tax Returns & Credits Personal income tax returns of the person making an assignment in bankruptcy or a proposal are required to be filed by the Income Tax Act. Credits are for G.S.T. rebates, etc. that the person may be eligible to receive on filing a tax return. Garnishment The legal proceeding by a creditor to seize a bank account, wages, or other monies due to a debtor. Judgment The formal decision, or Order of a Court deciding a lawsuit, and will state the Court s decision on the amount of a creditor(s) claim against a debtor. This constitutes final legal proof that a creditor s claim against a debtor is proper and permits the creditor to continue with further legal action to collect its debt. Statement of Claim A document filed with the Court by a creditor to start formal legal proceedings. It will usually outline the reasons why a person is being sued and provide some explanation of the debt or other damages claimed. Trustee or Administrator s Fee Fees paid to a person who is licensed as a Trustee or appointed as an Administrator under the Bankruptcy and Insolvency Act. These fees represent the cost of certain services provided by the Trustee or Administrator to debtors utilizing their services. Fees are sually set by tariff or scrutinized for reasonableness by the Court or the Superintendent of Bankruptcy. Windfalls An unexpected realization or receipt of funds (e.g. a winning lottery ticket, an unexpected inheritance). Writ of Execution An official order of the Court directing the Sheriff to seize cash or other property for the benefit of a single creditor. 17
This booklet is intended to provide a general overview of the restructuring options which are available to a debtor facing financial difficulties. While it is not a complete and precise statement of the Proposal and Bankruptcy process, we trust that its content, which is written in clear, simple terms, will provide individuals with the information needed to enable them to make decisions that will help them make a fresh start and move towards long term financial stability. Should you have any questions, please do not hesitate to contact us, or you may schedule a free initial consultation with one of our restructuring professionals who will be pleased to meet with you to provide further information in this regard. Deloitte & Touche Inc, Trustee in Bankruptcy Offices across Canada (see listing on back inside cover) 18
Debt solutions worksheet About this worksheet This worksheet is designed to support debt counseling and assessment of your financial situation. Where necessary, it will be supplemented with information not obtained from you directly. It may also incorporate information about your spouse and dependents and others, which can include sensitive information like income. Together, this information may be used to prepare documentation, including official documentation such as forms filed on your behalf with the Superintendent of Bankruptcy or Canada Revenue Agency. It is therefore of the utmost importance that any information provided by you is both accurate and complete. Interviewed by: Referred by: Date interviewed: Date signing: Last name All given names M / F Are you known by any other names? Address When moved there City Province Postal Code Mailing address (if different from above) Telephone numbers Residence: Emergency contact (name & number) Cell: Business: E-Mail Address: Previous address (if at current address less than one year) SIN / / Date of birth (yy/mm/dd) Marital status (Specify day, month & year of event) Married Single Widowed Separated Divorced Common-law Occupation Current employer Since when Address of employer If unemployed, since when Full legal name of spouse M / F Spouse s address (if different than above) Spouse s SIN / / Spouse s employer Spouse s occupation Spouse s business phone: Spouse s birth date (yy/mm/dd) Since when If unemployed, since when Spouse s cell phone: Dependents (all those who rely on you for financial support) Full names Relationship Date of birth Address Income If over 18, why dependent? Deloitte & Touche LLP and affiliated entities. Debt solution worksheet Page-1
Business information Have you owned or had an interest in a business in the last five years? Yes No If Yes: Corporation Proprietorship Partnership Name of business Nature of business Location of business When commenced When ceased Names of Directors/Officers/Partners Does the business have any assets/receivables? Yes No If Yes, please list: Have all of the required G.S.T. Returns been filed? Yes No GST# Required T4 s prepared? Yes No Where are the books and records? Cause of insolvency Describe what, in your opinion, caused your current financial problems Previous insolvency data Have you previously been bankrupt or made a proposal to your creditors? Yes No If Yes, please provide the following details: Name of Trustee or Administrator Date of Bankruptcy/Proposal City Assignment/Proposal was filed Date of Discharge/Certificate of Full Performance Please provide a brief description of the causes of your first Bankruptcy/Proposal: You cannot file another Bankruptcy/Proposal if you haven t been discharged from your prior bankruptcy/proposal. Page-2 Debt solution worksheet Deloitte & Touche LLP and affiliated entities.
Recent transactions Have you sold, disposed of, or transferred any assets in the past twelve months? Yes No (including RRSP s/term Deposits/GIC s and/or any other investments) If yes, specify asset, approximate date, net proceeds and disposition of proceeds: Have you made any large or lump sum payments in excess of regular payments to a Yes No creditor in the past twelve months? If yes, give details below: Have you had any assets seized by any creditor within the past twelve months? Yes No If yes, give details below: Have you sold or transferred any property in the past five years either Yes No in Canada or elsewhere? If yes, specify asset, approximate date, net proceeds and disposition of proceeds Have you made any gifts to a relative or other person that were of a value in Yes No excess of $500.00 in the past five years? If yes, give details below: Have you received any lump sum payments or settlements in the last 12 months? Yes No If yes, give details below: If you have paid alimony or maintenance payments during the past year: To whom paid? Amount Paid (YTD) $ By court order? Yes No Date of court order: Deloitte & Touche LLP and affiliated entities. Debt solution worksheet Page-3
Supplementary personal data Are you involved in civil litigation from which you may receive monies or property? Yes No (i.e. Insurance claims, divorce settlements, etc.) If yes, give details below: Has anyone left you an inheritance, which you have not yet received or are you Yes No expecting to receive any sums of money, which are not related to your normal income or any other property within the next 12 months? If yes, give details below: Are there any writs, judgments, or garnishments outstanding against you? Yes No If yes, give details below: Do you bank with a financial institution to which you owe money (including overdrafts, Yes No credit cards, lines of credit), or do you have any automatic debits or post dated cheques for debt payments? If yes, give details below: Name, address and account number of your current banking institution. Have you obtained new credit in the last three months or used credit cards in Yes No the last three months? If yes, give details below: Do you still have any credit cards in your possession? Yes No Page-4 Debt solution worksheet Deloitte & Touche LLP and affiliated entities.
Assets Description / Location (serial number, licence, account) Estimated value Exempt (Y/N) Secured (Y/N) Cash on hand / in bank Stocks, bonds, investments RRSP s, RRIF s, GIC s, RESP s Pension Plans Surrender value of insurance policies Household furnishings/personal effects Real Estate (in Canada or elsewhere) House Land / Cottage / Timeshare Rental / Business properties Motorized vehicles (year, make, model) Cars Truck(s) / Van(s) Recreational vehicle(s) Mobile home Tools of Trade Other assets of value Farming assets (use separate page) For which year was your last tax return filed? Refund received $ Amount owing $ Refund to come $ All employers for the last year Employer s name Address Date started Date ended 1. Is client employed by an SEC attest client or its affiliate? Yes No 2. Is client an immediate family member of an individual employed by an SEC attest client or its affiliate? Yes No If the answers to 1 and 2 are NO, you may STOP; the services are not prohibited by PCOAB rule 3523. If the answers to 1 and/or 2 are YES, proceed to 3. 3. Does the individual employed by an SEC attest client or its affiliate serve in a Financial Reporting Oversight Role (a person who is in a position to or does exercise influence over the contents or preparation of financial statements)? Yes No If the answer to 3 is NO, you may stop; the services are not prohibited by PCOAB rule 3523. If the answer to 3 is YES, consult with the Director of Operations. Deloitte & Touche LLP and affiliated entities. Debt solution worksheet Page-5
List all debts, including all mortgages, vehicles, leases and family debts Complete names of all creditors Complete address of all creditors including postal codes Who s debt? Business debt? (Y/N) Account number If you have co-signed a loan or contract for anyone else, show details below Lender s name Address Amount Borrower s name Address Amount owing ($) Sec. Pref. Unsec. Page-6 Debt solution worksheet Deloitte & Touche LLP and affiliated entities.
Monthly income and expense statement of the debtor and the family unit Monthly income Number of people in the family: Debtor Spouse Total Net employment income (take home) Pension/Annuities Child support Spousal support Child tax benefit Employment insurance benefits Social assistance Self-employment income: Gross Net Other net income (provide details): Net monthly income (1) (2) Net monthly income of the family unit: (1) + (2) (3) Monthly non-discretionary expenses: family unit Child support payments/alimony Childcare Prescriptions Fines/penalties imposed by the court Other Totals Surplus income Monthly discretionary expenses: family unit Housing expenses Rent/mortgage Property taxes/condo fees Heating/gas/oil Telephone Cable Power/water Other Personal expenses Smoking Entertainment/sports/dining Gifts/charitable donations Allowances Other Non-recoverable medical expenses Dental Other Total monthly expenses: family unit Deloitte & Touche LLP and affiliated entities. Living expenses Food/grocery Laundry/dry cleaning/grooming Clothing Transportation Car leases/payments Repairs/maintenance/gas Public transportation Insurance expenses Vehicle House Furniture/contents Life insurance Payments To the estate (to be completed by the Trustee) To secured creditors Debt solution worksheet Page-7
Have you any debts arising from: Fine or penalty imposed by the court (including traffic fines) Yes No Recognizance or bail bond Yes No Fraud, embezzlement, obtaining property by false pretenses Yes No Employment insurance overpayments Yes No 1. Are your vehicles or other assets insured? Yes No 2. Has anyone co-signed any of your outstanding debts? If yes, give details below Yes No 3. Do you have a safety deposit box? Yes No 4. Are you currently involved in a matrimonial dispute with respect to assets? Yes No 5. Are you storing any personal property which does not belong to you? (please list) Yes No Only for student loans: Degree/certificate received? Yes No Attended school from to Area of study Level of education completed Institution attended When did you receive funds? Are you working in that field? Yes No A statement of your financial affairs may be prepared from the information supplied by you on this application and that statement must be sworn by you under oath as being, to the best of your knowledge and belief, a full, true and complete statement of your financial affairs. I, the undersigned person, hereby consent to Deloitte & Touche Inc. collecting, using, and disclosing any personal information about me that I or any other party may give to Deloitte & Touche Inc. for the purpose of providing advice and/or in the performance of Deloitte & Touche Inc. s duties related to the assessment or handling of my debt crisis, whether it is assisting in informal settlements with creditors or in the performance of Deloitte & Touche Inc. s duties as Trustee under a Proposal or as Trustee in Bankruptcy under the Bankruptcy and Insolvency Act. I hereby certify that the information contained in this application is true and complete in every respect and fully discloses the state of my affairs. In addition, I recognize that any income in excess of a reasonable cost of living must be paid to the Trustee for the general benefit of the creditors. Date Signature of Applicant Date Signature of Applicant Page-8 Debt solution worksheet Deloitte & Touche LLP and affiliated entities.
Trustee in Bankruptcy One of our restructuring professionals will be happy to assist you. www.needafreshstart.ca debtcrisis@deloitte.ca 1 800 683 DEBT (3328) Offices across Canada Abbotsford #303 2722 Allwood Street Abbotsford, BC V3T 5R7 Telephone: 855 344 4440 Fax: 855 344 4450 Brossard 4605-A, Boul. Lapinière, Bureau 200 Brossard, Québec J4Z 3T5 Téléphone: 450 618 4270 Fax: 450 618 6420 Burlington 1005 Skyview Drive, Suite 202 Burlington, Ontario L7P 5B1 Toll Free: 866 615 6288 Fax: 519 650 7601 Burnaby/Coquitlam 9940 Lougheed Hwy, Suite 330 Burnaby, British Columbia V3J 1N3 Telephone: 604 422 8722 Calgary 700-850 2nd Street SW Calgary, Alberta T2P 0R8 Telephone: 403 267 1777 Toll Free: 877 604 1700 Fax: 403 260 4077 Chatham 240 Grand Ave W, Suite 212 Chatham, Ontario N7L 1C3 Telephone: 519 354 1234 Toll Free: 800 461 8076 Fax: 519 967 0598 Chicoutimi 901, Boul. Talbot, Bureau 400 Chicoutimi, Québec G7H 0A1 Téléphone: 418 549 6650 Toll Free: 800 463 9849 Fax: 418 549 4694 Corner Brook 98 Broadway Corner Brook, Newfoundland A2H 4C8 Telephone: 709 639 8892 Toll Free: 800 563 8337 Edmonton 2000 Manulife Place 10180-101 Street Edmonton, Alberta T5J 4E4 Telephone: 780 421 3611 Fax: 780 421 3782 Grande Prairie Aberdeen Center, Suite 204-10 9728 Montrose Ave Grande Prairie, Alberta T8V 5B6 Telephone: 780 538 0766 Toll Free: 800 683 DEBT (3328) Fax: 780 538 0769 Guelph 317 Speedvale Ave E, Suite 4B Guelph, Ontario N1E 1N3 Telephone: 519 836 6900 Toll Free: 866 615 6288 Fax: 519 650 7601 Hamilton 1 Hunter Street E, Suite G100 Hamilton, Ontario L8N 3W1 Toll Free: 866 615 6288 Fax: 519 650 7601 Hawkesbury 300 McGill Street Hawkesbury, Ontario K6A 1P8 Telephone: 613 632 4178 Fax: 613 632 7703 Kanata 515 Legget Drive, Suite 400 Kanata, Ontario K2K 3G4 Telephone: 613 751 5449 Fax: 613 563 2244 Kitchener 4210 King Street E Kitchener, Ontario N2P 2G5 Telephone: 519 650 7600 Toll Free: 866 615 6288 Fax: 519 650 7601 Langley 20316-56th Ave, Suite 225 Langley, British Columbia V3A 3Y7 Telephone: 604 534 0921 Fax: 604 534 7429 Laval 2540, Boul. Daniel-Johnson, Bureau 210 Laval, Québec H7T 2S3 Téléphone: 450 978 3500 Fax: 514 382 4984 London 255 Queens Ave London, Ontario N6A 5R8 Telephone: 519 679 1880 Fax: 519 640 4625 Mississauga 1 City Centre Drive, Suite 500 Mississauga, Ontario L5B 1M2 Toll Free: 800 757 2763 Fax: 416 775 8551 Montréal (Downtown) 1, Place Ville-Marie, Bureau 3000 Montréal, Québec H3B 4T9 Téléphone: 514 393 7115 Fax: 514 390 4100 Montréal 5879, boul. Henri-Bourassa est, Bureau 300 Montréal, Québec H1G 2V1 Téléphone: 514 327 3012 Montréal 2523, rue Jean-Talon est, Bureau 100 Montréal, Québec H2A 1T6 Téléphone: 514 727 4741 Ottawa 100 Queen Street, Suite 800 Ottawa, Ontario K1P 5T8 Telephone: 613 751 5449 Fax: 613 563 2244 Prince Albert 77-15th Street E, Suite 5 Prince Albert, Saskatchewan S6V 1E9 Telephone: 306 765 DEBT (3328) Toll Free: 800 683 DEBT (3328) Fax: 306 763 0191 Prince George 299 Victoria Street, Suite 500 Prince George, British Columbia V2L 5B8 Telephone: 250 564 1111 Toll Free: 855 344 4440 Fax: 855 344 4450 Québec 925, Grande Allée O, Bureau 400 Québec, Québec G1S 4Z4 Téléphone: 418 624 3333 Fax: 418 624 0414 Regina 2103-11th Ave, 9th Floor Regina, Saskatchewan S4P 3Z8 Telephone: 306 525 DEBT (3328) Toll Free: 800 961 DEBT (3328) Fax: 306 525 2244 Rimouski 287, rue Pierre-Saindon, Bureau 402 Rimouski, Québec G5L 9A7 Téléphone: 418 722 7221 Fax: 418 722 4037 Rouyn-Noranda 155, Avenue Dallaire Rouyn-Noranda, Québec J9X 4T3 Téléphone: 819 762 5764 Toll Free: 888 762 5764 Fax: 819 797 1471 Sarnia 560 Exmouth Street, Suite 106 Sarnia, Ontario N7T 5P5 Telephone: 519 332 1551 Fax: 519 332 6095 Saskatoon PCS Tower, Suite 400 122-1st Ave S Saskatoon, Saskatchewan S7K 7E5 Telephone: 306 343 DEBT (3328) Toll Free: 800 683 DEBT (3328) Fax: 306 343 4240 Sherbrooke 2727, rue King O, Bureau 300 Sherbrooke, Québec J1L 1C2 Téléphone: 819 823 1616 Fax: 819 823 3297 Surrey 10524 King George Hwy, Suite 310 Surrey, British Columbia V3T 2X2 Telephone: 604 580 1267 St. Catharines 25 Corporate Park Drive, 3rd Floor St. Catharines, Ontario L2S 3W2 Toll Free: 866 615 6288 Fax: 519 650 7601 St. John s 10 Factory Lane Fort William Building St. John s, Newfoundland A1C 6H5 Telephone: 709 576 8480 Toll Free: 800 563 8337 Fax: 709 758 5238 Thornhill 300 John Street, Suite 300 Thornhill, Ontario L3T 5W4 Telephone: 416 775 7004 Toll Free: 800 757 2763 Fax: 416 775 8551 Toronto (Bloor West Village) 2424 Bloor Street W, 2nd Floor Toronto, Ontario M6S 1P9 Telephone: 416 775 7007 Fax: 416 775 8551 Toronto (Downtown) 181 Bay Street, 14th Floor Toronto, Ontario M5J 2V1 Telephone: 416 391 0100 Fax: 416 775 8551 Toronto (North York) 5140 Yonge Street, Suite 1700 Toronto, Ontario M2N 6L7 Telephone: 416 391 0100 Fax: 416 775 8551 Vancouver 1055 Dunsmuir Street, Suite 2800 4 Bentall Centre Vancouver, British Columbia V7X 1P4 Telephone:604 640 DEBT (3328) Fax: 604 602 1583 Vancouver (North) Lonsdale Quay Hotel 123 Carrie Cates Court North Vancouver, British Columbia V7M 2E4 Telephone: 604 640 DEBT (3328) Fax 604 602 1583 Vaughan 400 Applewood Crescent, Suite 500 Vaughan, Ontario L4K 0C3 Telephone: 416 775 7004 Toll Free: 800 757 2763 Fax: 416 775 8551 Windsor 150 Ouellette Place, Suite 200 Windsor, Ontario N8X 1L9 Telephone: 519 967 0388 Toll Free: 800 461 8076 Fax: 519 967 0598 Winnipeg 360 Main Street, Suite 2300 Winnipeg, Manitoba R3C 3Z3 Telephone: 204 942 DEBT (3328) Toll Free: 800 782 0393 Fax: 204 947 2689 Woodstock 30 Metcalfe Street Woodstock, Ontario N4S 3E7 Telephone: 519 421 7111
www.deloitte.ca Deloitte, one of Canada s leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 7,600 people in 57 offices. Deloitte operates in Québec as Samson Bélair/Deloitte & Touche s.e.n.c.r.l. Deloitte & Touche LLP, an Ontario Limited Liability Partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/ about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte & Touche LLP and affiliated entities. 11-2468 The information contained herein is not intended to substitute for competent professional advice.