Filing for personal bankruptcy in BC (British Columbia) is a legal process in which you assign your assets to a licensed bankruptcy trustee in exchange for you obtaining relief from your debts. Bankruptcy in British Columbia is governed by federal law (the Bankruptcy & Insolvency Act) and by provincial B.C. bankruptcy rules.
Bankruptcy laws are designed to permit an honest but unfortunate debtor to obtain relief from his or her debts while treating creditors equally and fairly. Through the bankruptcy process, you are able to get a fresh start financially.
In order to file for bankruptcy in BC, and in Canada in general, you must live or do business in Canada and be insolvent. To be an insolvent person you must owe at least $1,000 and must:
Once a bankruptcy has been filed, there is a legal "stay of proceedings" that occurs. This stops any ongoing legal collection actions and prevents any further collection actions from starting. It stops wage garnishments, even those from Canada Revenue Agency for income tax debts. Calls from creditors and collection agencies should stop.
The stay of proceedings generally only deals with unsecured debts. Those creditors holding assets as collateral (e.g. house mortgages and car loans) will still have the right to foreclose or seize the asset if the loan is not paid. However, any shortfall or deficiency to the secured creditor after foreclosing or seizing will also be an unsecured debt and can be eliminated in a bankruptcy proceeding.
The "stay of proceedings" remains in place until your discharge from bankruptcy, meaning that your debts are then legally extinguished. For most bankruptcies, discharge occurs automatically after between 9 and 36 months depending on whether you have "surplus income" or have been bankrupt once before and as long as the basic bankruptcy duties are complied with.
A court discharge hearing will be required, if you have been bankrupt more than once before or have large income tax debts.
Once the bankrupt has received an absolute discharge, all debts are extinguished with the exception of the following:
You are permitted to keep some assets in a bankruptcy. These exemptions are set by various federal and provincial laws. For personal bankruptcy in B.C., the following assets are exempt:
British Columbia bankruptcy trustees normally charge a basic amount to be paid toward the cost of administering a B.C. bankruptcy. For example, a common fee is $260 to start and $170 per month during the bankruptcy process. This amount can vary depending on the circumstances of each individual. The payment can also be applied toward any surplus income which may be required to be paid to the trustee.
During the bankruptcy, you are free to earn a salary or carry on self employment. However, statements of household income and expenses must be submitted to the trustee at the end of each month in order to establish if a "surplus" of income exists.
The surplus is determined by comparing the household income to the standards set by the Office of the Superintendent of Bankruptcy. If you have surplus income, a portion (generally 50%) of the surplus is required to be paid over to the trustee for eventual distribution to unsecured creditors. For details, please see Surplus Income Calculation.
To get a better understanding of filing for bankruptcy in British Columbia, we suggest you further explore this web site or contact our Trustee in Bankruptcy in B.C. for a free in-person consultation about your situation and your options.