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As a debtor, what should I find out at my free initial consultation with a Trustee?
By Ian Penney, CPA, CIRP, Trustee in Bankruptcy
The first meeting should be the time to start to gather the answers to some basic question. You may want to make sure that you ask:
1. How much my bankruptcy cost? Your Trustee will outline the expected payments of surplus income if any, any repurchase requirements for equity in non-exempt assets and the Bankruptcy and Insolvency Act’s treatments of income tax refunds or lump sum payments from your employer or the government.
2. Will I have duties I have to perform during the bankruptcy?. You will to understand all of your duties and responsibilities during the time you remain in bankruptcy including your obligations to make payments, attend two credit counseling sessions, report your monthly income to the trustee, give the trustee the information necessary to file outstanding personal income taxes, for the year of bankruptcy and the year just prior.
3. How will my personal bankruptcy affect my spouse? While in many cases just one spouse files for bankruptcy without the other spouse filing, there is an obligation for the “family unit” to report income and expense on a monthly basis during the bankruptcy. If you spouse refuses to disclose this information then there can be consequences on how much you are expected to pay to the Trustee. As well, if you spouse has joint debts with you, then once you declare bankruptcy, they would be left to manage the debt on their own.
4. Which debts are not included in my personal bankruptcy? There are some debts that are not discharged in a bankruptcy. A short list includes, recent student loans, fines and penalties imposed by a court of law, or past or ongoing obligations for alimony and child support. There are some other debts that aren’t discharged and your Trustee will outline the rules regarding non dischargeable debt.
5. Will I lose all of my assets if I declare personal bankruptcy? Each province in Canada allows you to keep some asses as exempt. Generally, most trustees allow you to repurchase assets that may be beyond what are considered exempt, and your trustee will discuss your family budget to help you decide if you want to keep/afford to keep any assets that are secured such as your mortgage on your family home or your car loan.
6. Is there options other than bankruptcy? Your Trustee will discuss other debt options available to you. A very powerful option is a consumer proposal. As a debtor it allows you to avoid declaring bankruptcy but eliminates any interest charges and reduces the face value of the debt that you have to pay back.
7.What is the effect of a bankruptcy on my credit report? What is the best way to build up my credit score once I am discharged? Usually if you are having debt issues, your credit is already poor by the time they meet with a Trustee. In other cases, you have never missed a payment and may have perfect credit, but still insolvent as you may no longer have the ability to even make your minimum payments on a go-forward basis. Declaring bankruptcy will negatively affect your credit score in the short-term, but once the bankruptcy is over and you start using credit wisely, declaring bankruptcy can actually be a positive step towards rebuilding your credit and a stable financial future.