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Victoria Bankruptcy.ca Bankruptcy Overview
Bankruptcy is an option available when you are not in a position to repay a reasonable portion of your debt. The process relieves you of most debts, and legal proceedings by creditors generally stop.
A first bankruptcy can be completed in 9 months. Payments to the Trustee / CIRP are based upon your family income and the process and procedures would be explained to you during your free initial consultation with the Trustee / CIRP.
Most of your personal assets are exempt from seizure in bankruptcy, up to a maximum value amount for each type of assets.
Under the bankruptcy option the amount you pay is governed by the Bankruptcy Insolvency Act (BIA), based upon your unique situation.
If your financial problems are at the point where you would like some advice on bankruptcy, then please feel free to contact us. Our trustees will work with you to help make this difficult financial time as easy on you and your family as possible. Stop feeling overwhelmed by your debt and start on your path to financial freedom without claiming bankruptcy!
The procedures and legal consequences of consumer bankruptcy in Canada are governed by Canadian federal legislation.
Consumer bankruptcy is a legislative procedure under Bankruptcy and Insolvency Act ("the BIA")
- Complemented by provisions of federal and provincial legislation
- That allows an insolvent person, who cannot pay his debts and liabilities, and who assigns himself or petitioned by the creditors into bankruptcy, to surrender his property to a trustee in bankruptcy for the purpose of distribution among creditors in accordance with legislative priority of distribution scheme; and upon bankrupt’s compliance with bankruptcy procedures
- allows a bankrupt to be discharged (excused) from paying all or part of his debts and liabilities.
The legislation may be complemented by regulations and Office of the Superintendent of Bankruptcy directives (OSB Directive(s)) (the latter provide guidelines to the trustees in bankruptcy on various aspects of the BIA).
The bankruptcy procedure is under reform. Bill C-12 is a comprehensive insolvency reform package by Parliament to modernize the BIA and related acts. As of April 2008 the bill has received Royal assent but its legislative and regulatory amendments have not yet been proclaimed in force. The current status of Bill C-12 can be found at the Office of the Superintendent of Bankruptcy website and Parliament's website.
The bankruptcy process may be divided into three stages:
Initiation of the bankruptcy process: At this stage:
- An insolvent person considers the possibility of avoiding bankruptcy by filing a consumer proposal or making independent arrangements with the creditors. Filing a consumer proposal is a serious decision, because an insolvent person may be deemed "bankrupt" if he defaults on consumer proposal. ("consumer proposal", chapter III);
- If the consumer proposal is not accepted by the creditors or the consumer proposal is not a viable option, an insolvent person considers consequences of assigning himself into bankruptcy ("consequences of bankruptcy", chapter I(D)). An insolvent person may either voluntarily assigns himself into bankruptcy or is involuntarily petitioned into bankruptcy by his creditors ("initiating bankruptcy process", chapter II);
- The legal proceedings and creditor’s attempts to enforce the debts are stayed, no person is allowed to initiate or to continue existing legal actions against the bankrupt nor to enforce existing court orders (other than secured creditors who are allowed to enforce their security) ("stay of proceedings", chapter II(F)).
Between bankruptcy and discharge: At this stage:
- Bankrupt assigns his property to the trustee in bankruptcy for its further distribution among creditors under the priority of distribution scheme in the BIA ( "vesting of property in trustee", chapter IV);
- The bankrupt assists the trustee in bankruptcy in collecting the property for the benefit of the creditors, cancelling the fraudulent preferences and transactions and attending meetings of the creditors ("duties of the bankrupt" , chapter IV);
- Attends mandatory counselling on managing financial affairs after discharge, and abides by duties and procedures under the BIA ("mandatory counselling", "duties of the bankrupt", chapter IV);
- Informs creditors on any changes in financial circumstances and acquired assets ("duties of bankrupt", "treatment of assets and surplus income", chapter IV);
- Transfers part of his surplus income and all property acquired before the discharge to the trustee in bankruptcy for the distribution among creditors ("treatment of assets and surplus income" , chapter IV).
Absolute or conditional discharge:At this stage:
- The first-time bankrupt is automatically discharged after 9 months if no notice of opposition to discharge is filed either by creditors, official receiver or the trustee in bankruptcy. The first-time bankrupt may apply for the discharge before 9 months period expires;
- The second-time or more than two-time bankrupt has the trustee in bankruptcy apply for order of discharge to the bankruptcy court between 3 months and a year from the date of bankruptcy or where the bankrupt has waived this application, the bankrupt applies himself ("application for discharge order" , chapter V);
- Where there is an opposition to discharge, the debtor defends himself against the opposing party which attempts to persuade the bankruptcy court that one of the facts listed in s.173(1) has occurred ("opposition to discharge", chapter V);
- The bankrupt either obtains certificate of discharge from the trustee in bankruptcy in cases of automatic discharge of first-time bankrupts; or order of discharge from the court in other cases. Under s.178(2), the discharge releases the bankrupt from all claims provable in bankruptcy, except the claims listed in s.178(1) of the BIA ("absolute, conditional discharge", "non-dischargeable debts", chapter V);
- Where conditional discharge is granted, the bankrupt is obliged to comply with the conditions imposed by the bankruptcy court. The failure to comply may result in annulment of the discharge and other punitive consequences. The bankruptcy court may refuse to grant a discharge ("conditional discharge", chapter V).
Purpose and Objectives of the Bankruptcy Process
The purpose of the bankruptcy process is to introduce a legislative mechanism that would provide a fair and peaceful resolution of financial conflict between debtors and creditors, creditors competing among themselves for recovery of their loans and balance public interest in protecting financial security of creditors on one hand and public interest in allowing an insolvent individual to make a fresh start. Generally, the objectives of the bankruptcy process can be summarized as follows:
- To permit an honest, but unfortunate debtor to obtain a discharge of his debts and to make "fresh start";
- Not only to permit an honest debtor to make a fresh start, but also to rehabilitate such a debtor by counselling the bankrupt on managing his financial affairs after discharge in order to prevent subsequent insolvency of the bankrupt;
- To promote a sense of commercial responsibility of the bankrupt and to deter bankrupt from subsequent insolvencies by introducing stricter legislative and judicial treatment of second and ensuing bankruptcies;
- To permit an investigation of the financial affairs of the bankrupt by a mediator, a trustee in bankruptcy, who is given broad powers to facilitate settlement of the claims by way of consumer proposal, to require compliance with bankruptcy procedures, to set aside fraudulent transactions and preferences among creditors and to adjudicate various matters under the BIA;
- To protect the creditors from competing with each other and to secure the debtor from excessive pressure from the creditors attempting to collect their debts first by introducing a priority of distribution of bankrupt’s property scheme under which all creditors are treated equally in accordance with the scheme.
Consequences of Bankruptcy
- Bankrupt is discharged from all or a significant part of the existing debts and is able to make a "fresh start"; ("discharge", chapter V);
- Creditors are not allowed to start new legal actions or to continue existing ones against the debtor or the third parties in possession of bankrupt’s property ("stay", chapter II, also "stay in consumer proposals", chapter III);
- Collection agencies are not allowed to enforce the debts, meaning the collection calls will stop ("stay", chapter II);
- Bankrupt is entitled to keep certain property exempted from distribution among the creditors ("exempt property", chapter IV);
- Bankrupt gives up the legal title and control of non-exempt property ( definition of "property", chapter IV(B));
- Bankruptcy will be shown on bankrupt’s credit rating as long as seven years after discharge (Consumer Reporting Act s.9(3) (e));
- Bankrupt loses some professional and civil privileges, i.e. capacity to hold money in trust, capacity to be elected to certain civil positions;
- Bankruptcy still carries negative stigma, i.e. negatively influence bankrupt’s credibility in the community;
- Bankrupt loses part of any surplus income and all property received before the discharge is transferred to trustee for distribution among creditors ("treatment of pre-discharge income", chapter IV(C));
- Debtor is deprived of a part of the income and the property and as a consequence may have to lower his and his family standards of living;
- Debtor’s contractors may suspend and cancel the services where there is a contractual ipso facto clause allowing contractors to cancel the contract on bankruptcy ("executory contracts", chapter IV);
- Bankrupt has limited contractual capacity, debtor’s contracts are subject to a review by a trustee in bankruptcy;
- Debts that are listed in s.178(1) are not dischargeable debts and a bankrupt still has to repay them after discharge order is made ("non-dischargeable debts", chapter V(E));
- Bankrupt has duties to perform before the discharge ("duties of the bankrupt" chapter IV) and if the discharge is conditional, has some duties to perform after the discharge ("conditional discharge", chapter V(D)).
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