Top 6 Bankruptcy Law Rules in The Bankruptcy and Insolvency Act

Rebuild Credit with Doug Hoyes
Posted in Personal Bankruptcy
Posted by J. Douglas Hoyes, CA, CPA, CIRP, CBV - LIT

Important rules you should know when considering personal bankruptcy

Choosing personal bankruptcy as a way of overcoming an unmanageable debt load is a hard decision to make and it’s not always the best choice. Recent Canadian government statistics show that more and more people are choosing to file a consumer proposal.

It is important for anyone considering personal bankruptcy to know the rules that would affect them the most. These rules are governed by the Bankruptcy and Insolvency Act in Canada. Below are the ones that could have the greatest impact on your decision.

  1. Student loans are automatically discharged after seven years;
  2. RRSPs are exempt from seizure in a bankruptcy (under certain conditions)
  3. Income tax refunds are seized for the entire year of bankruptcy. This means if you go bankrupt on June 1 instead of losing your tax refund for the period from January 1 to June 1 you lose your tax refund for entire year.
  4. A secured lender cannot terminate a contract simply due to the filing of bankruptcy. For example, if file for bankruptcy and have a car loan, as long as your payments are up to date and you continue to make the payments you get keep the car.
  5. If you file bankrutcy in Canadayou are required to reveal all your income. If you have surplus monthly income of $200 or more above the threshold allowed by law, the length of the bankruptcy period is automatically extended – for 21 months for a first time bankrupcty, and 36 months for second bankruptcy. Read our article on Surplus Income for more details.
  6. The debt limit to be eligible to file a consumer proposal is $250,000 for an individual and $500,000 for a joint proposal.

The team at Hoyes, Michalos & Associates Inc. specializes in finding the best solution for people in Ontario faced with insurmountable debt loads. Bankruptcy is only one solution. When it’s completed and you receive your discharge, you’re well on your way to a fresh financial start.

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Rebuild Credit with Doug Hoyes

About J. Douglas Hoyes

Doug is our co-founder and is a Licensed Insolvency Trustee, Consumer Proposal Administrator, certified Insolvency Counsellor and Chartered Professional Accountant. Doug is a passionate advocate for ensuring that people find the right solutions to their debt problems and shares his knowledge and expertise as a regular contributor to our blog and in the media.

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