Nova Scotia Bankruptcy FAQs: NS Bankruptcy FAQs.

Questions and Answers about NS Bankruptcy and NS Personal Proposals.

You've heard the myths about bankruptcy. Get the Facts!

How do I know if I am in financial trouble? Is bankruptcy my only option? How do I file personal bankruptcy? What About my Student Loans? Will my spouse be affected? How much does it cost to declare bankruptcy? If I go bankrupt, will I lose everything? Will my creditors stop harassing me? What happens if someone co-signed a loan for me? What happens to my wages during a bankruptcy? Will I still owe income taxes after I declare bankruptcy? What debts are erased in a bankruptcy? How long will I be in bankruptcy? Who will find out that I have declared bankruptcy? What happens during the bankruptcy? Can a bankruptcy help alleviate the terrible stress I am under? What if I have the cash flow to make a proposal? Will I end up with a better credit rating if I use a credit counsellor? Will I ever get credit again? How do I prepare for my initial consultation with the Trustee?

 

 

How do I know if I am in financial trouble?

There are certain “warning signs” that may indicate you are in financial trouble, such as:

 

Is bankruptcy my only option?

If you are in financial trouble, you may believe that bankruptcy is your only option. In many cases there are options other than bankruptcy, including:

How do I file personal bankruptcy?

In Canada you can only file bankruptcy through a trustee in bankruptcy.

PowerPoint Presentation: The steps in filing a personal bankruptcy.

In Canada you can only file bankruptcy through a trustee in bankruptcy. Trustees are regulated by the Superintendent of Bankruptcy and are highly trained professionals with stringent codes of ethics.

 

What About my Student Loans?

Student Loans can be erased in a bankruptcy if the student was in school 7 or more years ago. This amendment will apply where the debtor obtains his or her discharge on or after July 7, 2008 (PROVIDED that at the time they filed they had ceased to be student for the required seven years) or the debtor had or becomes bankrupt on or after July 7, 2008. 

The amendment that will reduce to five years the period a bankrupt will have to wait to make a “hardship” application to have student loan debt or obligation discharged (BIA , s. 178 (1.1)) is also now in force.  This amendment applies to all debtors notwithstanding when the bankruptcy or the process that results in the bankruptcy is initiated.

How much does it cost to declare bankruptcy?

 

In most cases the cost of a bankruptcy is less than $200 a month for nine months.

In a bankruptcy, the costs are set by the government. In most cases the cost will be less than $200 a month for each of nine months. Payment terms can be arranged.

 

 

If I go bankrupt, will I lose everything?

No, you will not lose everything. The Nova Scotia government has bankruptcy and proposal exemption laws which allow you to keep equity in certain assets.

Equity is the excess that the value of an asset has over any charges or encumbrances against that asset.

For example, if you have household goods worth $10,000 and there is a $6,000 secured debt against them then the equity in the household goods is $4,000. In Nova Scotia the exemption for household goods is $5,000 so in this example you are entitled to the equity of $4,000 and the unsecured creditors cannot take this.

Nova Scotia Bankruptcy Exemptions:

 

Will my creditors stop harassing me?

 

By law, all actions against you must cease once the bankruptcy or proposal documents are filed.

Yes, they will! By law, all actions against a bankrupt must cease once the documents are filed. That means most lawsuits and wage garnishments against you will stop. This does not apply to secured creditors such as banks holding, for example, a lien on a car.

 

 

Will my spouse be affected?

 

Your spouse will not be affected by your bankruptcy if he or she is not responsible for any of your debt.

Your spouse, whether common law or married will not be affected by your bankruptcy if he or she is not responsible for any of your debt (did not sign an agreement or contract for any of your debt). If they have a supplemental credit card they are probably responsible for that debt. Your spouse's credit rating will not be affected by your bankruptcy and any assets in the spouse's name will not be part of the bankruptcy.

If your spouse is responsible for any of your debt or has his own debt then the spouse may have to file bankruptcy too.

 

What happens if someone co-signed a loan for me?

Anyone who has co-signed a loan for you will still be responsible to make loan payments after you go bankrupt.

 

 

 

What happens to my wages during a bankruptcy?

You will still continue to receive your wages.

 

 

 

Will I still owe income taxes after I declare bankruptcy?

Tax debt is erased in a bankruptcy.

Tax arrears and most debt is erased in a bankruptcy.

 

What debts are erased in a bankruptcy?

All debt is erased, upon the debtor being discharged from bankruptcy, except for the following:

 

How long will I be in bankruptcy?

 

In most cases a bankruptcy is over in 9 months, at which time all eligible debt is erased.

 

 

Who will find out that I have declared bankruptcy?

 

Unless you're a prominent person and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors.

Unless you are a prominent person, in most cases only your creditors will know you have filed for bankruptcy. Most bankruptcies are not published in the newspapers. Newspaper announcements are reserved for corporate and very large personal bankruptcies. Once you declare bankruptcy, the Trustee will notify all your creditors of your bankruptcy. The Superintendent of Bankruptcy will notify the credit bureaus. The credit bureaus will keep a record of your bankruptcy until 6 years after your discharge.

 

What happens during the bankruptcy?

The bankrupt must keep the trustee informed as to where the bankrupt is living and also must respond to the trustee's requests and assist him as required and provide whatever information is requested. The bankrupt must also provide the trustee with reports as to earnings and living expenses and any change in the bankrupt's family situation. The trustee will provide the bankrupt with appropriate forms to be filled in that will provide the trustee with the necessary information.  A meeting of creditors is not required unless requested by the Superintendent of Bankruptcy or creditors with an aggregate of at least 25% of the proven claims.  These meetings are usually held at the office of the trustee.

 

Can a bankruptcy help alleviate the terrible stress I am under?

 

For most people the stress of the financial crisis will vanish as soon as a bankruptcy or proposal is filed.

Stress is alleviated for a number of reasons. Probably the major reasons are the stay of proceeding and the fact that the trustee will deal with your creditors allowing you to get on with your life.

 

 

What if I have the cash flow to make a proposal?

 

A proposal allows you to avoid bankruptcy, while paying off only a portion of your debts.

If any person files for bankruptcy when he or she has the ability to make a proposal, it is the Trustee's duty to oppose the bankrupt's discharge.  In this case, the bankrupt may be in bankruptcy up to an additional 12 months beyond the usual 9 months.  The bankrupt will be required to make payments in each of these months.

 

Will I end up with a better credit rating if I use a credit counsellor?

 

No! So long as you're on any kind of payment plan the credit bureau will record that fact. Using credit counsellors will not give you a better credit rating faster. In fact, you will likely take longer to re-establish a good rating and pay much more if you use a credit counsellor rather than a trustee. For more information about credit counsellors and trustees refer to this page.

 

Will I ever get credit again?

 

You can and you will get credit again, if your cash flow can support your payments.

After you have been discharged from bankruptcy or completed your proposal, you may be a good credit risk, since you have no debt. Naturally, you will find it a little harder to get credit until you can re-establish a good credit rating.  

You can get credit again after a bankruptcy or a proposal. The bankruptcy and proposal laws of Canada are intended to give you a fresh financial start. The ability to rebuild credit is part of that new start.

Have a look at our tips on how to rebuild your credit and also have a look at our After Bankruptcy Lenders.

View our audio PowerPoint presentation on How to Prepare for your Meeting with the Trustee.

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