Hi there and welcome back to Understanding
Personal Bankruptcy in Canada, the third of a five video introduction series. Today we
are going to discuss about the financial reporting, financial counseling and some aspects of your
business and how it can be affected by personal bankruptcy. Let us discuss in brief about a business if
you have one. What kind of business do you have? Is it a
sole proprietorship? Or as it is an incorporated business?
Let us look at the sole proprietorship business model. If you do not have a business, we will
continue on with financial reporting and financial counseling after a few slides. For a sole proprietorship know that all assets
of a business is considered personal assets and therefore there is no differences between
business and personal and assets. Your trustee in bankruptcy will consider the
value of that business when comparing the assets with the exemption limits of each province. The assets of the sole proprietorship can
include vehicles, tools, pending receivables, and any monies owed to the business.
Note that the vehicle mentioned above is subjected to the provincial exemption limits for vehicles.
5. An incorporated business is slightly different. All assets of the corporation are considered
separate from personal assets and therefore the assets of the corporation cannot be seized
by a trustee in bankruptcy. And no creditor can legally try to acquire
the property of a corporation However A corporation may have corporate stock
or shares. And if these are owned by a director of a
corporation, then these will be considered personal property.
If the stocks or shares are of the significant value, then the value of these shares or stocks
can be taken by the trustee and redistributed among your creditors. If you are a director of a corporation, be
advised that if you are in a bankruptcy proceeding then you cannot continue to be a director.
That director may resign, the Corporation may be dissolved, or someone else assumes
the director position of the corporation. However you can still be a manager of a corporation.
During personal bankruptcy a sole proprietorship can be established and operated as per normal. Your trustee in bankruptcy will keep a record
of all income and expenses that may have been incurred for the period whereby personally
bankruptcy is in process. Therefore on a monthly basis, an income and
expense form must be filled in and handed over to the trustee.
Any additional income made in this time must also be included in that form for the trustee
to be aware of it. The time taken for a person to become discharge
from bankruptcy will vary from 9 months to 36 months.
Most people are discharged in nine months. However to determine if a bankruptcy will
spill over into 24-36 months surplus income will need to be examined.
During the period of bankruptcy you are allowed to keep only a certain amount of your income.
Any value above that amount is called surplus income. Surplus income works like this.
Depending on the number of people in the family, a certain amount of money will be allowed
it to be kept. For example, a family of four will be allowed
a maximum of $3743. If a family makes this amount or below their
bankruptcy time is nine months. Any value above that amount, 50% of it will
be taken and distributed among creditors and your bankruptcy will extend from 24-36 months.
If there is a sizable amount of income your trustee can extend the repayment period to
36 months. According to the Bankruptcy and Insolvency
Act of Canada, all bankrupt individuals must attend the financial counseling with the trustee.
During these sessions the finances of the individual will be examined and advice will
be given. Typically two sessions are required within
9 months. According to the Bankruptcy and Insolvency
Act of Canada, all bankrupt individuals must attend the financial counseling with the trustee.
During these sessions the finances of the individual will be examined and advice will
be given. Typically two sessions are required within
9 months. If these counseling sessions are not attended,
“a failure to appear” notice will be sent with a warning that if the sessions are not
attended the bankruptcy discharge may be delayed and the person may have to go to court themselves
to petition a judge for the bankruptcy to be ended.
The trustee themselves can oppose the discharge if the sessions have not been attended. And in summary, a sole proprietorship assets
are considered personal assets for bankruptcy purposes.
A director of a corporation must resign in the bankruptcy process and his or her value
of stocks or shares is personal property. The bankruptcy individual will need to attend
a minimum of two counseling sessions and all income and expenses during the month must
be reported to the trustee in bankruptcy. If you’ve enjoyed this video and found it
informative please look at the fourth video out of the five video series which will be
sent to you. Thank You for Watching