Consequences of Bankruptcy

Bankruptcy may put you in a position to have a fresh financial start. This depends on what led to your bankruptcy, if it was your fault and the type of debts you hold. Bankruptcy can also have a negative impact on you:

• Bankruptcy can hamper career opportunities. Bankruptcy is a matter of public record. Employers may do a bankruptcy search before hiring an employee or of a current employee. You may not be eligible for money handling jobs. For example, jobs with banks or with employers who handle trust funds.
• Bankruptcy can impact your ability to access credit. This means that you may not be able to borrow money or obtain credit cards. If you are able to borrow money after bankruptcy, your interest payments will probably be much higher than they would be if you had not become bankrupt.
• Bankruptcy can have social consequences. Financial status is important in our society. Bankruptcy was once a crime and is considered by many to be a way of shirking debt and avoiding financial obligations. When people assign in bankruptcy, your relationships may suffer.

It is important to remember that bankruptcy is a legal option. You will have to decide whether the consequences of a difficult financial situation are worse than the negative impacts.

A spouse's/common-law partner's income may have a bearing on the bankruptcy outcome. Families are limited to a certain income for simple bankruptcies. If the family's income exceeds the amount Parliament has determined a family needs to survive, the person who assigns in bankruptcy may be required to pay. A bankruptcy trustee is best positioned to determine the financial impact of a spouse's income. A bankruptcy trustee is a licensed professional who is trained to assist people who are unable to pay their debts.

You will be required to report your monthly family expenses to the trustee. Income and expense reporting is very fact dependent. This is something you will need to discuss with your trustee and your partner.

The number of people you support financially may be a factor in determining whether you will have to make surplus income payments to the bankruptcy trustee during the bankruptcy. It is important to carefully discuss your family circumstances with your trustee. This will allow the trustee can make an accurate assessment of whether or how much you should be paying for surplus income.

This depends on the province you live in. In Saskatchewan you will probably be able to keep your home as long as you remain living in it. If you move out, then different rules apply and the house may become property of the bankruptcy estate.

A bankrupt can generally keep one vehicle, so long as it is not worth more than the exemption amount that is prescribed by the government of Saskatchewan. Vehicles required for business activity or employment may also be exempt.

If you decide to sell your home or car, you may be entitled to keep some of the money that you receive. This is a complicated process and you may wish to seek legal advice or speak to a trustee. A bankruptcy trustee is a licensed professional who is trained to assist people who are unable to pay their debts. A trustee will have more information about what happens when you sell your home or vehicle during your bankruptcy. Also see The Enforcement of Money Judgments Act for more information.

Be prepared to lose a lot of property and some of your income. The property you can keep is defined in exemptions legislation. Trustees in each province will be familiar with applicable exemptions. A bankruptcy trustee is a licensed professional who is trained to assist people who are unable to pay their debts. Generally, you are entitled to:

• some household items;
• a car (personal use valued at a certain amount in Saskatchewan);
• a home (if you live in it in Saskatchewan);
• clothing;
• things you need for employment;
• farm machinery (in Saskatchewan);
• certain forms of retirement investments.

Not all student loans can be discharged by bankruptcy. You will want to discuss this with your trustee. A bankruptcy trustee is a licensed professional who is trained to assist people who are unable to pay their debts.

A loan's dischargeability will depend on a number of factors including:

• your loan agreement;
• when you ceased being a student;
• the length of time between when you ceased being a student and assigned in bankruptcy;
• whether your loan is with the government or a private company.

Non-dischargeable debts include:

• fines;
• penalties;
• restitution orders;
• debts arising out of a recognizance or bail;
• civil damage awards in respect of bodily harm intentionally inflicted, or sexual assault or wrongful death;
• alimony;
• maintenance debts;
• debts arising from fraud.

See s.178 of the Bankruptcy Insolvency Act for more information.

Not all tax debts are dischargeable in bankruptcy. Debts for GST, PST and employee income taxes will not be discharged. Personal income tax debt may be dischargeable. In serious cases, a court hearing may be required to determine how best to resolve personal income tax debt.