Why am I still bankrupt?
With the rising costs of food, gas, interest rates on lines of credit and mortgages, we often are contacted by individuals who find themselves under pressure to reduce their debt load. When they reach out to us and we do an insolvency check in some cases we find out that they have filed a bankruptcy in the past and in some cases as many as 20 years ago, and have never been discharged from that bankruptcy. This may also come to light when they are applying for new credit, checking their credit score or are being contacted by creditors that were included in their bankruptcy filing.
The question we get asked is how did this happen and what can they now do about it.
To answer the first part of this question is that when an individual files for bankruptcy, they are required to perform certain duties in order to complete the bankruptcy process and obtain a discharge from bankruptcy. The most common duties that remain undone include:
1. Failing to make the required payments in your bankruptcy.
When you file for bankruptcy, the Trustee will calculate the amount of money that you will be required to pay into the Estate for the benefit of your creditors. The calculation is based on a number of factors, including the number of people in your household, the monthly income for your household, and any equity in assets that may not be subject to an exemption.
2. Failing to file a monthly report for each month and term of your bankruptcy.
Filing for bankruptcy will require you to report and provide supporting documentation on your income and certain deductible expenses, such as medical expenses and spousal or child support.
3. Failing to attend your two (2) mandatory counseling sessions.
As part of the process, you will be required to attend two mandatory counseling sessions. The sessions deal with creating a budget, pitfalls of credit, spending habits and rebuilding credit once you receive your discharge.
4. Failing to provide the Trustee with the documentation needed to process your year of bankruptcy income tax returns.
For the year of bankruptcy, two returns will be prepared. The first return is for the period of January 1st to the date of your bankruptcy (called a pre-bankruptcy return) and the second for the period from the date of your bankruptcy to December 31st (called a post-bankruptcy return).
When a debtor fails to perform any of those duties, the Trustee is required to object to the discharge of the bankrupt. If the bankrupt continues to fail in performing those duties, the Trustee may proceed to obtain its own discharge from the file and at that time, the creditors’ rights are revived and the bankrupt becomes what is known as an undischarged bankrupt. Being an undischarged bankrupt means that you are still bankrupt but no longer have the protection from your creditors afforded to you under the Bankruptcy & Insolvency Act and therefore, your creditors may once again commence collection actions against you.
There are options for dealing with these situations. Some of the options include:
1. Contacting your Trustee, if they still exist, to see if they will assist you in completing the duties that were outstanding. Your Trustee may require a fee to be paid up front before they will reopen the file and be reappointed. This fee may be significant as the Trustee will have to prepare a considerable amount of paperwork, notify all the creditors, that were part of the bankruptcy, the Office of the Superintendent of Bankruptcy and make a Court application to reopen and be reappointed to your file.
2. If your Trustee is unwilling to assist you, you may:
A. Seek legal counsel to assist you in your own application for discharge. You will want to seek out legal counsel that is familiar with insolvency proceedings to make all the applications and to notify all the same parties as in 1 above.
B. You can undertake the process to seek your own discharge before the Court. This can be a daunting venture for someone not familiar with preparing the application and serving all the documents to all of the parties.
C. You may seek the assistance of another licensed insolvency Trustee to assist you with the completion of the duties or to file a consumer proposal to deal with the debt. In many circumstances the filing of a consumer proposal on the debts of the old bankruptcy may be the most cost effective manner to deal with those debts and the old bankruptcy.
If you find yourself in this situation, please reach out to us to discuss your options. Visit us at correctthedebts.com and book a free, no-obligation, non-judgmental consultation to review your options.