The following changes are in effect as of September 18, 2009:
Surplus Income - Mandatory Payments
First time bankrupts who have surplus income will be required to make payments to their estate for 21 months and second time bankrupts will be required to make payments for 36 months.
Bankrupts with High Income Tax Debt
Bankrupts with high income tax debt will not be eligible for an automatic discharge. Bankrupts with personal income tax debt which exceeds $200,000, or represents 75% or more of total unsecured proven claims will have to seek a Court Order to be discharged from their debts. This is to prevent the use of bankruptcy by high income individuals as a strategy for tax planning.
Consumer Proposal - Debt Threshold Increase
A consumer proposal may be filed by someone with up to $250,000 in debts, excluding mortgages on their principal residence. This will raise the threshold from the current $75,000.
Discharge of Second Time Bankrupts - Time Period Extension
Second time bankrupts are eligible for an automatic discharge after 24 months (36 months if they have surplus income).
Ipso Facto Clauses
The “ipso facto” clauses will apply to bankruptcies. The protection afforded to debtors under Division I and II proposals against the impact of “ipso facto” clauses (a clause that allows a creditor to terminate an agreement on the basis of the filing of a proposal) will be extended to bankruptcies. This will insure consumers have access to basic services such as electricity, gas, telephone, and leases after bankruptcy.
Secured loans cannot be terminated when personal bankruptcy is filed. There will be the option to continue to pay the secured loan and keep the asset if payments are up to date and absent of any other defaults.
Some of the new rules in Bill C-12 came into force July 7, 2008. The new legislation aim to make the insolvency system fairer and to reduce the potential for abuse, while respecting the fundamental objective of providing a fresh start to the honest, but unfortunate, debtor. The summary provided below is for general information only, please contact F. J. Zielski & Associates to better understand how the changes may apply to your financial situation.
The period in which a student loan is discharged from bankruptcy has been reduced from 10 years to 7 years. The new time frame affects those who file for bankruptcy now, and to any current undischarged bankrupts. The “hardship provision” which allows for an application to have student loans discharged is now available after only 5 years.
Amounts held in RRSPs are now exempt from seizure in bankruptcy. In the province of Ontario RRSPs will be exempt subject to a claw back on any contributions made within 12 months of filing bankruptcy. All other contributions will be exempt.
If you have any questions about the news and updates you see here, please do not hesitate to contact F. J. Zielski & Associates. We have three locations in Ontario: Belleville, Kingston, and Trenton, with local phone number for Cobourg.