Initial Consultation Booklet

With more than 35 years of experience, Smythe Insolvency is a dedicated team of Licensed Insolvency Trustees and qualified

insolvency counsellors serving you in twelve British Columbia locations.

smytheinsolvency.com

Initial Consultation

Your first visit will help you determine the proper course of action

given your present financial position. In this session we will:

1. Respond to your immediate problem (i.e. garnishments,

judgments, creditor harassment, etc.);

2. Assess your financial situation and your ability to pay;

3. Discuss the many options available to you to ensure that

you have a clear understanding of each one. We will also

explain why we recommend one option over another based

on your unique circumstances;

4. Review your rights and responsibilities and your creditors’

rights and responsibilities.

If you’re experiencing signs of financial difficulties and don’t

know where to turn, a consumer proposal or personal bankruptcy

may be the answer.

What is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee is an officer of the court whose

primary role is to ensure that your rights and your creditors’ rights

are maintained throughout the bankruptcy or consumer proposal

process. In Canada, trustees are licensed and regulated by the

federal government and will work with you to determine what the

best option is for your individual circumstance. Licensed Insolvency

Trustees abide by a strict code of conduct when advising you of your

debt-relief options, while other unlicensed debt consultants may not.

A Licensed Insolvency Trustee’s fees are regulated by the federal

government. There are no hidden costs. Furthermore, because

Licensed Insolvency Trustees are the only professionals authorized

to file a consumer proposal, they have extensive experience in

understanding the process and what creditors expect. When you

speak with a Licensed Insolvency Trustee you are dealing with

someone who has the knowledge, skills and expertise to solve the

problem.

What can a Licensed Insolvency Trustee do for you?

• Provide you with a free consultation to discuss your situation

• Deal with your creditors directly

• Stop the phone calls, wage garnishments and legal

proceedings, including debts to the Canada Revenue Agency

• Negotiate a settlement with your creditors (consumer

proposal)

• File a bankruptcy for you if a consumer proposal is not the

right option

• Provide counselling for a better financial future

Consumer Proposal Information

What is a consumer proposal?

A consumer proposal is a settlement offer to creditors available to

anyone owing under $250,000 (excluding your mortgage). It is a

legal way to settle your debts by freezing interest and paying only

a portion of your debts, either by making a lump sum payment or

several monthly payments over a period of time (usually between

three to five years). The settlement must provide your creditors

with a greater realization than what would be available to them

in a bankruptcy.

Filing a consumer proposal stops all garnishments, lawsuits or

other court proceedings initiated, or that may be initiated by your

unsecured creditors in respect of debts incurred prior to the date

of the consumer proposal.

What happens after you file a consumer proposal?

After you file, we will prepare the documents required, outlining

the terms of your offer which will be sent to all creditors. The

creditors have 45 days to accept or reject the terms of your

consumer proposal. The proposal requires only a majority of your

creditors (in dollars) to accept your offer. All other creditors are

bound by the terms.

Upon acceptance, you will start making payments to our office

and we will periodically distribute the proceeds to the proven

creditors. Upon fulfilling the terms of your consumer proposal you

will receive a certificate of full performance and the balance of

your debts will be extinguished.

How does a consumer proposal differ from an assignment

in bankruptcy?

In a consumer proposal there is no vesting of assets - your

property will remain in your possession. In addition, you will

file your own income-tax returns and be eligible to receive any

applicable refunds. You will not be required to report income and

expenses or be subject to surplus-income guidelines during the

consumer proposal period.

What should you know about filing a consumer proposal?

When filing a consumer proposal, you must provide full disclosure

of all your assets and liabilities, as well as real estate disposed of

in the past five years.

It is mandatory that you attend two counselling sessions

throughout the consumer proposal process.

You must stay current on the consumer proposal terms. If you are

unable to make payments for an amount that is equal to or more

than the amount of three payments, your consumer proposal will

be annulled and the administrator will inform the creditors. The

creditors’ rights will be revived and you will be unable to make a

subsequent consumer proposal.

Bankruptcy Information

What is bankruptcy?

Bankruptcy is an option for debtors that are unable to make

any other settlement arrangements with their creditors. It is a

legal process regulated by the Bankruptcy and Insolvency Act.

A bankruptcy provides immediate relief, freezing the collection

actions of all your creditors who may have a claim against you.

The idea behind personal bankruptcy is to permit an honest

person in an unfortunate situation the option to eliminate their

debts and focus on building a brighter financial future.

Who can go bankrupt?

In order to declare bankruptcy, you must meet certain conditions:

• Owe at least $1,000; and,

• Be unable to meet regular payments as they fall due, or

• The realizable value of your property is insufficient to pay

all of your debts.

Stay of proceedings

The filing of a bankruptcy halts all garnishments, lawsuits or

other court proceedings initiated, or that may be initiated by your

unsecured creditors in respect to debts incurred prior to the date

of bankruptcy.

Only the court can grant permission to unsecured creditors to

continue actions against you once you are bankrupt.

Surplus income

When filing a bankruptcy, payments will depend on how much

you earn and your family size. The Superintendent of Bankruptcy

sets out income standards each year, and if your earnings exceed

the standard, you will have to pay a portion of your earnings into

the bankruptcy estate for either 21 months (first-time bankrupt)

or 36 months (second-time bankrupt). The Trustee will be able

to estimate these payments for you if you bring current pay

information to your free consultation. In certain circumstances,

the surplus-income payment or terms can be modified by

mediation or by the Court.

Discharge from bankruptcy

A first-time bankrupt without surplus income

You will be automatically discharged from bankruptcy nine

months plus one day after the bankruptcy filing date.

A second-time bankrupt without surplus income

You will be automatically discharged from bankruptcy 24 months

plus one day after the bankruptcy filing date.

A first-time bankrupt with surplus income

You will be automatically discharged from bankruptcy 21 months

plus one day after the bankruptcy filing date.

A second-time bankrupt with surplus income

You will be automatically discharged from bankruptcy 36 months

plus one day after the bankruptcy filing date.

In all these cases you are eligible for an automatic discharge from

bankruptcy provided:

• Your discharge from bankruptcy was not opposed by either a

creditor, the Licensed Insolvency Trustee, or the Superintendent

of Bankruptcy

• Your duties have been properly complied with. These duties

include, but are not limited to:

• Full disclosure of all assets and liabilities and details of

property disposed of in the past five years

• Timely reporting of monthly income and expenses

• Payments to the trustee in accordance with the surplus

income guidelines

• Attending the two counselling sessions

• Surrendering all credit cards

• Providing the trustee with all the necessary tax information

to file your tax returns

• Keeping the trustee informed of any change in residence,

employer, marital status, etc.

• Keeping the trustee informed of any change in your assets or

income

High Income Tax Debt – A debtor will not be eligible for an

automatic discharge. A bankrupt with personal income tax debt

exceeding $200,000 (representing at least 75% of total unsecured

proven claims) will require a court order to be discharged from their

debts.

If your discharge is opposed by a creditor or by the trustee, we

will arrange for your application for discharge to be heard by the

Bankruptcy Court. After hearing our report on your conduct

throughout the bankruptcy, your present economic situation, and

the opposing creditors’ arguments, the court may issue any of the

following orders:

(a) Absolute: Applies immediately and means that you are

no longer responsible for your debts, except for those listed

in Section 178 (see next page);

(b) Adjourned: This will postpone the hearing either

indefinitely or to a later date;

(c) Conditional: You may be required to pay a certain sum of

money for distribution to your creditors. If subsequent

circumstances do not permit compliance with the

conditions, the court has the authority to modify the Order.

(d) Suspended: Same as absolute but with a delay before

coming into effect;

(e) Refused: The court has the right to refuse discharge, but

it rarely exercises this power.

Upon obtaining your discharge you will be released from all debts

except for those listed in Section 178, as noted below:

• Fines or penalties imposed by a court or default on bail bond;

• Student loans - if you are a student at the date of bankruptcy, or

if you go bankrupt within seven years after ceasing to be a full or

part-time student;

• Alimony or child support;

• An award of damages by a court in civil proceedings relating to

assault, sexual assault or wrongful death resulting from same;

• Debts arising from fraud, embezzlement or misappropriation of funds;

• Debts not disclosed to the trustee (these creditors will be entitled

to the dividend that would have been paid if a claim had been

submitted in the bankruptcy);

• Employment Insurance overpayment of benefits.

A first bankruptcy will be noted on your credit bureau for six years

after obtaining your discharge. A second bankruptcy will be noted

on your credit bureau for fourteen years after obtaining your

discharge.

Property of the Bankrupt (Sections 67)

Your assets, whether in your possession or in the possession of a third

party, will vest with the trustee for the general benefit of creditors.

Secured loans cannot be terminated when personal bankruptcy is

filed. You may also have 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.

Where a creditor holds security against any asset, he will normally

be allowed to exercise his rights to realize on his security after

receiving permission from the trustee.

Exempt property

The trustee will not take possession of certain assets if they are

exempt from seizure. Exempt property will vary from one province to

another. In BC, an individual may claim the following assets as exempt:

Household furnishings and appliances $ 4,000

Tools of the trade $10,000

Motor vehicle (1) $ 5,000

Equity in a home $12,000 in the Capital

Regional District & Metro

Vancouver

$ 9,000 elsewhere in the

Province

Registered retirment savings plan (RRSP) less the value of

contributions made in the year preceding bankruptcy.

All necessary clothing and all required medical aids (of a debtor or

a dependent).

Non-exempt property

Any RRSP contributions made within one year prior to your

bankruptcy, guaranteed investment certificate (GIC), term deposits,

savings, life insurance cash surrender value (in certain circumstances),

stocks, bonds, etc. must be turned over to the trustee. Personal

effects such as jewellery, collectables, recreational equipment, etc.

are not exempt and must be turned over to the trustee, or you

may elect to purchase the value of these assets from the trustee if

you wish to keep them.

Other assets

Any property acquired by you, such as lottery winnings, inheritance,

gifts or a lump sum settlement such as certain Insurance Corporation

of British Columbia (ICBC) awards, Worker’s Compensation Board

(WCB) settlements, superannuation, Canada Pension Plan (CPP)

benefits, etc. for which you may become eligible for prior to your

discharge, must be disclosed to the trustee as it normally is an asset

of the estate divisible amongst your creditors.

Tax refunds

A tax return for the period of January 1st to the date of bankruptcy

will be prepared by the trustee (pre-bankruptcy return). Any tax

refund for that period, as well as refunds of previous years not yet

received will be remitted to the trustee. Another tax return will be

prepared for the period from the date of bankruptcy to December

31st (post-bankruptcy return). A refund from that tax return will

also be paid in to the bankruptcy estate, as well as any GST credits.

If there is a balance owing to the Canada Revenue Agency on the

post-bankruptcy return you are responsible for payment.

Settlement of property (Sections 91 and 95)

Gifts or transfers of property at less than full-market value during the

12 months prior to bankruptcy (five years in certain circumstances) are

subject to review and may be recovered by the trustee.

If during the three months prior to bankruptcy (12 months if

a related person), a creditor received preferential or special

treatment, such as being paid while others were not, the trustee

may demand reimbursement from these creditors. The trustee

must be informed of these payments.

Duties imposed upon the Bankrupt (Section 158)

You must also fulfill all of the following duties while you are an

undischarged bankrupt:

• Reveal and turn over to the trustee all non-exempt assets in your

possession or control;

• Make available to the trustee all books and records relating to

assets or your affairs;

• Attend at the Office of the Official Receiver (Bankruptcy

Administration), if and when required, to be examined under

oath as to the facts relating to the bankruptcy;

• Provide a complete statement of assets and liabilities, including

creditors’ names, addresses, account numbers, invoices, and

amounts. Where additional bills or legal documents are received

by you, they should be forwarded to the trustee. If assets or

debts were accidentally omitted, the trustee must be informed

promptly;

• Inform the trustee of the details of all property disposed of

during the 12 months prior to the bankruptcy;

• Inform the trustee of the details of all property disposed of by

gift during the five years prior to the bankruptcy;

• Inform the trustee of any material change in your financial

situation.

Cost of Bankruptcy

Surplus Income x =+

The more assets you have or the more income you make, the more

you pay into your bankruptcy, and vice versa.

Breakdown

Now it’s your turn

Months in Bankruptcy

Asset Buyback

Payments into Estate

x =+

Notes

smytheinsolvency.com

Our Locations

advice@smytheinsolvency.com

BURNABY501 – 3292 Production WayBurnaby, BC V5A 4R4

CAMPBELL RIVER590 – 11th AvenueCampbell River, BC V9W 4G4

COURTENAY250 – 470 Puntledge RoadCourtenay, BC V9N 3R1

DUNCAN103-222 Ingram StreetDuncan BC V9L 1P3

LANGLEY305 – 9440 202 StLangley, BC V1M 4A6

NANAIMO201 – 1825 Bowen RoadNanaimo, BC V9S 1H1

NORTH VANCOUVER305 – 221 Esplanade WestNorth Vancouver, BC V7M 3J3

PORT ALBERNI4855 Johnson RoadPort Alberni, BC V9Y 5M2

SQUAMISH37897 2 AvenueSquamish, BC V8B 0R2

SURREY200 – 7404 King George Blvd.Surrey, BC V3W 1N6

VANCOUVER700 – 355 Burrard StreetVancouver, BC V6C 2G8

VICTORIA301 – 1321 Blanshard StreetVictoria, BC V8W 0B6

1 888 751 2668 1 855 382 2660