PB Personal Bankruptcy – Frequently Asked Questions

All bankruptcy clients are required to submit their payments by pre-authorized payment, unless the trustee agrees to accept cash payments, or requires you to make cash payments.

You are required to make your full payment each month to ensure that your bankruptcy ends on time. We encourage you to select your payment frequency. For example, if you are paid weekly, you may make one quarter of your monthly payment each week. Here’s how it works.

Pre-authorized payments will be processed at 9:00 am on the designated date, except for non-business days where the payment will be processed on the preceding business day (such as Friday for a Saturday or Sunday payment), and taken from the account on the next business day.

If funds will not be in your account on the due date, please call our head office at 1-800-472-7775 ext 6002 or email payments@hoyes.com prior to the payment being processed to hold the payment and to make alternate payment arrangements.

There is a $25 NSF charge for bounced payments.

If you are having problems making your payment, or if you expect to have problems, please call our office immediately at 1-800-472-7775 ext 6002. We would prefer to discuss the situation with you as soon as you realize there may be a problem, because the more advance notice we have, the easier it will be to work out a solution to get you back on track.

You are legally required to submit Monthly Income and Expense Statements during your bankruptcy. These reports are used to determine if you will have surplus income to be paid to the estate for your creditors. Click here for information on how to complete these reports, or to download additional forms.

In bankruptcy, the more you make, the more you pay. It’s called surplus income, and the calculation is set by the federal government. Your trustee uses the information from you monthly income and expense statements to do this calculation.

Read our articles for more information:

• What is surplus income?
• Surplus income calculator (the results may not be exact if you have a complicated situation, so please contact Hoyes Michalos for the specific calculation in your bankruptcy)
• Office of the Superintendent of Bankruptcy Surplus Income Directive – the government’s official explanation of how surplus income is calculated

If you have any questions, please contact us at 1-800-472-7775 or e-mail us at bankruptcy@hoyes.com.

The short answer: you lose it.

According to section 67 of the Bankruptcy and Insolvency Act, all assets “vest” in the trustee, meaning the trustee is required to take your assets. The only exceptions would be assets that are otherwise exempt from seizure (like most of your personal belongings, which the trustee can’t take).

This rule covers all assets that you own on the date you file bankruptcy, located anywhere in the world, and if covers all assets that may be acquired or “devolved” on the bankrupt before discharge.

For example, if your rich uncle dies while you are bankrupt and leaves you some money in his will, that money will go to the trustee, to be given to your creditors. It doesn’t matter that it may take a year or two to distribute the money from your uncle’s estate, at which time you are already discharged from bankruptcy; because he died while you were bankrupt, the money goes to the trustee.

Examples of windfalls would include:

• an inheritance
• winnings from a lottery, bingo or casino; or
• any other cash, gift or windfall

A creditor, or the Office of the Superintendent of Bankruptcy (OSB), or the trustee may request an examination under oath of a bankrupt.

In some cases an examination is requested if there are unusual transactions, such as complicated business issues or large debts.

In other cases the examination is completely random. The OSB routinely selects a random sample of bankrupts from all trustee firms and examines them to confirm that all proper procedures were followed.

If you are selected for an examination, you are required to attend. If you don’t attend, it is likely that the OSB will oppose your discharge from bankruptcy, and you would be required to attend a court hearing to receive your discharge.

If your are unable to attend the examination at the time and date set by the OSB, Hoyes Michalos does not have the authority to reschedule the examination, as the time and date is set by the OSB. However, you may contact the OSB directly and ask them to reschedule the examination to a different date. It will be up to the OSB whether or not they agree to your request.

The examination will be conducted by the OSB. A copy of the examination questionnaire can be found here.

If you do not complete your duties, the trustee is required to “oppose” your discharge from bankruptcy. A creditor also has the power to oppose your discharge, as does the Office of the Superintendent of Bankruptcy. Oppositions are uncommon and tend to arise only in certain circumstances like incomplete duties or questions about income, assets or events before filing. If your discharge is opposed, a discharge hearing is held in bankruptcy court, and the court will decide on the terms of your discharge. The court may grand the discharge as normal or require additional payments or conditions before discharge. We are here to guide you through the process if this happens. Please call our office at 1-800-472-7775 or email help@hoyes.com if you have any questions.

Most people do not have to go to bankruptcy court. If you complete your required duties and no one raises an objection, you are automatically discharged from bankruptcy and there is no court appearance.

You would only need to attend bankruptcy court if your discharge cannot happen automatically — for example, you did not pay your surplus income, did not complete your counselling session, did not provide tax information to your Trustee or there is an objection to your discharge.

If a court hearing is required:

• Your automatic discharge is delayed
• A hearing is scheduled
• Your Trustee will explain the situation and present any proposed resolution
• A Registrar in Bankruptcy reviews your file, recommendations from your Trustee and may ask some questions

The court may:

• Grant your discharge as normal, or
• Set conditions (such as additional payments or steps to complete) before discharge

Your Licensed Insolvency Trustee will prepare you in advance, attend court with you, and guide you through what to expect. Bankruptcy court is generally brief and focused on resolving outstanding issues so your discharge can move forward.

Co-signed debts: Any person or people who have co-signed and/or guaranteed any of my debts may be held responsible for such debts.

Secured creditors

• Keeping: If I have elected to keep a secured asset, I understand that I must be current with payments to the secured creditor now and in the future.
• Surrendering: If I have elected to surrender the asset to the secured creditor, I understand that I must co-operate with the secured creditor in returning the asset so that the debt will be included in the consumer proposal.
• Writs of execution registered against my assets prior to my filing may not be automatically removed even though the debt may be discharged. Further action may be required to have these items removed.

Undisclosed creditors: I am required to disclose all known creditors. If I have unintentionally forgotten about a debt that is outstanding today, I will advise the Trustee so that this creditor can be added to the consumer proposal.

If a creditor does not know about my bankruptcy, I may be held liable to pay that creditor the same dividend rate as the other creditors received from my bankruptcy pursuant to section 178 (1) (f) of the Bankruptcy & Insolvency Act.

Fine, penalty or restitution orders: Any penalty or fine imposed by a court, or any debt arising out of the recognizance or bail, or any aware of damages by a court in civil proceedings in respect of bodily harm, sexual assault or wrongful death. Reference: Bankruptcy & Insolvency Act, section 178 (1) (a)

Fraud & Misrepresentation: Any debt or liability arising out of fraud, embezzlement, misappropriation, or misrepresentation.

The government may consider over payments from various government programs to be a result of misrepresentation and may resume collections on all or part of the debt. Reference: Bankruptcy & Insolvency Act, section 178 (1) (d) and (e)

Personal tax debts over $200,000 representing 75% of more of total debts: A court hearing will be required to determine the amount that will be discharged. Reference: Bankruptcy & Insolvency Act, section 172.1

Student loans: Government funded or guaranteed student loans where there has been less than seven years from the date the government has recorded as my end of study date (when I ceased to be a full or part-time student) to today. Reference: Bankruptcy & Insolvency Act, section 178 (1) (g)

Any debt or liability for alimony or child support: Any family law support or alimony arrears and future obligations. Reference: Bankruptcy & Insolvency Act, section 178 (1) (b) and (c)

Bankruptcy mediation is an informal meeting used to resolve specific issues in a bankruptcy, such as surplus income or discharge opposition, without going to court. It is not a hearing, and it is not adversarial. For more information on the bankruptcy mediation process click here.

A pre-bankruptcy tax return is a return for the period from January 1 of the year of bankruptcy to the day before the date of bankruptcy. This is a requirement of the federal Income Tax Act when you file bankruptcy.

This tax return covers the period from the date of bankruptcy to December 31 of that same calendar year. Like the pre-bankruptcy return, this is a requirement of the Income Tax Act when you file bankruptcy.

These are tax returns for any year prior to the calendar year in which bankruptcy is filed, but that are unfiled at the time bankruptcy is filed.

Your biggest responsibility is to provide the trustee with the information to prepare the various tax returns. We will require you to provide us all your tax slips and other information to prepare the returns.

The information to prepare the Pre-Bankruptcy return and any Prior year returns was discussed with the trustee when you filed for bankruptcy. If you have been unable to provide this information, we will contact you to make arrangements to provide the documents.

For the Post-Bankruptcy return, we will send you an e-mail and/or letter to remind you of the information we require. Please see below under Tax Return Preparation to learn what to provide us for your Post-bankruptcy taxes and how to provide it.

The trustee must ensure that all income tax returns are filed related to periods up to the end of the calendar year in which you filed for bankruptcy.

Consider this example. You file for bankruptcy in April of 2025, but haven’t done your 2024 personal taxes yet. The trustee will help to prepare the 2024 Prior year return, as well as the Pre-bankruptcy and Post-bankruptcy returns for 2025. Even though you would not be discharged from bankruptcy until 2026, you would be responsible for preparing your own 2026 return in the spring of 2027.

• If there is a refund from the Pre-Bankruptcy, Post-Bankruptcy or Prior year tax return, the Canada Revenue Agency will send the refund to the trustee. The trustee is required by law to keep the refund for the benefit of your creditors.
• If there is a balance owing from the Pre-Bankruptcy or Prior year tax return, you are not required to pay it. It is included in bankruptcy along with your other debts.
• If there is a balance owing from the Post-Bankruptcy tax return, you are responsible for paying it to CRA because it is considered a new debt incurred after the date of bankruptcy. Furthermore, the deadline to pay the balance owing is April 30 to avoid interest and penalties from the CRA.

The trustee will normally prepare the pre and post-bankruptcy returns, as well as one prior year return.

If your discharge date is in a year subsequent to the year you filed bankruptcy, the trustee does not prepare that return.

No. Preparing tax returns is part of the bankruptcy process at no additional cost.

For people with more complicated tax returns, sometimes it makes sense for you or your accountant to prepare the return. You can discuss this with your trustee if you are concerned.

We only prepare tax returns for people who file bankruptcy with our firm. If your spouse has not also filed bankruptcy, he or she will be responsible for preparing his or her returns.

Canada Revenue Agency will send tax refunds to the trustee for the pre-bankruptcy, post-bankruptcy and prior year returns that are assessed after the date of bankruptcy. The trustee is required to keep those refunds for distribution to your creditors.

As part of a bankruptcy, the government decided that some tax items should go to the bankruptcy for your creditors but some you keep. Click here for an updated summary of what government tax credits you keep or lose.

You are not required to pay a balance owing on the pre-bankruptcy or prior year returns since it relates to periods of time before bankruptcy. The balance owing is included in bankruptcy along with the other debts.

However, you are required to pay a balance owing on the post-bankruptcy return since it relates to a period of time after bankruptcy. Payment is made to Canada Revenue Agency, not the trustee.

You are responsible for paying the balance owing from the Post-bankruptcy tax return and any subsequent years because these are considered new debts incurred after your date of bankruptcy.

If this happens to you, you make that payment to the Canada Revenue Agency, not to the trustee.

The CRA website has detailed information about your payment methods.

Yes. We will send you a copy of the completed return for your records. A meeting with the trustee is not required to prepare the return.

Once your return has been reviewed by the Canada Revenue Agency, a notice of assessment is issued. It reports whether there is a balance owing or refund.

• For Pre-bankruptcy and Prior year returns, the notice of assessment is sent to the trustee’s office. After we have reviewed it, we will forward the notice to you for your records. For Pre-bankruptcy and Prior year returns, the trustee is required to keep the refunds for your creditors. However, if there is a balance owing, you are not required to pay it since it is included in your bankruptcy.
• If there is a refund on the Post-bankruptcy return, the CRA will send the notice of assessment and refund cheque to the trustee’s office. The trustee is required to keep the Post-bankruptcy refund, if there is one.
• If there is a balance owing on the Post-bankruptcy return, the CRA will send the notice of assessment directly to you. This is because you are responsible for paying this balance owing as it is considered a new debt incurred after your date of bakruptcy. Please retain this for your records. We may ask for a copy of it to complete our review of your file.
• If there is a balance owing that you are required to pay, you make that payment to the CRA, not to the trustee. The CRA website has information about the different methods of payment that are available.