New Canadian Bankruptcy Rules Proposed

The Wage Earner Protection program will guarantee wage payments of up to $3,000 per employee if their employer goes bankrupt. They will also be given top priority over bank loans for payback. On a short term basis, having priority over bank loans could be a benefit; however, banks may not be inclined to give large loans to companies, which could hurt both the company and the employee.

Students will be eligible for loan discharge after only 7 years of leaving the school as opposed to 10 years. These rules are complicated; further discussion is available at www.student-loan-bankruptcy.ca.

Debtors may find themselves bankrupt for an extended period of time. If a debtor has an income over the government permitted threshold, ($1,713 per month for a single individual, more for a family) it is likely that their bankruptcy will be extended for an additional 12 months.

Significant debts with Revenue Canada will be more difficult to discharge. If a debtor owes more than $200,000 in tax debt or if the tax debt makes up 75% of the total debt, the debtor will be ineligible for discharge after 9 months. The debtor will be required to attend a court hearing and must convince the court that they are capable of paying off debts and that they have a promising financial future.

RRSPs may be exempt from seizure in certain instances. Contributions made in the 12 months prior to the bankruptcy will not be exempt.

In the year that the debtor goes bankrupt, they will lose their tax refund for the entire year.