Bankruptcy is your chance to start over. In exchange for your debts being ‘discharged’ you give up your assets and make a monthly payment during your bankruptcy. This is the cost to you of eliminating your debts once and for all so you can begin to rebuild your credit and your finances. It is never a good idea to hide things from your bankruptcy trustee. At a minimum, undisclosed information could complicate or lengthen your bankruptcy, at worst you could be charged criminally.
What Can Go Wrong If You Fail To Disclose?
Your discharge may be delayed to deal with outstanding items. If for example you forget to tell your bankruptcy trustee that you have significant unfiled tax returns, you may find that CRA requests that your discharge be delayed until you file all your old returns.
Your bankruptcy costs could be more than you expected. The cost of bankruptcy is affected by the requirement to pay surplus income. If you think telling your bankruptcy trustee you have a lower income will get you a cheaper bankruptcy you will be in for a surprise. You are required to file a statement of income as part of your bankruptcy process. Reporting income higher than you originally indicated could trigger a surplus income payment that your trustee could not have told you about since he was unaware of your higher income. It is better to fully disclose your family income up front, so you and your trustee can fully understand the cost of your bankruptcy and explore alternatives such as a consumer proposal.
You could extend the length of your bankruptcy. If you fail to disclose certain assets, or provide information that eventually complicates your bankruptcy, it is possible that this will delay your discharge. The court could issue an Order of Conditional Discharge which means that they will impose certain conditions or penalties before you are bankrupt. This could include extending the length of your bankruptcy and require you to make additional payments.
Your creditors can refuse your discharge. If you fail to disclose assets or important facts and your creditors feel you are acting fraudulently, they can petition to have your discharge refused. Your trustee can do the same if he feels you are withholding information or assets.
You could face criminal charges. In the extreme, if your omission is considered fraudulent it is possible that you could be charged criminally. When you file for bankruptcy you are required to sign your bankruptcy documents. One of these documents, the Statement of Affairs, is a listing of all your assets, liabilities and a summary of your personal information. Penalties for a false statement can be imposed under the Bankruptcy and Insolvency Act and the Criminal Code.
What About Honest Mistakes
Bankruptcy is often a stressful process for most people. It is quite possible that you will inadvertently forget to disclose something on your documents or tell you trustee. We all make mistakes sometimes and honest mistakes are easily remedied. As soon as you learn of your error, contact your trustee immediately. They can help you take appropriate action to correct the matter to everyone’s benefit.
Can Bankruptcy trustees assist with unfiled income tax returns?
Thanks for your time
To avoid a possible opposition to your discharge from bankruptcy due to unfiled tax returns, it is recommended that you file all outstanding tax returns prior to filing bankruptcy. This gives CRA time to assess your returns, and it is therefore less likely that they will have questions during your bankruptcy. Your trustee will file your tax return for one prior year if it has not been filed, and they will file your tax return for the current year, but you should file all other prior tax returns before filing for bankruptcy. For more information you can read our related post Do I Have To File My Tax Returns Before Filing Bankruptcy?
I forgot to add 4 creditors to my bankruptcy and it was an honest mistake. can my trustee help me figure this out will there be a penalty i would have to pay
Yes, you can add creditors that your forgot. You should contact your trustee immediately and explain the situation, and if they are debts that existed at the time of your filing, your trustee can notify those creditors.
Can I pay down a loan just before filing on an exempt automobile that I am upside down on. I owe $27,000 on a vehicle that has a book value of about $20,000. If I pay $5000 on the loan instead of giving it to the trustee, have I done anything wrong?
Hi Bruce. I would suggest you discuss this with your trustee before filing. Since you owe more than the vehicle is worth, your trustee isn’t going to take your vehicle, since they would have to surrender it to the lender. It has no value. If you paid down the loan you potentially increase the value and make it more likely that the trustee would take the vehicle.
So, to answer your question, it does not appear to make any sense to pay down the loan prior to bankruptcy.
We bought property off a family member just before they went for a consumer proposal… They asked us to hold it for them for a year until they got back on their feet…however the terms of the proposal was three years….now we have received an offer on the property from someone who would like to buy it…we talked to them about it…now they are scrambling to find the money to buy it back…can they do that and can we be held accountable for this…they still have 2 years left before they are discharged.
Hi James. If the family member sold you the property for a less-than-market-value price and didn’t disclose it to their trustee or their creditors, it would appear that they were trying to hide assets from their creditors. I would suggest you ask your family member for a full explanation, and perhaps ask to speak to their consumer proposal administrator to ensure that all laws were followed.
If you know someone was suppose to be inherenting money because he was in a will with his mother on her death bed and had the will lawyer change it into his daughter getting the money so after bankruptcy he could have his third in the inherentence is that wrong and what would the problems be.
Hi Cassie. If a bankrupt inherits money, or the right to inherit money, it becomes property of the bankruptcy estate. If the mother changes her will on her deathbed so that the bankrupt doesn’t inherit money, then he doesn’t. It’s a question of the facts in the particular case.
What if your 8 months into a bankruptcy but don’t want to go ahead with it anymore. Can one just decided not to continue with it? Is there penalties that will be forced on the person? Thanks!
Hi John. No, once you are bankrupt, the only way for the bankruptcy to end is for you to complete the bankruptcy and be discharged, or to file a consumer proposal and make a deal with your creditors that way which, if they accept, has the effect of annulling your bankruptcy.
My husband wasn’t working when I entered bankruptcy. I am almost done and he just recently found a job. If I don’t disclose this what could happen? And could they find out?
Hi Bella. The surplus income you pay while bankrupt is based on the average of your family income throughout the bankruptcy, so if your bankruptcy is almost done and your husband has just started working, it likely won’t have much impact, if any, on your payments, so I would suggest you disclose everything to your trustee.
I have received the creditors package from a debtor filing bankruptcy, but a lot of the information is inaccurate. He disclosed $0 cash on hand, when I have a garnishee statement stating that he had thousands of dollars in his bank account 3 days before filing. He also incorrectly listed the judgement amount – he put it down for half of what it actually is. He also works for cash and his income reported is much less than what he actually makes. What should I do as a creditor?
You should immediately contact the trustee and detail your concerns, with whatever facts and supporting documents you have, and request that the trustee investigate.
My partner recently filed for bankruptcy and during the process I forgot to disclose the full amount that I recieve because some of my money, like 60$, gets put into a savings account automatically. It’s something that I never think about, it just happens, but I was going through my finances yesterday and realised that I had inadvertently made a mistake when telling him how much I make. It was an honest mistake. What will happen? It was my mistake, not his. I’m going to be contacting the trustee later today to rectify my mistake, but I don’t want anything terrible to happen due to my mistake.
Nothing terrible will happen – particularly since you are bringing this forward by yourself (before someone else “finds it”). It may change the payment requirements for your spouse as it will mean the trustee will have to revise their income calculations. Without knowing more about your situation I can’t tell you exactly what, if anything will change, but no one is going to “get in trouble”. Try not to worry.
I filed a consumer proposal I disclosed everything including a upcoming settlement from an accident my proposal was accepted I paid for 5 months I settled my accident and paid my proposal off now the trustee is calling me saying that I need to pay my debts in full I was told this applied to bankruptcy and not to a proposal that is why I chose the proposal my creditors can see on my forms in black and white I disclosed it and they accepted why am I being held responsible now ? I paid my proposal in full got a receipt I even have an email where I asked exactly what I owed and now they are making it my fault I paid it over 5 weeks ago and they have not released me
When a proposal is accepted by your creditors and approved by the Court then your obligation is to satisfy the terms of the proposal. Review exactly what you agreed to – if you did not agree to repay your debts in full if/when you received your settlement then you should not have to do so now. I suggest you speak to a lawyer if you do not believe the terms you agreed to required you to repay your debts in full.
I received an automatic discharge after 21 months I have the certificate, but now my trustee is saying he may not complete his part for 6 months or more, because there’s a possibility that I have an auto insurance claim coming to me with a small amount of income from an accident 13 months before I filed bankruptcy. He said this income should all go toward the bankruptcy. How can he do this after I’ve already got the certificate? The claim was disclosed to him at the start of the bankruptcy.
This will sound technical, but your personal discharge is not the same thing as the bankruptcy being completed and discharged. The settlement from your accident is an asset that belongs to your bankrupt estate (not to you personally) so the trustee may be required to at least review the settlement when ever it is paid out, that is unless the trustee signs the settlement back over to you. This is something you need to discuss with your trustee. If you don’t like there answer then you may want to speak to a lawyer too. Parts of the settlement may be exempt from seizure – it depends on how it is worded and what the settlement is for.
If I was notified I was going to be receiving an inheritance can I refuse the money so it goes to other beneficiaries?
Sorry, when you filed for bankruptcy your assigned your right to any inheritances you became eligible for during your bankruptcy to your creditors. Depending on how much you owe and how much of an inheritance you are expecting to receive you may be able to file a consumer proposal in order to keep some of the money. It is something you should discuss with your trustee.