Tell Your Bankruptcy Trustee Everything

Category: Personal Bankruptcy (12) comments

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. canada bankruptcy lawIt 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.

Leave A Comment

    1. Bankruptcy Canada Trustee Post author

      Hi Scott,
      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?

  1. franco

    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

  2. J. Douglas Hoyes

    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.

  3. Bruce


    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?

    1. J. Douglas Hoyes

      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.

  4. James

    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.

    1. J. Douglas Hoyes

      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.

  5. cassie

    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.

    1. J. Douglas Hoyes

      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.

  6. John

    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!

    1. J. Douglas Hoyes

      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.


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