Frequently Asked Bankruptcy Questions

Bankruptcy Questions Chart. The chart below is provided solely for the purpose of facilitating the reader’s understanding of the terms used on this website. They are general interpretations only and are not to be considered legal definitions.For additional information please call us at 416-665-3328.

 

Bankruptcy ChartConsumer ProposalInformal ProposalBankruptcyConsolidation Loan
Protects me from all my unsecured creditors:
Avoids having to sell my house to release any equity:
Stops interest from continuing to build:
Creditors are obliged to write off debt:
Creditors are forced to participate based on the Bankruptcy and Insolvency Act:
The arrangement runs for a fixed period:
Creditors will no longer pursue my case:
It avoids the stigma of bankruptcy:
My problem is kept private:
You only pay back a portion of your debt:

Bankruptcy Questions

  1. Do I have to pay a minimum portion of the debt I owe?
  2. Do I get to keep my assets such as a car, boat, or snow machine during a proposal?
  3. What assets will I lose if I go bankrupt?
  4. When can I purchase a car or acquire other assets such as a boat, home, etc..?
  5. What happens to our income tax returns and GST funds?
  6. Do I have to make payments to any creditors during my bankruptcy?
  7. Do I have to go to court?
  8. How do I pay the Trustee’s fees?
  9. Will I ever get credit again?
  10. Will debt consolidation and/or and Informal Proposal affect my credit rating?
  11. How long does it take to regain a good credit rating after a debt restructuring?
  12. What types of debt do you work with?
  13. Can my creditors take legal action to recover their debts such as seizing property or garnishing wages while a proposal is pending?
  14. Is debt restructuring possible when income is limited to an old age pension?
  15. Do you get to keep your credit cards?

Proposal Questions

Marriage Related Questions

  1. Is my spouse responsible to pay any loan that he/she might have co-signed for?
  2. Can only one person in a marriage file for a consumer proposal?
  3. If one person in a marriage has created the debt and the majority of it is in their name alone do they have to include the spouse in the process?
  4. Could I be held responsible for my spouse’s credit card debt if the cards are in his/her name only?

Student Loan Questions

  1. Do you take in government debt? I have student loans and debt with Revenue Canada.
  2. How are student loans affected by a proposal or a bankruptcy?
  3. Can I still get a student loan if I consolidate my debt?

Mortgage Related Questions

  1. Would your service prevent me from receiving a mortgage?
  2. Is it possible to include a loan secured against a mortgage in a consumer proposal?

Bankruptcy Questions

1. What is bankruptcy?
Bankruptcy affords the opportunity to a person, who is hopelessly burdened with debt, to free himself of the debt and start fresh – “a new lease on life.” To go into bankruptcy it is necessary for a person to be insolvent. To be insolvent means to:

  1. Owe at least $1,000;
  2. Not be able to meet your debts as they are due to be paid.

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2. What is a Licensed Insolvency Trustee?
Licensed Insolvency Trustees are the only Debt Consultants that are regulated by the government and have their fees set by the government.
The website of the Superintendent of Bankruptcy describes Licensed Insolvency Trustees as follows:

  • A Licensed Insolvency Trustee is a person licensed by the Superintendent of Bankruptcy to administer proposals and bankruptcies and manage assets held in trust. The Trustee can give a debtor information and advice about the proposal and bankruptcy processes and make sure that both the debtor’s rights and the creditor’s rights are respected.
  • A person has to use a Trustee if he or she goes bankrupt. However, trustees are not just for filing bankruptcy. They are also Professional Debt Consultants and can make arrangements with your creditors on your behalf; provide debt counselling; negotiate settlement agreements and help you make a proposal to your creditors to avoid bankruptcy. If a Trustee feels you need the protection of independent legal advice the Trustee will refer you to an insolvency lawyer. In some cases the Trustee will be able to advise you of a solution that will cost you nothing and have you avoid bankruptcy.

When dealing with a trustee you are protected as follows:

  1. By the fact that the federal government regulates trustees;
  2. By the stringent code of ethics to which all trustees are subject;
  3. If you have a dispute there is a mechanism in place to have the dispute mediated.

In most cases, It will cost you less to use a Trustee than other Debt Consultants since trustees have their fees regulated by the government.
Trustees are the most highly trained and educated Debt Consultants in Canada. Almost all Trustees have both an accounting designation and a university degree. In addition, all must complete and pass a rigorous three-year bankruptcy and law course and be investigated by the RCMP before being granted a trustee licence. Ongoing professional development is mandatory.
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3. Will my creditors stop harassing me?
Yes, they will! By law, all actions against a person filing a bankruptcy or a proposal must cease once the documents are filed. This does not apply to secured creditors such as banks holding, for example, a lien on a car, or a mortgage on a house.
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4. Who will know?
In a bankruptcy, where there are significant assets, a notice is placed in the “legals” section of the newspaper notifying creditors of the date of the meeting of creditors. If there are minimal assets, the creditors are notified by mail only – there is no advertisement in the “legals” section of the newspaper. Any legal filing of a bankruptcy is a public document, which the general public has access to. From this documentation, the Credit Bureau is notified and the bankruptcy is recorded and will remain on your credit record for 6 years. This does not mean that you cannot obtain credit during this time. Any granting of credit is the responsibility of the creditor to approve.
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5. Can my bank refuse to let me open a bank account or cancel my existing account?
No. They cannot. If your bank cancels or refuses to open a bank account for you because you have been or are in bankruptcy they are breaking the law. We always advise you to open a new bank account before filing a bankruptcy or a proposal at a bank that you have no debt with.
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6. What do I do if I have Canadian debt but now live in a foreign country?
You have a number of options, and may even be able to file a Canadian bankruptcy from that foreign country. You must have lived in Canada within 12 months before you file the bankruptcy or have business debts in Canada.
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7. How much am I allowed to keep?
The property exempt from seizure is set by the provinces and territories as follows In Ontario the following assets are exempt and cannot be seized by a trustee:

  1. Household Furniture valued to a maximum of $11,300.00
  2. Person Possessions (clothing etc.) to a maximum value of $5,650.00
  3. Tools of Trade to a maximum value of $11,300.00
  4. A car or truck to a maximum value of $5,650.00
  5. Certain life insurance policies and pensions
  6. Farmers tools to a maximum of $28,300.00

Please note that if you are self-employed your car or truck can sometimes also be considered as a Tool of Trade, which increases their exemption from $5,650.00 to $11,300.00. It is also possible to keep two vehicles – the first vehicle exempt, as a personal vehicle, the second exempt as a business vehicle.
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8. What don’t I keep?
In a bankruptcy, assets in excess of your allowed personal exemption, such as, real estate, automobiles and boats that are the property of the bankrupt as at the date of bankruptcy and anything that the bankrupt acquires during the bankruptcy vests in the trustee for the benefit of the creditors of the bankrupt. This would include inheritances received or to which the bankrupt might become entitled by the death of someone during the time of the bankruptcy. It also includes such things as lottery winnings and anything that the bankrupt might accumulate, such as assets bought with any surplus income.

Tax refunds outstanding, as at the date of the bankruptcy also vest in the trustee for the benefit of the creditors. The Income Tax Act requires a bankrupt debtor to file two tax returns for the year of the bankruptcy. The first (pre bankruptcy tax return) covers the period January 1st through to the date of bankruptcy. The second (post bankruptcy tax return) covers the period starting with the date of the bankruptcy and ending December 31st. Pre and Post bankruptcy tax rebates vest in the trustee for the benefit of the creditors. These bankruptcy period tax returns are normally prepared by the trustee at no cost to you.
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9. What is a proposal?
Under the Bankruptcy and Insolvency Act, a Trustee or an Administrator of Proposals files a Proposal or an arrangement between you and your creditors to have you pay off only a portion of your debts, extend the time you have to pay off the debt, or provide some combination of both. To be acceptable, your creditors must be better off under a Proposal than if you file a bankruptcy. There are two types of Proposals an individual can file:

  1. Consumer Proposal – A person is eligible if his total debts, excluding debts secured by a principal residence, do not exceed $250.000. The consumer proposals cannot be for more than five years. If the creditors do not accept the Proposal the debtor is not automatically bankrupt. Financial Counselling is required during the proposal.
  2. Other Proposal – There is no restriction on the amount a person owes. If the creditors do not accept the Proposal the person is automatically bankrupt effective as at the date of the creditors’ meeting. Counselling is not required during the proposal.

Please refer to the section of our website called “Alternatives to Bankruptcy” for more information about proposals.
Additional information please call 416-665-DEBT / 416-665-3328.
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10. Do I have to list all my debts?
Yes, you cannot select which debts you wish to include or not to include. You must list all debts even those owing to Canada Revenue Agency, friends, family, student loans etc. Certain debts even though they are listed in the bankruptcy and proposal may still be collected by creditor after the bankruptcy and proposal is finished – these are:

  1. Alimony and maintenance
  2. Child Support
  3. Fines or penalties imposed by a court
  4. Restitution orders
  5. Student loans if you were a student within the last 7 years
  6. Debts obtained by fraud or misleading representation

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11. What happens to my job?
The simple answer is – nothing. Bankruptcy and proposal does not affect employment and you cannot be fired because you filed an assignment in bankruptcy or a proposal. If you are bonded there may be restrictions from the bonding company, but that applies to very few people. The only reason for a trustee to contact your employer would be if your wages were being garnished. The trustee will stop the garnishee immediately after you sign the papers to start the bankruptcy or proposal, but the payroll department of your employer finds out about the bankruptcy or proposal when they are notified to stop the garnishee.
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12. What happen to the stress and pressure I am under?
The answer is easy – once you sign the papers to file either a bankruptcy or a proposal the stress and pressure is gone. The Trustee will file your papers in court to stop all legal proceedings, wage garnishee, etc. In addition the trustee will write to each of your creditors telling them they are only to deal with your Trustee. If a creditor or collection agency phones you – answer the call and tell them to phone the Trustee’s office.
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13. Do I have to pay a minimum portion of the debt I owe?
No. In a bankruptcy, you only have to turn over your surplus income as set out in the guidelines published by the Office of the Superintendent of Bankruptcy. The only other money which you might be paying to the trustee might be for the purchase of an asset that the trustee might otherwise be taking from you to sell. The amount is accumulated by the Trustee and distributed to your creditors after the trustee is discharged.

14. Do I get to keep my assets such as a car, boat, or snow machine during a proposal?
Yes, certain assets are exempt form seizure by the trustee (e.g. – car to value of $5,650.00) other assets (boat, snowblower, ATV, snowmobile may be covered by the personal possession exemption of $5,650.00.Even if the value of the assets exceeded the exemption limit most people simply pay the trustee the excess value over the exemption and keep the asset.
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15. Do I lose my furniture if I go bankrupt?
Not necessarily. If you have not pledged or given your furniture as collateral to any creditors, you are able to claim an exemption (or you are allowed to keep) up to $11,300.00 (of the resale value of the furniture). If you have given your furniture as collateral, you may want to negotiate a monthly settlement for its value with the security holder.
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16. What assets will I lose if I go bankrupt?
You lose whatever interest you may have in assets except furniture, personal effects, and tools of trade. These exceptions apply if you have not previously pledged or given those assets as collateral to various creditors. However, there are many situations where you may be able to keep vehicles, a house and other assets if the creditors agree. You should discuss these matters with the Trustee.
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17. When can I purchase a car or acquire other assets such as a boat, home, etc.?
Before your discharge is granted, you may lease or purchase assets from the exempt portion of your monthly income. This could include the purchase of cars, boats, RRSP’s, etc. After you are discharged there are no restrictions.
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18. What happens to our income tax returns and GST funds?
Any refunds that you may have from previous years will become an estate asset available to all your creditors. The tax return for the year in which you become bankrupt is also an estate asset. This includes the period from January until the date of bankruptcy (pre-bankruptcy return). A second tax return will have to be completed for the period from the date of bankruptcy to December 31 (post-bankruptcy return). Any refund will be assigned to the Trustee for the benefit of the creditors, whether you are discharged or not. GST funds are normally sent to the trustee for the period until the end of the calendar year of the year when you file the bankruptcy. When the trustee is discharged from the bankruptcy all or a portion of the GST will be paid to the debtor as a lump sum, the amount being paid will be directed by the court.
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19. Do I have to make payments to any creditors during my bankruptcy?
No, payments should only be made to the Trustee. Of course, ongoing living expenses (rent, mortgage payments, heat, hydro, water, telephone, car payments, food, clothing, etc. must still be paid.

The Courts and the Superintendent of Bankruptcy make use of an Income Standard that determines if you have a surplus income that should be paid into your estate. This Standard assesses your net family income, and sets the amount (if any) that you may have to pay into the estate. As the Standard changes yearly, the Trustee will assist you in determining what amount (if any) you will have to pay.
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20. Do I have to go to court?
What most people relate to as the Court Hearing is in fact the creditor meeting. Due to recent changes in legislation it is extremely unlikely that you will be required to meet with your creditors. However, if a creditor opposes your discharge, or if you were bankrupt previously, you will likely have to attend before
the Bankruptcy Court in your locality at the time of discharge.
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21. How do I pay the Trustee’s fees?
The Trustee is generally the first one to be paid out of the bankruptcy estate. Your estate is created from proceeds of tax returns, the sale of assets, payments to estate, etc. The fees are set by the Court and the Trustee must present his/her account to be approved by the Court. We do not wish to create undue hardship for our clients and will always allow you to pay for our fees or purchase of assets over the nine (9) month period of your bankruptcy.
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22. How long will the bankruptcy last?
If this is your first time filing for bankruptcy and you have no surplus income you will be automatically discharged nine (9) months after the date when you filed the bankruptcy.

If you are required to pay surplus income, payments are required for 21 months and you will be automatically discharged from bankruptcy at the end of the 21 months.

If this is your second bankruptcy you will be automatically discharged 24 months after the date when you filed the bankruptcy only if you do not have any surplus income obligations. If you are required to make surplus income payments to the estate, these payments must be made for 36 months and you will receive your discharge automatically after the 36th month.

Please note that any or all of the trustee, a creditor or the Superintendent of Bankruptcy can file a notice of Opposition to stop the automatic discharge. The Trustee would normally file the Notice of Opposition if the debtor does not fulfilled all their obligations (e.g. – made all required payments, supplied all information requested, attended counselling sessions on time, etc.) The creditor or Superintendent of Bankruptcy would normally file an opposition if there were exceptional circumstances to the bankruptcy (e.g. abuse of the system, public interest considerations, etc.) or if they felt that the debtor could have filed a proposal but failed to do so. If a proposal was viable but the debtor failed to file a proposal, the trustee would normally request mediation with the Official Receiver. Ultimately the Trustee may request a hearing in court in order to have the court rule on the discharge of the debtor – ie- grant or refuse the discharge or suspend the date that the discharge becomes effective or attach other conditions that the debtor must meet in order that he/she becomes discharged.
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23. Will I ever get credit again?
During the two (2) financial counselling session that we will give you during your proposal or bankruptcy we will train you on what you have to do in order to re-establish your credit. In addition we will refer you to specific lenders that we deal with if you want to purchase a car or a house and need financing.
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24. Will debt consolidation and/or and Informal Proposal affect my credit rating?
Different restructuring options have different effects on your credit rating. As a general rule any time you settle your debts at less than 100 cents on the dollar it will have a negative effect on your credit rating. For many, the question that must be asked is: is it worth it to take a hit on your credit rating to avoid paying back the money you owe? Any debts included in a Bankruptcy will show up on your credit bureau as an R9 (Bad debt; placed for collection; moved without giving a new address) while debts settled through an Informal Proposal appear as an R7 (Making regular payments through a special arrangement to settle debts).
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25. How long does it take to regain a good credit rating after a debt restructuring?
The only way a person can rebuild their credit is to obtain new credit and then use it responsibly. The ability for a debtor to rebuild their credit after debt restructuring will depend on many factors. For instance, it will depend on what type of debt restructuring the debtor has done as some are more damaging to a person’s credit report than others. Some types of debt restructuring can have the debtor start almost immediately while others cannot begin for up to 36 months.

It will also depend on how diligent a person is on reestablishing their credit rating and whether you have someone who is familiar with the credit system assisting you in ensuring you are doing the right credit rebuilding activities at the right time.

If you had a credit rebuilding plan and followed the steps it should take a debtor about 2 to 4 years to rebuild their credit.
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26. What types of debt do you work with?
We handle nearly every kind of debt imaginable, including credit card debt, bad loans and more.
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27. Can my creditors take legal action to recover their debts such as seizing property or garnishing wages while a proposal is pending?
We have found in the past that debtors who try to negotiate on their own debts through Informal Proposals don’t always understand the process and in many cases find that although they thought they had settled their debts now owe the unpaid balance. There is no guarantee that a creditor will not pursue legal action against a debtor while in negotiations but this process is very rare. In most cases the creditors will work through the negotiation process first before considering legal action. If a lump sum payment is accepted and the proper paper work for the Informal Proposal is processed they cannot come back to pursue the debtors assets.
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28. Is debt restructuring possible when income is limited to an old age pension?
The type of income a debtor receives does not limit the ability for debtors to carry out different restructuring options. In all cases, regardless of how a debtor feels, it’s about looking at all of the options available and then having the debtor choose the option that they feel works best for them based on their current circumstances.
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29. Do you get to keep your credit cards?
This largely depends on the type of restructuring used. If you file into Bankruptcy, as a requirement of the Bankruptcy you must give up all forms of credit. A Consumer Proposal only deals with unsecured debt with a positive balance – meaning if you have a credit card with a zero balance and you did not have other debts with this institution it would not be included in the proposal, and it would be free for use as a tool after the Consumer Proposal has passed to rebuild your credit. With Informal Proposals you have the option to deal with each debt individually, so cards which are not included in the restructuring would be free for you to retain.
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Proposal Questions

1. Will my creditors stop harassing me?
Yes, they will! By law, all actions against a person filing a bankruptcy or a proposal must cease once the documents are filed. This does not apply to secured creditors such as banks holding, for example, a lien on a car, or a mortgage on a house.
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2. Can my bank refuse to let me open a bank account or cancel my existing account?
No. They cannot. If your bank cancels or refuses to open a bank account for you because you have been or are in bankruptcy they are breaking the law. We always advise you to open a new bank account before filing a bankruptcy or a proposal at a bank that you have no debt with.
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3. How much am I allowed to keep?
The property exempt from seizure is set by the provinces and territories as follows In Ontario the following assets are exempt and cannot be seized by a trustee:

  1. Household Furniture valued to a maximum of $11,300.00
  2. Person Possessions (clothing etc.) to a maximum value of $5,650.00
  3. Tools of Trade to a maximum value of $11,300.00
  4. A car or truck to a maximum value of $5,650.00
  5. Certain life insurance policies and pensions
  6. Farmers tools to a maximum of $28,300.00

Please note that if you are self-employed your car or truck can sometimes also be considered as a Tool of Trade, which increases their exemption from $5,650.00 to $11,300.00. It is also possible to keep two vehicles – the first vehicle exempt, as a personal vehicle, the second exempt as a business vehicle.
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4. What is a proposal?
Under the Bankruptcy and Insolvency Act, a Trustee or an Administrator of Proposals files a Proposal or an arrangement between you and your creditors to have you pay off only a portion of your debts, extend the time you have to pay off the debt, or provide some combination of both. To be acceptable, your creditors must be better off under a Proposal than if you file a bankruptcy. There are two types of Proposals an individual can file:

  1. Consumer Proposal – A person is eligible if his total debts, excluding debts secured by a principal residence, do not exceed $250.000. The consumer proposals cannot be for more than five years. If the creditors do not accept the Proposal the debtor is not automatically bankrupt. Financial Counselling is required during the proposal.
  2. Other Proposal – There is no restriction on the amount a person owes. If the creditors do not accept the Proposal the person is automatically bankrupt effective as at the date of the creditors’ meeting. Counselling is not required during the proposal.

Please refer to the section of our website called “Alternatives to Bankruptcy” for more information about proposals.
Additional information please call 416-665-DEBT / 416-665-3328.
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5. Do I have to list all my debts?
Yes, you cannot select which debts you wish to include or not to include. You must list all debts even those owing to Canada Revenue Agency, friends, family, student loans etc. Certain debts even though they are listed in the bankruptcy and proposal may still be collected by creditor after the bankruptcy and proposal is finished – these are:

  1. Alimony and maintenance
  2. Child Support
  3. Fines or penalties imposed by a court
  4. Restitution orders
  5. Student loans if you were a student within the last 7 years
  6. Debts obtained by fraud or misleading representation

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6. What happens to my job?
The simple answer is – nothing. Bankruptcy and proposal does not affect employment and you cannot be fired because you filed an assignment in bankruptcy or a proposal. If you are bonded there may be restrictions from the bonding company, but that applies to very few people. The only reason for a trustee to contact your employer would be if your wages were being garnished. The trustee will stop the garnishee immediately after you sign the papers to start the bankruptcy or proposal, but the payroll department of your employer finds out about the bankruptcy or proposal when they are notified to stop the garnishee.
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7. What happen to the stress and pressure I am under?
The answer is easy – once you sign the papers to file either a bankruptcy or a proposal the stress and pressure is gone. The Trustee will file your papers in court to stop all legal proceedings, wage garnishee, etc. In addition the trustee will write to each of your creditors telling them they are only to deal with your Trustee. If a creditor or collection agency phones you – answer the call and tell them to phone the Trustee’s office.
Top of Page

8. Will I ever get credit again?
During the two (2) financial counselling session that we will give you during your proposal or bankruptcy we will train you on what you have to do in order to re-establish your credit. In addition we will refer you to specific lenders that we deal with if you want to purchase a car or a house and need financing.
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9. How long does it take to regain a good credit rating after a debt restructuring?
The only way a person can rebuild their credit is to obtain new credit and then use it responsibly. The ability for a debtor to rebuild their credit after debt restructuring will depend on many factors. For instance, it will depend on what type of debt restructuring the debtor has done as some are more damaging to a person’s credit report than others. Some types of debt restructuring can have the debtor start almost immediately while others cannot begin for up to 36 months.

It will also depend on how diligent a person is on reestablishing their credit rating and whether you have someone who is familiar with the credit system assisting you in ensuring you are doing the right credit rebuilding activities at the right time.

If you had a credit rebuilding plan and followed the steps it should take a debtor about 2 to 4 years to rebuild their credit.
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10. What types of debt do you work with?
We handle nearly every kind of debt imaginable, including credit card debt, bad loans and more.
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11. Can my creditors take legal action to recover their debts such as seizing property or garnishing wages while a proposal is pending?
We have found in the past that debtors who try to negotiate on their own debts through Informal Proposals don’t always understand the process and in many cases find that although they thought they had settled their debts now owe the unpaid balance. There is no guarantee that a creditor will not pursue legal action against a debtor while in negotiations but this process is very rare. In most cases the creditors will work through the negotiation process first before considering legal action. If a lump sum payment is accepted and the proper paper work for the Informal Proposal is processed they cannot come back to pursue the debtors assets.
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12. Is debt restructuring possible when income is limited to an old age pension?
The type of income a debtor receives does not limit the ability for debtors to carry out different restructuring options. In all cases, regardless of how a debtor feels, it’s about looking at all of the options available and then having the debtor choose the option that they feel works best for them based on their current circumstances.
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13. Do you get to keep your credit cards?
This largely depends on the type of restructuring used. If you file into Bankruptcy, as a requirement of the Bankruptcy you must give up all forms of credit. A Consumer Proposal only deals with unsecured debt with a positive balance – meaning if you have a credit card with a zero balance and you did not have other debts with this institution it would not be included in the proposal, and it would be free for use as a tool after the Consumer Proposal has passed to rebuild your credit. With Informal Proposals you have the option to deal with each debt individually, so cards which are not included in the restructuring would be free for you to retain.
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Marriage Related Questions

1. How is my spouse affected?
Your spouse, whether common law or married will not be affected by your bankruptcy if he or she is not responsible for any of your debt (did not sign an agreement or contract for any of your debt). If they have a supplemental credit card they are probably responsible for that debt. Your spouse’s credit rating will not be affected by your bankruptcy and any assets in the spouse’s name will not be part of the bankruptcy. If your spouse is responsible for any of your debt or has his/her own debt then the spouse may have to file bankruptcy too.
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2. Is my spouse responsible to pay any loan that he/she might have co-signed for?
Yes. Bankruptcy does not eliminate the debt or other obligations of a spouse, only the obligations of the bankrupt. Any other party that is not bankrupt is responsible for paying their debts as they normally come due. As a result, it may be necessary for your spouse to consider other options.
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3. Can only one person in a marriage file for a consumer proposal?
If an individual debtor files for protection from their creditors in either a Bankruptcy or a Consumer Proposal then all the assets of the debtor and any joint assets must be listed in the documentation. In addition, for the purposes of preparing a Consumer Proposal the incomes of both the debtor and his or her spouse must be listed.
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4. If one person in a marriage has created the debt and the majority of it is in their name alone do they have to include the spouse in the process?
The spouse of a person who is in financial trouble does not have to be part of the process but certain aspects of their joint life must be disclosed as part of the process. This would include all assets that are considered “joint assets” where both names appear to own it, joint liabilities where both names are responsible for the debt and the combined income of the family. In most cases the spouses name may appear on the documents but he or she would generally not be required to meet with the Trustee, creditors (if applicable) or attend any meetings. In addition, nothing would appear on his or her credit rating except the history of any joint debts affected by the restructuring. In some cases the spouse then becomes 100% financial responsible of the joint debt once the person in trouble has settled with his creditors but this depends on whom the creditors are.
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5. Could I be held responsible for my spouse’s credit card debt if the cards are in his/her name only?
A person cannot be held responsible for someone else’s debt unless they have done the following:

  1. Both parties have signed for the credit card as a co-applicant
  2. The principle card holder has requested a supplement credit card for the spouse

If the spouse or common law partner does have a supplement credit card then we commonly use this questionnaire to determine if a supplement card holder is responsible for the debt:

  1. Does the credit card statement come in one name or both names?
  2. Does the spouse have a supplement credit card, if so, has it ever been used?
  3. Did both people sign up for the credit card as co-applicants?

Obviously, the more times you answer “Yes” the more likely you are to be responsible for the debt. It is important to note that there are “no hard fast rules” as some creditors will pursue supplement credit card holders while other creditors will not. In many cases it is as important to know who the creditor is as the outcome of the questionnaire.
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Student Loan Questions

1. Do you take in government debt? I have student loans and debt with Revenue Canada.
Depending on the age of the student loan (you must be out of school for the past 7 years) and Canada Revenue agency debt, (it must be either personal taxes or Director Liabilities) they can be included in different restructuring options. Certain types of debts may not be included in restructuring but these are considered and reviewed on a case by case basis.
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2. How are student loans affected by a proposal or a bankruptcy?
It depends on the age of the student loan. If it has been longer than 7 years since the last time you attended school then it is considered unsecured and therefore can be included in a Consumer Proposal or Bankruptcy. If the time is less than 7 years then it is protected by laws that protect the student loans from being included.
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3. Can I still get a student loan if I consolidate my debt?
This will depend on what type of student loan you are planning to apply for and the severity of the type of restructuring you do.
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Mortgage Related Questions

1. Would your service prevent me from receiving a mortgage?
As a general rule if you pay less than 100% of the balance owing to a creditor it will have a negative effect on your credit rating. In many cases it has been our experience that many debtors already have tarnished credit ratings before considering their options and seeking assistance to deal with their financial situation. There are 3 factors that affect the ability for someone to obtain a mortgage: credit rating, employment income, and the down payment. Most lending institutions use the Beacon Score to evaluate the debtors capability to obtain mortgages. Typically a Beacon Score of 650 or higher means a debtor can qualify without too many restrictions.
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2. Is it possible to include a loan secured against a mortgage in a consumer proposal?
If you do have a large loan that is secured against your house you should verify by obtaining a residential property search that can be conducted in every province in Canada. The fee is normally around $30 for such a service but it will list your residential home and any loans that are currently registered against if. If the loan is secure then it cannot be included in a Consumer Proposal as these are only capable of dealing with unsecured debts.
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