Under the Ontario Business Corporations Act, you are not allowed to be a director of a corporation while you are in the bankruptcy process. During the period from the date when you sign the initial bankruptcy papers to the date when you are discharged from your bankruptcy, you must not be a director of any corporation, whether for profit or not. If you are a director of your church via a Not-For-Profit corporation, you should resign your position as a director. As soon as you are discharged from your bankruptcy, you may become a director again. Note that this does not apply if you are filing a Consumer Proposal – it only applies to a bankruptcy.
When you file an Assignment in Bankruptcy, you must assume that your creditors will do a computer search within their bank system. If you are a director of your church, a letter will be sent to the church by your creditor requesting clarification of your status. In extreme circumstances – if your church has a bank loan, the bank may reduce the authorized total loan available to the church or ask that the loan be paid off. Unfortunately, the letter will be sent to the person at the church who normally deals with banking matters. It may or not be you.
Discussing this with your trustee before you file the bankruptcy papers will save on the embarrassment later.
Bankruptcy is a legal process governed by the Bankruptcy and Insolvency Act for a person who can no longer pay back debt. The person who owes the debt assigns all assets — with some exceptions which are governed by Provincial legislation — to a trustee in bankruptcy who sells the assets that are not exempt to help pay your debt to the creditors.
A Consumer Proposal is a formal offer by a debtor to creditors. This may include an offer to pay a percentage of the debt, pay back the debt over a period of time (maximum of 60 months), or some combination of both.
This option is available to individuals whose total debt does not exceed $250 000, not including debts secured by their principal residence.
Division I (Commercial) Proposal
A Division I (Commercial) Proposal is a formal offer by a debtor to creditors. This may include an offer to pay a percentage of the debt, pay back the debt over a longer period of time, or both. Unlike a consumer proposal there is no limit with respect to how much money is owed, nor is there a limit to the number of months that you may choose to make in your offer to make monthly payments.
Just because you are over 65 years old does not mean you cannot file an assignment in bankruptcy. If you are unable to pay your debts as they normally come due, the debts total more than $1,000 and your liabilities are greater than your assets – you have passed the test of insolvency and are entitled to file an Assignment in Bankruptcy. The question then becomes – should you do so. If your income is only from Canada Pension or Old Age Security, you are protected as these cannot be seized or garnished by a creditor. Note that once your pension is deposited to your bank account, it becomes co-mingled with other monies and loses the identity of its origin. Your bank account could be garnisheed regardless of the source of the money. Therefore, never give a creditor information about where you bank.
The biggest reason why seniors declare bankruptcy is to stop the harassment of telephone calls and letters from collection companies and creditors. The bonus is that no creditor is allowed to start a lawsuit or continue one (if they have already started) as of the day you file the Assignment in Bankruptcy.
Well, it happened. You racked up a lot of debt and you now have to deal with it. You have decided that you are capable of making a settlement with your creditors by offering to pay a portion of your total debt over a period of time (usually 60 months with no interest) using a Consumer Proposal. At least, you can avoid bankruptcy.
Setting up the Consumer Proposal is done with the assistance of a Licensed Insolvency Trustee (formally called a Trustee in Bankruptcy) or some other qualified person. They will review your assets, liabilities, income and expenses to come up with a plan that your creditors will be likely to accept. Beware of anyone who advertises that they can reduce your debts by “up to 80%” before they meet with you and review your specific situation. Sometimes, you might be able to make a small down payment using money in an RRSP, cash surrender value of life insurance, etc. Sometimes, your budget is not stable because you only have full time seasonal work. Construction workers, roofers, road pavers, usually only work 8 or 9 months per year and it is common to structure their Consumer Proposals over a 60-calendar month period (the maximum allowed by law) but only require that monthly payments only be made in 8 specific months each calendar year. You might also have a steady job and be able to make payments for all 12 months each year. You might want to pay off the Consumer Proposal faster than the 60 months in order to assist you in rebuilding your credit faster and cleaning up your credit report. No problem – simply put a clause into your proposal that allows you to do this at your option at any time with no advance notice or penalty of any kind. The creditor will always agree as they may get their money sooner than they expected.
A Consumer Proposal is not for everyone. But if you wish to customize it to meet your specific situation, if can be done.