We regularly get asked common questions that are listed below. If your question isn't listed below, please ask us.
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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:
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:
When dealing with a trustee you are protected as follows:
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.
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.
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.
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.
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.
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:
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.
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.
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 Proposal than if you file a bankruptcy. There are two types of Proposals an individual can file:
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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).
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.
We handle nearly every kind of debt imaginable, including credit card debt, bad loans and more.
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.
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.
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.
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.
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.
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:
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.
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:
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:
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.
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.
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.
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.
We handle nearly every kind of debt imaginable, including credit card debt, bad loans and more.
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.
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.
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.
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.
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.
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.
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.
A person cannot be held responsible for someone else’s debt unless they have done the following:
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:
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.
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.
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.
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.
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.
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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