You just got a letter/phone call about an old debt that you owe. The first consideration is to determine if you owe the money. If you do not owe the debt, simply tell the collection company that you do not owe the money. Ask them to send you copies of any documentation that proves otherwise. When they say that they do not have to send you any papers or that they do not have to prove to you that you owe the money – be very clear – yes, they do have to prove that you owe the money and if they refuse to prove it, you will not pay them any money. In other words, you are not refusing to pay what you owe, but you are legally entitled to know what you owe and to whom you owe it to.
In Ontario, there is a law called The Limitations Act of Ontario which stops a creditor from suing you if your debt is over two (2) years old. The debt is still owing, of course, but the creditor cannot go to a court to collect the debt. You must be aware that if you acknowledge the debt in any way, the two-year period starts all over again. Also note that the credit bureau (Equifax Canada and Trans Union of Canada) will still list the delinquent account for six years as an R9 bad debt which will keep your credit score low. Certain debts are not subject to the two-year limitation period – these include income tax, government guaranteed student loans, child support arrears, etc.
Other provinces/territories have similar limitation periods. Ontario, Alberta, British Columbia and Saskatchewan are all two years. Quebec’s limitation is three years. The rest of Canada is six years.
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.
Absolutely not. Your bankruptcy is yours alone. Your family is only involved when it comes to the preparation of your budget. The budget is based on family income (your income and that of your spouse or partner plus any child tax credit being received) and the family living expenses. When listing the family expenses, there is also shown the cost of your child’s allowance, school and sports fees. As long as the expenses are reasonable, there is never an issue with the creditors.
I just got married and I was wondering if I am responsible for my partner’s old debts? The short answer is no. Just because you married each other, this does not mean that you have any liability to pay anything from your partner’s old debts. The old debts were his/hers before you got married – the liability to pay the old debts does not change. A word of caution. Do not sign anything that commits you to pay anything against your partner’s debts and do not request or accept a spousal credit card from your new partner. Keep your finances separate.