I filed a Consumer Proposal and my trustee tells me that he has to file an Administrator’s Report. What is this?
Your trustee is acting in this situation as the Administrator of your proposal. As such, there is a requirement under the legislation that he submits a report to your creditors:
The proposal was filed with the Officer Receiver who represents the Office of the Superintendent of Bankruptcy
Your financial situation and assets listed on your documents are reasonable
Your list of creditors (with balances higher than $250) is reasonably accurate
Explains what is the cause of your financial problems
A brief summary of your net income per month, type of employment, the fact that you do not wish to file a bankruptcy and the amount that the creditors will receive in the proposal. If you and your partner are filing individual proposals at the same time, the joint creditors will be notified of the concurrent proposal so that they realize that they receive payments from both proposals. If the administrator has determined that the payment in the proposal is lower than the creditors would receive in a bankruptcy, there is an obligation to disclose that fact but add any mitigating factors for the creditors to consider before deciding whether or not to vote for or against your offer.
In many cases, the creditors start reviewing your proposal by reading the Report of the Administrator. It is a very important document.
What is debt exclusion from bankruptcy? A bankruptcy or proposal will get rid of most of your debts, but not necessary all of them. This is because certain debts are secured to your assets. The most common being a mortgage on your home or a loan on your car. If you want to keep the house or car, you must continue to pay the debt secured to the asset. In addition, other debts listed in Section 178 of the Bankruptcy and Insolvency Act specifically exclude certain debts from being included in bankruptcy as a matter of public policy.
These debts include spousal support, child support, debts originating in fraud, debts incurred while acting in a fiduciary capacity. These also include debts resulting from an assault, fines and penalties awarded by a court (income tax, traffic and criminal). Finally, student loans are not included in your bankruptcy unless you have not been a student for seven years. However, in cases of severe hardship, a court can reduce the seven year limit to five years.
What can I do if I cannot make my student loan payments?
Thousands of Canadians cannot afford to pay their student loans. The law in Canada punishes anyone making a consumer proposal or filing for personal bankruptcy if they recently stopped being a full-time student. Student loans are not forgiven unless a person can satisfy the 7-year waiting period or the discretionary 5-year waiting period based on financial hardship.
If you cannot make your monthly student loan payments then you do have a number of options:
Firstly, your lender might offer a number of debt relief options. Secondly, it might be to your advantage to make small token monthly payments. Thirdly, if you have not made a payment on your student loan for a minimum of six months you can explore negotiating a one-time lump sum payment as settlement in full—sourcing funds from family members or the sale of an asset.
Finally, you might want to consider credit counselling as a “bridging strategy”. Credit counselling might help you reduce your monthly payments on your unsecured consumer debt—but not your student loan -which might significantly improve your cash flow situation. Some Canadians seeking personal bankruptcy or a consumer proposal will use credit counselling until they satisfy the all-important 7-year waiting period.
If you want to make a consumer proposal or file for personal bankruptcy and you have ceased attending school a minimum of 5 years—but not 7 years–then you can bring a motion before a judge who has a discretion to grant you a discharge on the grounds of financial hardship.
We have written many articles over the years about student loans. We recently found the enclosed article which details the history of student loans and bankruptcy in Canada. It is reproduced in its entirety: