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.
How can I avoid paying a debt due to the passage of time?
In Ontario, where a consumer has an unsecured consumer debt, the creditor must sue the consumer within two years of the date of last payment, otherwise the creditor might find it very difficult, if not impossible, to recover any monies from the consumer. An Ontario resident can only take advantage of Ontario’s two year statute of limitations to avoid paying a debt to a creditor on unsecured consumer debts. This protection is not available for the following types of debts:
Monies owing to the government
Spousal support and child support obligations
The clock on Ontario’s two-year statute of limitations begins to run on the date of last payment. A consumer can restart the clock during this two-year window by either making a partial payment or making a written acknowledgement of the debt. On the date that the two-year statute of limitations expires the consumer’s financial obligation does not magically disappear. The expiry of the two-year limitation period, however, does provide the consumer with an affirmative defence in the event that the creditor were to sue the consumer.
If a creditor were to sue a consumer after the expiry of Ontario’s two-year statute of limitations the consumer simply has to file a defence pleading the expiry of Ontario’s two-year limitation period and the creditor would lose its lawsuit. Creditors rarely sue consumers on unsecured consumer accounts more than two years after the date of last payment.
Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the <a href="https://www.rumanek their explanation.com/contact/free-evaluation-form/”>free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.
I have a Tax Free Savings Account (TFSA) but my debts total more than I have the ability to pay. I do not want to file a bankruptcy and am considering a proposal. Can my creditors force me to cash the TFSA as part of the proposal?
The short answer is “no.” When making a proposal you are offering a settlement to your creditors which they either accept or refuse. In your case if the creditors know you have the TFSA they may refuse to accept your original proposal and ask you to resubmit your proposal with an initial lump sum presumably coming from the TFSA But, once they refuse the original proposal it is your choice if you decide to make a second offer and it is their choice whether or not to accept a second (or third) offer.
Remember the creditors are only trying to recover as much of their debt as is possible. It is all about negotiating the amount that they are willing to settle for. That is the job that the Administrator of your proposal is doing for you.
Many people who are in financial difficulty are seeking help from credit counselors and debt management companies. Some of these companies are not-for-profit, others are for-profit. As a person in trouble how do you know who you are dealing with- more important- are they properly trained and is their primary purpose to help you or just charge you a fee. Notwithstanding your mental state before you sign their papers ask as many of the following questions as possible and make sure you are comfortable with the answers.
– Are the persons you are talking with properly trained?
– Are they a certified credit counselor?
– Are they designated as having completed Accredited Financial Counselor Canada (A.F.C.C.) course of study?
– Have they completed the Insolvency Counselors Qualification Course from the Canadian Association of Insolvency and Restructuring Professionals and the Office of the Superintendent of Bankruptcy (Industry Canada)?
1. Is the company the credit counsellor works for a not-for-profit company or a for-profit company?
2. Is the company licensed by either the Federal or Provincial government to provide service to you? Do not confuse being licensed with a voluntary membership in an association such as the Better Business Bureau.
3. Does the company have an initial “no charge’ counselling policy or do you feel intimidated to “sign up” by their counsellor?
4. Is the company paid in full or in part by your creditors for any service they provide to you?
5. Are you expected to pay any fees to the company in addition to the settlement reached with your creditors? If so, ask how much are you required to pay and when do you have to pay the fees?
Assuming you sign up with the company:
-When do they notify your creditors that you are in their “debt program”?
– When does interest stop on your debts?
– What is the effect on your credit rating?
– Does the company notify Equifax Canada and/or Trans Union of Canada at the start and on the completion of your proposal to you creditors?
– Will the company immediately stop all lawsuits and pay garnishees against you? Some companies wait until your fee to the company is paid.
– Do you get copies of all documents?
– If money is paid to the debt management company for distribution to your creditors is the money held in a trust and bonded account?
– Are you entitled to receive a copy of the accounting of fees to the company and payments made to your creditors?
– Is the company licensed? If so –by who?
– Will the company put all of their answers to you in writing (before you sign up with them) and allow you to go home and decide what is in your best interest to do?
After the Debts Are Paid
Will the company and the credit counsellor work with you to reestablish yourself financially? Do they provide any scheduled financial counselling meetings while you are in their program? Will they assist in obtaining a credit card or improving your credit rating?
You are trusting yourself to someone you have only just met. Trust your instincts that you are dealing with the right persons at the best company for you.