If I am in financial trouble, do I have to go see (and pay) a consultant before I speak with a Licensed Insolvency Trustee? You do not have to use a consultant of any kind before speaking with a trustee and considering filing an Assignment in Bankruptcy or a Consumer Proposal. There may be a level of comfort in speaking with a consultant who is not in an officer of the court and may be able to communicate with you in your native language, but, this is a choice that you make that has a cost attached to it. You are paying a consultant for their opinion about your situation and then you still have to pay the trustee who is going to do the work. Sometimes you are simply paying two people to get a second opinion before you make a very serious decision of what to do with your life going forward.
When you file a Consumer Proposal in Ontario, there is a hold on all legal proceedings that your creditors can take against you. Interest on all debts stop as of the day the court accepts the Consumer Proposal and confirms the appointment of your Licensed Insolvency Trustee who acts as the Administrator of your proposal. If the creditors accept the offer in your proposal, then your only obligation is to make payments in accordance with the terms of the proposal, which may or may not include an interest factor. If the creditors refuse your proposal, then you have options. Normally, your trustee will contact the creditors who refused to agree to your proposal and ask what they would accept in payments to change their decision. This may take several months of negotiating back and forth. You want to pay as little as possible. Your creditors want as much as possible. Somewhere in the middle is what is reasonable in these circumstances.
In cases where no proposal can be negotiated with the creditors and the proposal is refused by a majority of creditors, then you, as the person filing would be back at square one. The full rights of all creditors are reinstated and their right to claim interest is back to the day you filed the Consumer Proposal when the interest was stopped. If you subsequently file another proposal or a bankruptcy, the interest stops again.
Contact Rumanek & Company Ltd. for more information on bankruptcy in Ontario and debt solutions. Please fill out the bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome personal bankruptcy in Ontario for more than 25 years.
You have graduated from University and have been unable to find a good paying job in your area of expertise. The periods of non-repayment and interest relief of your student loan debt have been maxed out. You are starting to get letters and/or phone calls from a collection agency. A friend tells you that he was in the same situation last year. He solved his problem by paying his student loan payments with his credit card. His logic was that the collection agency got off his back and he had no stress. If he got a good job, there would be enough money to pay everyone – even though he knew that the interest on the credit card was higher than the interest on the student loan. Plus, he got “points” on his credit card. The friends’ research pointed out that if he ever had to go bankrupt in the future, all of the credit cards debt should be included in the bankruptcy but student loans could not be included in the bankruptcy unless he was out of the school for more than seven years. He had the ultimate “win-win” situation.
Well, not quite. The interest rate on the average credit card is so high in relation to the interest on student loan debt, that any benefit from “points” is insignificant. If you do wind up filing an assignment in bankruptcy and your trustee (or the creditors) determine that you intentionally converted your student loan debt to credit card debt, be prepared for there to be an examination under oath before an Official Receiver (a representative of the Office of the Superintendent of Bankruptcy) who may recommend an opposition to your discharge from bankruptcy. At the very best, you will have to convince the licensed insolvency trustee/creditors/court that you had every intention of paying your debts and it was only a change in your financial circumstances that caused you to file the bankruptcy. As the worst, there will be a finding of an intent to commit fraud – a debt for fraud is not discharged in bankruptcy.
If the above is similar to your situation, please have a discussion about it with your trustee before signing any papers.
Will I lose my RESP if I file a Consumer Proposal?
No, you will not lose an RESP in a Consumer Proposal. In a Consumer Proposal, you are making an offer to your creditors to settle your debt to them based on the terms of your offer. The terms of your offer is usually that you are prepared to pay a percentage of your debts over a period of time–usually 60 months with no interest. It is rare that the creditors will ask that you collapse the RESP to pay the money into the proposal. Even if they ask, you have the right to refuse.
Please see related article – Will I lose my RESP in a Bankruptcy?