We've Got Answers to Your Questions
about Debt Reduction Solutions
Below are some of the most common questions we answer about Personal Bankruptcies and Consumer Proposals. Please remember that the rules covering both are complicated, and that because everyone's debt reduction or debt relief solution is different, our answers here can only be brief general outlines.
We recommend that you meet with one of our experienced trustees to discuss your particular situation.
About Bankruptcy...
|
About Consumer Proposals... |
|
|
|
Common Questions on Personal Bankruptcy
What is bankruptcy?
Bankruptcy is a legal process, regulated by the Federal Government that stops any legal action by creditors and allows a person to be discharged from most, if not all, of their debts.
Who can file for bankruptcy?
In order to declare bankruptcy an individual must:
- owe at least $1000
- be unable to pay their bills as they generally become due
- be insolvent
How long will I be in bankruptcy?
The bankruptcy process is normally 9 months long, if you have never been bankrupt before. When the bankruptcy is over, your debts are discharged by law (you no longer have to pay back your debts). There are some exceptions to this debt solution, and we will explain these to you when we meet.
If you have been bankrupt before, or you do not perform your duties in the bankruptcy or if someone opposes your discharge, then instead of your discharge being given automatically at the end of nine months, the bankruptcy court will decide what type of discharge you will receive.
Will notice of my bankruptcy be published in the newspaper?
No. For most consumer debt bankruptcies, no notice is required by law to be published.
Will my creditors stop calling me?
Yes. Our office will deal with your creditors. By law, actions against you cease when bankruptcy is filed. This includes garnishees, judgements and other legal actions.
What assets can I keep?
You are allowed to keep a reasonable amount of personal effects, household furnishings, and one motor vehicle worth $3,000 or less, if there are no liens on the vehicle.
What if there is a lien on my vehicle?
You may be able to keep assets that you have pledged to creditors, such as a car, however, in these cases you will have to negotiate with the creditor directly. In some cases you may be able to keep a car even if you have pledged it as collateral if you require the car for work and the car is worth $6500 or less. We will explain the provincial laws to you when you attend the free consultation.
Will I lose my house if I file for bankruptcy?
You may be able to keep your house if you file for bankruptcy. This is a complicated area and depends on a number of things, including the amount of equity in the home and if the mortgage holder would be agreeable to letting you keep it. Each situation is different and your home will be discussed when you meet with us at the consultation.
How will my credit rating be affected?
You will have an R9 credit rating at the credit bureau for a period of 7 years from the day you sign for bankruptcy. While obtaining credit after a bankruptcy will be difficult, it will not be impossible. You are required to attend 2 financial counseling sessions during the bankruptcy which will teach you to use credit wisely in the future.
What about student loans?
If the date of bankruptcy is more than 10 years after you completed your studies, the debt will be discharged with the bankruptcy.
Common Questions on Consumer Proposals
What is a consumer proposal?
A consumer proposal is a formal offer made by a debtor to his/her creditors to settle the debts on debt reduction terms he/she can afford and which the creditors are willing to accept.
Who can make a consumer proposal?
A consumer debtor who is insolvent and whose debts are less than $75,000 excluding their home mortgage can file a consumer proposal as a debt solution.
How do I make a consumer proposal?
You must first decide on what kind of offer you can make to your creditors. Next, you should meet with a trustee to discuss your offer. The trustee will help you prepare the proposal documents and lodge them with the Federal government.
Will my creditors stop calling me?
Yes. By law, actions against you cease once the proposal is filed. This includes garnishees, judgements and other civil legal actions.
How long must I wait to see if my proposal has been accepted?
First, you must wait 45 days to see if your creditors accept your offer. During that time a meeting of your creditors may be called to discuss your proposal. The creditors will vote to accept or reject your proposal. If the majority of your creditors accept the proposal, you must wait an additional 15 days to see if a creditor or other interested party wishes a bankruptcy court to review your offer for its reasonableness. In general, a total of 60 days is required.
To whom do I make my proposal payments?
Once your proposal is accepted, you make all payments to our office. As an officer of the court, we administer your funds and distribute them evenly to your creditors.
What happens if my proposal is rejected?
If the majority of your creditors or the court refuses your proposal, it has failed and you are back to square one again. The creditors rights are revived and the calls and garnishments may start again.
What happens if I cannot fulfill the terms of my proposal?
If you make a debt reduction proposal which is accepted by the majority of your creditors you must keep your promises to them. If you cannot, you may decide to amend your proposal, failing which your proposal will be deemed annulled and your creditors are free to start legal action again.
What happens once my proposal has been completed?
You will receive a "Certificate of Compliance" from our office which is your proof that the proposal has been completed. Any remaining balances owing to your creditors are extinguished. There are some exceptions to this as a debt reduction solution, and these will be discussed at your meeting with us.
How will the proposal affect my credit rating?
You will have an R8 credit rating at the credit bureau for a period of 6-7 years after the completion of your proposal. You are required to attend 2 financial counseling sessions during the proposal which will teach you to use credit wisely in the future.
These debt reduction solutions along with financial management counseling or insolvency counseling are intended to get you out and keep you out of debt.
