The following list represents some frequently asked questions with respect to bankruptcy and insolvency issues. For more detailed information and answers to specific questions, or to book a free initial consultation please contact us at 204-944-0187 (toll free: 1-800-263-0070). If you would prefer, you can complete our First Step form.
Who is a Licensed Insolvency Trustee
A Licensed Insolvency Trustee is a person who is licensed, by the Superintendent of Bankruptcy, to file and administer both bankruptcies and proposals under the Bankruptcy and Insolvency Act.They are also educated in financial counselling and can provide information on other alternatives available to help you resolve your financial difficulties.
A person licensed by the Superintendent of Bankruptcy is subject to regulation by the federal government and by a strict code of ethics. Prior to obtaining a license, a Trustee candidate is investigated by the RCMP to ensure that there is nothing in their background that would preclude them from obtaining the license.
Many Trustees are members of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP). In addition to the federal government’s requirements, the association sets out Standards of Professional Practice and has its own Code of Ethics.
What is a Consumer Proposal?
A consumer proposal allows you, with the help of an Administrator, to offer to repay your creditors a portion, or all of, your outstanding debt over a specified period of time. If approved, unsecured creditors are bound by the proposal. You make the specified payments to the Administrator who in turn pays your creditors. Upon meeting the obligations outlined in your proposal, you will receive a Certificate of Full Performance and be legally released from most or all of your debts.
Am I Eligible for a Consumer Proposal?
If you are an individual with $250,000 or less in debt, not including the mortgage on your principal residence, a consumer proposal may be the ideal solution. Let us help you determine whether a consumer proposal is a viable option for you.
What is Personal Bankruptcy?
Personal bankruptcy is a legal process designed to protect the honest but unfortunate debtor. It aims to provide relief by allowing the debtor to discharge most or all debt.
Will My Student Loan be Discharged through Filing for Personal Bankruptcy or a Consumer Proposal?
Generally, if you have attended school within the last seven years, your student loan debt will not be discharged when you file for personal bankruptcy or a consumer proposal. However, the Court is able to release you from your student loan five years after you have completed your studies if it determines that the loan causes undue hardship and efforts were made to repay it.
Will Filing for Bankruptcy or a Consumer Proposal Affect My Future Application for a Job?
This depends on the position. Potential employers do not usually inquire about your financial history. However, in certain professional or regulated positions, filing could affect your ability to acquire or maintain the position.
Will I Lose My House, Vehicles and Other Assets if I File a Personal Bankruptcy or a Consumer Proposal?
In bankruptcy, some assets are subject to seizure by the Trustee. There is, however, legislation that protects or exempts specific assets and those cannot be seized. Some examples of exempt assets include: household furnishings up to a maximum value of $4,500; one motor vehicle required for employment worth up to $3,000 in excess of any loan on which it is held as security; tools of trade which are required to earn income not exceeding a value of $7,500; registered retirement savings plans and locked-in pension plans.
In addition to this list, there are other assets that may be exempt from seizure. Assets that are encumbered are not protected from the secured creditor, however, and will likely be seized if arrangements are not made to continue payment of that specific debt.
In a consumer proposal, your assets are not subject to seizure by the Administrator. Therefore, you do not lose your unencumbered assets unless one of the terms of the proposal specifically states that the asset will be surrendered. Assets that are encumbered are not protected from the secured creditor, however, and will likely be seized if arrangements are not made to continue payment of that specific debt.
Who Will Know about My Bankruptcy or Consumer Proposal?
Consumer proposals and bankruptcies are a matter of public record. In most cases, however, your creditors, the Office of the Superintendent of Bankruptcy, Canada Revenue Agency and the credit bureaus are the only ones who receive notice of the proceedings. Consumer proposals are not published in the newspaper, neither are most personal bankruptcies.
How Long Does a Bankruptcy or Consumer Proposal Last?
A consumer proposal will last for the time period necessary to meet the commitment you made to your creditors. It cannot, however, propose payments for a period that extends beyond five years.
Various criteria determine the length of a bankruptcy. Whether you have been previously bankrupt, you have a surplus income pursuant to the Superintendent’s Standards, or you are considered to be a personal income tax debtor are only some contributing factors that affect the process and the time period involved.
Will My Spouse be Responsible for My Debts if I File a Bankruptcy or a Consumer Proposal? What about a Co-Signor?
Your spouse is not responsible for your debt unless they have specifically entered into an agreement or a contract in which they took responsibility for the debt. Accepting a supplemental credit card, or taking responsibility as a co-borrower or co-signor are examples of situations in which your spouse may have responsibility for the debt.
If your debt has been co-signed by another individual, that individual will be responsible for the unpaid debt.
Often when one spouse is responsible for the other’s debt, both individuals file for either a consumer proposal or a bankruptcy to eliminate the debt problem entirely from the household.
How Much Does It Cost to File a Consumer Proposal or a Bankruptcy?
Every situation is unique. Although the costs of a consumer proposal or a bankruptcy (in most cases) are subject to a tariff by which all Trustees/Administrators are bound, the monthly payments, if any, will depend on your personal circumstances.
Will My Creditors Keep Phoning Me or Continue to Take Legal Action to Collect Their Accounts if I File a Consumer Proposal or a Bankruptcy?
When you file a bankruptcy or a consumer proposal, almost all action by creditors is subject to a Stay of Proceedings. This means that collection must stop, except in cases of alimony or child support/maintenance arrears, or those unusual circumstances where permission to continue the action is granted by the Court.
Are My Wages Affected if I File a Consumer Proposal or a Bankruptcy?
Your wages are your own in both a consumer proposal and a bankruptcy.
In bankruptcy, should your income exceed standards established the Superintendent of Bankruptcy, you will be required to pay a portion of your income to the Trustee. Should you fail to make these payments voluntarily, the Trustee may apply to the Court for an order directing your employer to deduct the required amount from your pay and remit it directly to the Trustee.
Is My Income Tax Debt Covered by a Consumer Proposal or a Bankruptcy?
Your income tax debt up to the date you filed your insolvency proceeding is discharged when you receive your discharge from bankruptcy or your Certificate of Full Performance from your consumer proposal. In the case of a consumer proposal, however, specific provisions are required in the proposal to include the debt from January 1 of the year of filing to the date the consumer proposal is filed. The Administrator is aware of these provisions.
Will I Ever be Able to Get Credit Again if I File a Consumer Proposal or a Bankruptcy?
It is our experience that many individuals who have filed a consumer proposal or a personal bankruptcy obtain credit in the future. Whether or not you have filed for either of these proceedings is usually just one of a number of criteria that lenders use when determining your credit worthiness. There are no guarantees, however, as no one is required to give you credit. (This is no different than if you had not entered into an insolvency proceeding.)
When you receive your discharge from bankruptcy or your Certificate of Full Performance with respect to your consumer proposal, you have resolved your financial problem. This may contribute to your ability to obtain credit. A completed consumer proposal demonstrates to the lender that you are able to now meet financial commitments and manage your finances.