FAQs
Bankruptcy Frequently Asked Questions
Yes, an amount owing for personal income tax is an unsecured debt that can be included in a bankruptcy, just like a credit card or loan. If Canada Revenue Agency has registered a lien on your property – then the debt becomes secured against the property and is not discharged in a bankruptcy. It is always best to seek professional advice early from a Licensed Insolvency Trustee to avoid Canada Revenue Agency registering a lien.
You are required to attend two credit counselling sessions as part of the bankruptcy process. In the second session, the counsellor will discuss rebuilding your credit. The first step we suggest is to obtain a secured credit card (investigate the annual fee, interest rate, etc.). Purchase your groceries and gas for your vehicle on the credit card and then pay it off in full when due every month. You will not be incurring interest, and the expense for groceries and gas are already in your budget, so you know you can pay the bill in full when due.
A bankruptcy only relieves the bankrupt from their responsibility to pay the debt. If anyone has guaranteed or co-signed the debt for you, they will still be responsible for paying the debt.
Only a Licensed Insolvency Trustee can file an assignment in bankruptcy for you. You do not need a referral and the initial consultation to review your financial situation and explain the process is free of charge at Taylor Leibow Inc. Contact us via email or telephone to schedule an appointment in Hamilton, Burlington, or St. Catharines.
The Trustee will determine if there is any value to the secured asset over and above the secured loan. If the amount owing on your car or house is greater than the value of your car or house then the Trustee does not seize your asset, and you can make arrangements directly with the secured party to continue to pay their debt. In most instances, as long as your payments have been current, the bank will allow you to continue the loan and keep the asset.
The following debts survive a bankruptcy meaning you will still have to pay the creditor after your discharge:
- Fines or penalties imposed by a court;
- Award of damages with respect to intentional bodily harm, sexual assault or wrongful death;
- Alimony and child support;
- Debts arising from illegal activity such as fraud, embezzlement, misappropriation, etc.;
- Debts incurred by fraudulent misrepresentation or false pretenses;
- Dividend for creditors not disclosed to the trustee; and
- Student loan debts where you have attended school within the last seven years.
A bankruptcy will remain on your credit rating for 6 years from discharge for a first time bankruptcy and 14 years for a second time bankruptcy. A consumer proposal will stay on your credit rating for 3 years from completion of the proposal.
The Trustee’s fees and filing costs are set by tariff under the Bankruptcy and Insolvency Act. We can arrange for payment terms that fit your financial situation.
An individual filing bankruptcy for the first time is usually discharged from the bankruptcy and thus cleared of the majority of their debts within nine months. If they are required to make monthly surplus income payments, a first time bankrupt will be discharged in 21 months.
A second time bankrupt will be discharged in 24 months if there is no surplus income obligations, and 36 months if they are required to make surplus payments based on their monthly family income.
An opposition to your discharge by a creditor, or failure to comply with duties will delay the above time frames.
No. In Ontario, a bankrupt is able to retain the following property:
- Household furniture up to liquidation value of $13,150.00
- Personal effects up to $5,650.00
- Tools of the trade up to $11,300.00
- A vehicle up to $6,600.00
- Pensions
- Life insurance policies with specific designated beneficiaries
- RRSP’s held with a life insurance company that meet certain restrictions
- RRSP’s (except contributions in the preceding twelve months)
Consumer Proposal Frequently Asked Questions
A consumer proposal will be reported on your credit report as an R7 for 3 years from completion of the proposal or 6 years from the initial filing, whichever occurs first.
A consumer proposal can offer a one time lump sum payment and/or payments over a maximum 5 year term. Once the proposal has been accepted by your creditors and the court, the terms are open and you can pay the proposal off sooner if you desire.
Your spouse is not responsible to pay your debts just because you are married. They are only legally responsible for your debts and thus should consider filing a consumer proposal with you if they have guaranteed and/or co-signed your debt. A free, initial assessment with a Licensed Insolvency Trustee will fully explain how your actions may affect your spouse.
A consumer proposal is a formal, legally binding process administered by a Licensed Insolvency Trustee (“LIT”). The LIT works with the debtor to develop an offer to pay creditors less than what they are owed or to extend the time to pay off the debts.
Legislation authorizes a joint consumer proposal to be filed if the debts are substantially the same; the total debt is less than $500,000, and the administrator is of the opinion that a joint filing is in the best interests of the debtor and creditors.
As long as you provide proof of wages to your trustee, and there is not a garnishment of your wages, your employer does not have to be notified of your consumer proposal.
If you have offered a monthly payment to your creditors, missing one payment will have no effect. If you miss a total of 3 payments, your proposal will be in default, and the creditors can once again pursue you for payment of your debt.
Contact your trustee right away to see if an amendment can be filed to your proposal or if a bankruptcy is required.
No, if the creditors are voting against your proposal, a meeting of creditors will be called, and the trustee will negotiate with yourself and the creditors to see if a compromise can be reached.
Your creditors have 45 days to vote on the proposal you offered to them. If the required voting is obtained at the 45 days, you will know at the end of 45 days from filing. If the creditors are voting against your proposal at the end of the 45 days, a meeting of creditors will be called within 21 days to actually vote on the proposal.
A consumer proposal must offer your creditors more than they would receive in a bankruptcy. We will analyze what realizable assets you own (TFSA, equity in house, RESP, etc.), surplus income payments that must be paid in a bankruptcy and any transfer of assets to determine a reasonable amount to offer to your creditors.
Yes, you may. There is no interest charged on the proposal, so the only benefit to paying the proposal sooner is it will be removed from your credit report sooner.
A consumer proposal allows you to retain your assets and to offer your creditors a monthly amount that you can afford over a maximum of 5 years. A proposal is typically filed where there is equity in your house, or you have significant surplus income payments.
Only a Licensed Insolvency Trustee can file a consumer proposal for you. You do not need a referral and the initial consultation to review your financial situation and explain the process is free of charge at Taylor Leibow Inc. Contact us via email or telephone to schedule an appointment in Hamilton, Burlington, or St. Catharines.
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