FAQs
Bankruptcy Frequently Asked Questions
Bankruptcy eliminates most unsecured debts, but certain debts, such as student loans (less than seven years old), child support, and court fines, are not discharged.
There is no fixed time limit. A bank account remains frozen until the issue is resolved, such as paying the debt, negotiating a settlement, or obtaining a court order to release it.
Unsecured creditors are immediately stopped from pursuing you for collection of your debts. The non-exempt value of your assets must be realized, your debts are discharged, and you will be required to complete financial counseling. A first bankruptcy affects your credit for seven years after discharge.
No, individuals filing for bankruptcy must cover administrative costs, which include trustee fees. If you cannot afford the fees, you may be eligible for assistance through the Bankruptcy Assistance Program. Contact the Office of the Superintendent of Bankruptcy for details.
A first-time bankrupt in Ontario is eligible for an automatic discharge in nine months if their income is below a set threshold. The automatic discharge is extended to 21 months if they are required to make surplus income payments. Repeat bankruptcies last longer.
If the equity in your car is below the provincial exemption limit, you can keep it. If the equity exceeds the limit, you can make arrangements to pay the difference.
When you file for bankruptcy, your creditors are stayed from pursuing you for collection. Your assets vest in your trustee to realize for the general benefit of your creditors. Depending on your income, you may be required to make surplus income payments. You will be required to follow specific duties, such as attending credit counselling sessions and submitting income reports. Bankruptcy remains on your credit report for seven years after discharge for a first bankruptcy.
Yes, but they must first obtain a Court judgment before they can issue a garnishment order to your employer.
The statute of limitations for most debts in Ontario is two years from the last payment or written acknowledgment of the debt. After this period, creditors can still attempt to collect, but they cannot sue you in Court to obtain a judgement and enforce payment.
The CRA can keep your bank account frozen indefinitely until the tax debt is paid or a suitable payment arrangement is made. The freeze can be lifted once the CRA is satisfied with your repayment plan, or you file an assignment in bankruptcy or a proposal.
It depends on your Province’s exemption limits and the amount of equity in your home. If your home equity is within the allowable exemption, you may be able to keep it. However, if the equity exceeds the limit, you may need to pay the equity to your trustee or sell the home.
Yes, but a collection agency must first obtain a Court judgment against you. Once they have a judgment, they can apply for a garnishment order to deduct a portion of your wages directly from your employer.
If the Canada Revenue Agency (CRA) freezes your bank account due to unpaid tax debts, you will not be able to access your funds until the debt is resolved. CRA can issue a garnishment order to your bank without a Court order. To lift the freeze, you must either pay the balance owed, negotiate a repayment plan, seek legal assistance or file an assignment in bankruptcy or a proposal with a Licensed Insolvency Trustee.
When a person passes away, their debts do not disappear. Instead, the estate is responsible for repaying any outstanding debts using the deceased’s assets. If the estate does not have enough funds to cover the debts, they generally go unpaid. Family members are not personally responsible for the debt unless they co-signed or guaranteed them.
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.
A first-time bankruptcy typically lasts for nine months, but if you have surplus income, it will be extended to 21 months. A second bankruptcy will last 24 months, or 36 months with surplus income. If there is an opposition to your discharge, then your discharge will be issued by the Court.
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
Credit counseling is an informal debt repayment plan where you repay the full amount over time, usually with reduced or no interest. A consumer proposal is a legally binding agreement where you typically negotiate to pay a reduced amount of the total debt
A consumer proposal affects your credit for up to six years from the filing date or three years after completion, whichever is sooner.
Yes, but only after obtaining a Court judgment against you.
Yes, the CRA can freeze your account without a Court order if you have outstanding tax debts. The freeze will remain in place until the debt is resolved, a payment arrangement is made or you file an assignment in bankruptcy or consumer proposal.
You must owe between $1,000 and $250,000 (excluding your mortgage) and be unable to repay your debts in full. A Licensed Insolvency Trustee will assess your financial situation to determine eligibility.
Creditors have 45 days to review and vote on the proposal. If the majority accept it, the proposal becomes legally binding, and you begin making payments under the agreed terms.
A consumer proposal remains on your credit record for three years after completion or six years from the filing date, whichever comes first.
Creditors, the CRA, secured lenders, and contractors who have completed work on your home can place a lien on your house if debts remain unpaid. A lien can prevent the sale or refinancing of the property until the debt is settled.
A consumer proposal typically takes five years to complete, depending on the terms negotiated with creditors. You may be able to pay it off sooner if you make larger payments.
A consumer proposal can last up to five years, but the exact duration depends on the repayment agreement reached with creditors. Some proposals may be paid off sooner if the debtor is able to make larger payments.
Yes, a consumer proposal negatively impacts your credit score. It is recorded as an R7 rating on your credit report, indicating that you have entered into a debt settlement agreement. This can make it more difficult to obtain credit until the proposal is completed and removed from your report.
A consumer proposal remains on your credit report for three years after completion or six years from the date of filing, whichever comes first. This means that if you complete a five-year proposal, it will stay on your credit for a total of six years from the start date.
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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