Personal Bankruptcy & Consumer Proposal FAQ

If any of the following describe your situation, it is time to seek help.
1. Relying on credit for everyday living expenses.
2. Repeated phone calls and/or letters from creditors.
3. Taking cash advances from one credit card to pay another.
4. Financial troubles that are affecting your family life, your ability to work and/or adding an overall sense of daily stress.
5. Making minimum payments only.
6. Unable to reduce your overall amount of debt even though you are paying the most that you can each month.
7. Staying awake at night worrying about your finances.
In Canada there are currently no government-sponsored programs that allow you to enter into payment arrangements with your creditors. Every organization that offers debt consolidation, even those that are “not for profit”, charge fees for their services and are sometimes supported by the credit card companies themselves. Once you have signed up for a payment program, you must complete the program entirely or find yourself in a worsened financial position.

LIT's are professionals governed by a federal Act called the Bankruptcy and Insolvency Act and adhere to strict ethics and codes of conduct. It is a LIT’s obligation to see that debtors are treated fairly and equitably and that the rights of debtors and creditors are respected.

LIT's are the only professionals who can administer either a bankruptcy or proposal legislated by the Bankruptcy and Insolvency Act.
• Make full and complete disclosure of all of your assets and liabilities / debts;
• Disclose any significant payment you have made to your creditors in the last 12 months;
• Disclose the details of any assets or property you have disposed of in the last 5 years;
• Attend a meeting of creditors (if one is required);
• Attend any examination under oath (if one is required);
• Provide the Trustee with any books and records that the Trustee requires;
• Assist in the sale or disposal of any assets where they are not being retained;
• Submit monthly income and expense statements;
• Provide information necessary for the trustee to complete your income tax return; and
• Generally assist the Trustee.
For a first bankruptcy, an automatic discharge will be issued after 9 months from the date of your bankruptcy in the following circumstances:

1. You have completed two counselling sessions;
2. Your creditors, the Superintendent of Bankruptcy, and the Trustee are not opposing your discharge;
3. You have not had surplus income based on the Superintendent’s Standards during your bankruptcy.
RRSP’s are exempt from seizure however, the contributions made in the one-year period before the date of bankruptcy will have to be paid to the Trustee for the benefit of creditors. Company pension plans are also exempt from seizure. RESP's are not exempt and debtors have the option of making payments to the Trustee for the value of the RESP or having the RESP collapsed.
No. A bankruptcy filing is done on an individual basis. However, if your spouse has co-signed any of the debts (such as loans or credit cards), they could be left responsible for the entire debt if you file bankruptcy. This is true for anyone who has co-signed on your debts.

Your household income is reviewed each month and your spouse’s income is considered part of this.
Yes. By law, all actions against you, including garnishments, are halted. Certain debts such as some court fines, court-ordered restitution, alimony and child maintenance are not released by bankruptcy.
The amount you have to pay in a bankruptcy depends on your income and the assets you want to keep. Every situation is different so you need to review with the Trustee what the payment will be for your particular situation.

For each month that you are an undischarged bankrupt, you have to submit monthly income and expense statements to the Trustee, showing the amount of household income. This amount is compared to a federally set income guideline. Any amount above the guideline is considered to be surplus income and 50% of this excess is payable to the Trustee.

Required payments can be paid on a monthly payment plan, and in some cases, government refunds such as GST and income tax refunds can be applied.

The fees of a Licensed Insolvency Trustee are regulated under the Bankruptcy and Insolvency Act
Certain kinds of debts are not released by bankruptcy or a consumer proposal. These include:

1. Fines imposed by the Court;
2. Debts incurred by misrepresentation or fraud;
3. Alimony or child support payments;
4. Debt for damages imposed by the Court for intentional bodily harm, sexual assault or wrongful death;
5. Student loans (if bankruptcy occurs within 7 years of ceasing full or part-time studies);
If you are an individual, cannot meet payment obligations as they become due and if all indebtedness is less than $250,000 (not including a mortgage on your principal residence), a consumer proposal is an option.

If your debts are above $250,000, or if the debts are related to a business, then an ordinary proposal may be an option.
After your proposal has been filed, your creditors should be dealing directly with us. If you are contacted directly by a creditor, you should refer them to us to ensure that they have been made aware of the proposal and we can advise them of their rights as creditors under the BIA.
It may be possible to file an amended proposal with lower payments as long as the majority of creditors agree. If your circumstances have changed dramatically, personal bankruptcy may be a viable option as well.
A utility company cannot cut off service if a bankruptcy or consumer proposal is filed even if they are a creditor at the time of filing. They could elect, however, not to supply further services unless an arrangement is made. These could include an initial deposit, reconnection charge or an arrangement for payment of future services.
A consumer proposal is usually a matter of record at a credit bureau. This information is available to credit grantors and may affect your ability to get credit in the future. However, if you have currently missed payments to your creditors or find yourself in collections already, this information is most likely already reflected on your credit rating. A consumer proposal is reported for 3 years after you have fully completed your settlement as compared to a first-time bankruptcy which is reported for 7 years after discharge from bankruptcy.
The two largest credit-reporting agencies in Canada are Equifax and TransUnion. These agencies are a repository of consumer credit information. They do not make credit decisions, rate consumers, or grant credit. The agencies receive information about you directly from your credit grantor and is based solely on that grantor’s experience with you. This information is then compiled in a credit report that is made available to members of the credit-granting agency or you, the debtor. A copy of your credit report is free of charge if mailed to you via Canada Post, but there is a charge (approximately $15) if requested over the Internet.
It is recommended that you check your credit report every year to ensure that the information is accurate and that there have not been any unauthorized inquiries. If you find that there are inaccuracies or errors, there is a dispute process within the Credit Reporting Agencies and they are required under law to investigate on your behalf and make corrections where necessary.
The first step is to ensure that the information in your credit report is accurate. After that, the only way to improve your credit report is to use credit wisely. Some suggestions include:

• Do not apply for a myriad of credit sources; limit yourself to two credit cards with small credit limits.
• Pay your bills on time. Work with your creditors to allow time to pass to show that your payment habits have improved.
• Be prepared to show stability of employment and residence. Creditors want to know that you have a reliable source of income and that they can easily contact you if necessary.
• Get a secured credit card and pay off the balance every month.
• Keep an emergency store of cash to be used to pay your living expenses if something goes seriously wrong with your income sources.
• If you run into problems, communicate with your creditors and tell them that you intend to pay your bills, but you need a bit of leeway.
• Consider that bankruptcy may well permit you to recover a good credit rating much faster than credit counselling. Negative credit items, including records, remain on your credit report up to seven years.
If you are having debt problems, a collector or collection agency can contact you on behalf of their client in an attempt to get payments from you. Being behind in your payments does not mean that the lender or its collection agent has the right to harass you under law.

For questions concerning debt collection activities in your Province, see the links under “Collection Agencies Info & Complaints” on our Links page

Hi, I’m Rob Boulanger, Are you struggling with personal debt or creditors calling? Contact me, so we can review solutions that will help.