If you’re struggling to pay your bills every month, you may be thinking about bankruptcy to help you relieve these financial pressures. Filing for personal bankruptcy can be a viable option if you have unsecured debt you can’t pay and you’re worried about legal actions your creditors may initiate.

As with any life decision this big, we’re sure you have many questions. Below, we briefly answer the top 20 personal bankruptcy FAQs that Canadians like yourself have asked. If you’d like more detailed answers specific to your circumstances, please feel free to reach out to us. We’ve helped numerous Canadians in the same situation achieve a fresh financial start.

Top 20 Personal Bankruptcy in Canada FAQs

What Is Bankruptcy?

Personal bankruptcy is a legal proceeding in Canada governed by the Bankruptcy and Insolvency Act. Personal bankruptcy offers relief to individuals who cannot meet their monthly financial obligations and may need help to get their overwhelming debt under control. This insolvency proceeding can offer Canadians a fresh financial start in as little as nine months.

Do I Qualify for Personal Bankruptcy in Canada?

To file personal bankruptcy, you must be insolvent. To be insolvent you must meet the following requirements:

• You are unable to meet your monthly financial obligations when they’re due; or
• Your assets are worth less than your debts;

and

• You owe at least $1000 in unsecured debt.
• You reside, do business, or hold most of your assets in Canada.

If you meet these requirements, you’re able to file for personal bankruptcy in Canada.

How to File for Bankruptcy Without a Lawyer?

A lawyer isn’t needed to file for personal bankruptcy in Canada. That being said, this isn’t a legal proceeding you can initiate on your own. By law, a Licensed Insolvency Trustee (LIT) is the only entity licensed and regulated to initiate a personal bankruptcy proceeding on your behalf.

What Debts Does Bankruptcy Affect?

Insolvency proceedings, such as personal bankruptcy, can only discharge unsecured debt. This would include:

• Credit Card Debt
• Payday Loans
• Unpaid Utility Bills
• Overdue Rent
• Money Owed to Service Providers

Secured debt, such as mortgages and car loans or debts incurred through fraud, remain unaffected by personal bankruptcy.

Can Bankruptcy Clear Student Loans?

That depends. If you have been a full- or part-time student in the past seven years, your student loan debt will remain largely unaffected by personal bankruptcy. If you’ve been out of school for more than seven years, all of your school loans can discharged in as few as nine months through personal bankruptcy depending on your specific circumstances.

Can Bankruptcy Clear Tax Debt?

For the most part, yes. If you’re unable to pay your current or past-due income taxes, they may included and discharged through personal bankruptcy. For this to happen your tax debt must not be related to fraud or tax evasion.

Can Bankruptcy be Denied?

Unlike a consumer proposal, creditors can not vote down your personal bankruptcy filing. That being said, if your Licensed Insolvency Trustee finds evidence of debt through fraud, the hiding of assets, or misrepresentation of your income and expenses, they may refuse to file personal bankruptcy on your behalf, or potentially refer your file for investigation by the Office of the Superintendent of Bankruptcy.

Will Debt Collectors Keep Bothering Me After Bankruptcy?

No. Once personal bankruptcy is filed, an immediate stay of proceeding is initiated. This means all legal action to recover unsecured debt must stop. This includes:

• Collection Calls
• Past Due Notices
• Wage Garnishments with very few exceptions
• Legal Threats
• Court Action
• Freezing Bank Accounts

Personal bankruptcy offers not just debt relief but relief from legal action related to that debt as well.

What do You Lose When you Declare Bankruptcy?

The belief that you’ll lose everything by filing bankruptcy is unfounded. Unless you own assets with significant value, it’s unlikely you’ll lose much. The assets you will lose in personal bankruptcy could include:

• Vacation Home(s)
• Rental Properties
• High-value Household Items
• Certain Investments
• Collectibles (art, antiques, jewelry, etc.)
• Second Vehicles
• Recreational Vehicles

Certain assets are exempt and vary by province. The only way to be certain of what you’ll lose is to contact a Licensed Insolvency Trustee.

How to File for Bankruptcy and Keep your Car?

Rules for keeping your car during bankruptcy vary by province. As a general rule, if your car falls below a certain value, it is exempt from being taken to pay your creditors. It may also be exempt if it is leased or financed for near its value and the payments are up to date.

If you File for Bankruptcy what Happens to Your House?

If you are up-to-date on your mortgage payments, your house cannot be foreclosed upon to pay your creditors in a personal bankruptcy proceeding. If you have equity in your home, you may need to use that equity to pay your unsecured creditors. The amount of equity in your primary residence that is exempt from being liquidated to pay your debts varies by province.

What is the Downside of Filing for Bankruptcy?

While personal bankruptcy offers debt and legal relief from your creditors, it’s not without its downsides, which could include:

• Lower Credit Score
• Difficulty Obtaining Credit
• Loss of Non-exempt Assets
• Loss of Home Equity
• Difficulty Renting

Discussing the advantages and disadvantages of personal bankruptcy with a Licensed Insolvency Trustee is important. This will give you a better understanding of how it will affect you and your family. 

How does Bankruptcy Affect your Spouse?

Filing for personal bankruptcy should have no effect on your spouse’s credit rating or finances. The only time your spouse will be affected financially will be if:

• They have co-signed for any of your unsecured loans.
• You hold joint, unsecured debts together.

Your debts and credit rating are your own and will not affect your spouse.

Can Bankruptcy Affect My Job?

It’s unlikely that filing for personal bankruptcy will affect your job. The only exceptions would be if:

• You work in banking or finance.
• You must be personally bonded and insured for your job.
• Your job requires a security clearance.
• You’re the director of a corporation.

Speak with an LIT as while there are some exceptions, there is generally little risk to employment.

If you don’t fall within certain job exemptions, it’s illegal for your company to fire you simply for filing for personal bankruptcy.

How Long Does Bankruptcy Last in Canada?

As a general rule, a personal bankruptcy can last:

• 9 Months – First bankruptcy, and you have no surplus income requirements.

• 21 Months – First bankruptcy, and you have surplus income requirements.

• 24 Months – Second bankruptcy, and you have no surplus income requirements.

• 36 Months – Second bankruptcy, and you have surplus income requirements.

To determine if you will have surplus income requirements, you must meet with a Licensed Insolvency Trustee.

How to File for Bankruptcy with No Money Up-Front?

Filing for personal bankruptcy should not require much, if any, money upfront. Your first consultation with your LIT will be free of charge. If you decide personal bankruptcy is your best option, there will be filing fees and costs involved. These costs and fees can be spread out monthly throughout the bankruptcy to make them more manageable.

How Long does Bankruptcy Stay on Credit Report in Canada?

This depends on whether this is your first bankruptcy. If so, personal bankruptcy will stay on your credit report as an R9 rating, the lowest rating available, for six years after it is discharged. If this is your second bankruptcy, the R9 rating can stay on your credit report for up to 14 years after the bankruptcy is discharged.

How Many Times can You Declare Bankruptcy in Canada?

There is no set limit on the number of times you can file for bankruptcy in Canada. That being said, subsequent bankruptcies’ cost, duration, and consequences are more severe after your first personal bankruptcy.

Are there Alternatives to Bankruptcy in Canada?

There are a few different alternatives to personal bankruptcy, including:

• Consumer Proposals
• Negotiating With Your Creditors
• Credit Counselling
• Effective Money Management

There are advantages and disadvantages to each of these personal bankruptcy alternatives. Setting up a free consultation with a Licensed Insolvency Trustee can help you decide which debt relief option is best for you.

Is Filing for Bankruptcy Public Record in Canada?

Yes, but accessing this information requires payment of a fee. As such, it is uncommon for friends, neighbours, your work, etc to find out unless you tell them yourself. Personal bankruptcies are filed and recorded by the Office of the Superintendent of Bankruptcy (OSB). In addition, bankruptcies are also reported to credit bureaus. If someone has your personal information, they can use these agencies to see if you’ve filed for personal bankruptcy.

Were These Personal Bankruptcy in Canada FAQs Helpful?

If you’re drowning in unsecured debt and unable to make your monthly payments, personal bankruptcy might be your best option. We’re hoping these personal bankruptcy FAQs have answered some of your questions about the process. 

If you have additional questions or would like to start the personal bankruptcy process, please feel free to reach out for a free initial consultation. It’s quite possible that within a year, all of the stress and aggravation associated with your financial problems could be a thing of the past.

Regarding personal finances, few things can be as stressful as accumulating debt, especially when that debt involves an overwhelming entity like the Canada Revenue Agency (CRA). The prospect of owing money to the CRA can lead to mounting anxiety and sleepless nights for many Canadians.

When faced with CRA debt, it’s crucial to understand the options available to alleviate this burden, paving the way toward financial recovery. You can take informed steps toward resolving your economic challenges by gaining insight into CRA debt forgiveness and related processes. You may prevent undue tax burdens by proactively managing your financial affairs.

Understanding the Canada Revenue Agency (CRA)

Before we delve into the complexities of CRA debt forgiveness, it’s vital to grasp the role and responsibilities of the Canada Revenue Agency (CRA) in the Canadian financial landscape. The CRA is a federal agency responsible for administering and enforcing taxation laws in Canada.

Its overarching mission includes collecting income tax, goods and services tax (GST), and other federal levies. The CRA ensures Canadians comply with tax regulations to facilitate the funds necessary to support vital public services and government programs.

In addition to its primary role, the CRA has the authority to collect debts owed to the government. When individuals or businesses fall behind on their tax obligations, the CRA attempts to recover these outstanding debts.

After multiple attempts to resolve debt through communication and negotiation have failed, the CRA may employ various collection methods as a last resort. Understanding how the CRA operates in tax collection, debt recovery, and CRA debt forgiveness is crucial as you seek solutions that can lead to debt relief.

The Reality of CRA Debt

Individuals in arrears with the CRA can experience severe financial and legal consequences, ranging from collection efforts to wage garnishments. 

Taking proactive steps to resolve outstanding tax obligations is vital to avoid the potential consequences of unpaid tax debt. Learning about your options, including CRA debt forgiveness, helps you reduce the risk of adverse outcomes. 

Why Do I Owe the CRA Money?

Understanding the reasons behind CRA debt is necessary to address the issue effectively. Owing money to the CRA often stems from common scenarios that individuals and businesses may encounter.

Failing to report all sources of income, such as rental income, investment gains, or self-employment earnings, can lead to potential debt. Experiencing significant life changes like job loss, divorce, or business closure can disrupt financial stability and make it challenging to meet tax obligations. 

Misunderstanding deductions and tax credits or not claiming eligible ones can result in higher tax liabilities. Making mistakes or errors in tax returns, whether unintentional or due to oversight, can result in underpayment of taxes. The CRA is also responsible for collecting CERB overpayments and repayment.

Business owners who withhold income tax, Canada Pension Plan (CPP), and Employment Insurance (EI) contributions from employees’ paychecks but fail to remit those funds can accrue substantial CRA debt. These scenarios highlight the importance of accurate reporting and seeking professional tax advice when needed. 

Steps the CRA Can Take to Recover Debt

The Canada Revenue Agency (CRA) can deploy several tools to recover outstanding debts from businesses and individuals. Since they possess more rights than other creditors, they can garnish wages and place liens without a court order, interrupt tax refunds and government benefits, and more.

The CRA may start by issuing demand letters to recover unpaid taxes, prompting individuals to address their tax debt. While this collection method may not harm your credit score directly. It may make securing loans or credit difficult in the future as lenders typically confirm that tax filings are up to date.

The CRA can take any of the following adverse actions to collect unpaid debt:

• Wage Garnishment – The CRA can garnish wages, significantly reducing disposable income.
• Asset Seizure or Property Liens – The CRA can seize assets or register liens on property, including real estate, vehicles, and personal property, to recover tax debts.
• Bank Account Seizure – The CRA can freeze and seize funds from bank accounts.
• Legal Action – The CRA may take legal action against those who repeatedly fail to address their tax debt, resulting in substantial legal expenses and court judgments.

It’s crucial to understand the CRA will generally only pursue these collection methods after several failed attempts to resolve the debt through communication and negotiation. Exploring options like tax relief programs, CRA debt forgiveness, or payment plans can help prevent aggressive collection actions by the CRA.

Are There CRA Garnishment Limits?

Yes, there are limits to how much the CRA can garnish from your bank accounts or wages. While the specific limits can vary by province, the framework ensures individuals have a minimum income to cover essential living expenses.

In many provinces, the CRA can garnish up to 50% of your wages or salary, with exceptions for low-income individuals. The agency also has limits on the amount of funds it can freeze or seize from your bank accounts, ensuring you have access to essential funds for daily living expenses.

Knowing these limits helps you understand your rights and protections as a debtor as you deal with CRA debt. Still, seeking professional advice as you navigate the complexities of tax debt is strongly advised.

Navigating CRA Debt Forgiveness in Canada

CRA debt forgiveness is when the Canada Revenue Agency (CRA) agrees to reduce or eliminate tax debt, relieving individuals or businesses facing overwhelming tax liabilities.

Can I Negotiate Payments with the CRA?

Yes, it’s possible to negotiate payment arrangements with the CRA. Negotiating payments can provide a manageable way to resolve your tax debt. Negotiating with the CRA, though, will not offer you true CRA debt forgiveness.

This process may be viable if you are experiencing financial hardship, have exceptional circumstances that have made it challenging to pay your tax debt on time, or believe there are errors or disputes regarding your tax assessment.

You may improve your chances of a successful negotiation by providing accurate and complete financial information and demonstrating your willingness to cooperate and resolve the debt. It’s crucial to note that even when the CRA accepts a payment plan, it typically won’t reduce the principal amount owed.

Under What Conditions is CRA Debt Forgiveness Possible?

CRA debt forgiveness is not guaranteed even if the following conditions are present. A thorough assessment of your financial situation and the circumstances surrounding the debt will still be required.

The agency may consider CRA debt forgiveness in specific circumstances, such as the following:

1. Financial Hardship
2. Errors or Misunderstandings
3. Insolvency

Seeking professional advice may be effective when engaging with the CRA through formal processes to explore the possibility of debt forgiveness.

The Importance of Seeking Professional Advice for CRA Debt Forgiveness

When tackling CRA debt, consulting with experts, particularly Licensed Insolvency Trustees (LITs) like Powell Associates Ltd., is advisable. They assess your financial situation, explore options, and empower you to make informed decisions, helping you regain control of your economic well-being.

Licensed Insolvency Trustees’ expertise ensures you fully understand your rights, responsibilities, and potential implications of various debt resolution strategies. LITs possess specialized knowledge of tax debt resolution options, help navigate complex processes, and represent you in negotiations with the CRA, increasing the likelihood of favorable outcomes.

There Are Two Options for True CRA Debt Forgiveness

In cases of extreme financial hardship, individuals may explore options like consumer proposals or bankruptcy, two primary avenues for seeking true CRA debt forgiveness. 

Consumer proposals offer debt consolidation for unsecured debts below $250,000 without the extreme consequences of bankruptcy. While bankruptcy is more drastic, it is usually considered when debt is overwhelming and other options aren’t feasible. The CRA can be included as a creditor in both these debt reduction options.

Let’s take a look at the processes, advantages, and disadvantages of each of these options.

The Consumer Proposal Option

A consumer proposal (CP) is a formal agreement between an individual and their creditors to repay a portion of their debts. This option allows you to negotiate a reduced debt amount and extended payment terms with creditors, consolidating debts into a single monthly payment.

Submitting a consumer proposal involves working with a Licensed Insolvency Trustee. They assess your finances, help create a proposal, and submit it to the CRA.

Benefits of a consumer proposal include:

• protecting assets, 
• stopping collection actions, 
• An end to wage garnishments,
• and avoiding bankruptcy. 

Drawbacks may include the impact on your credit rating and the need for creditor approval.

The Bankruptcy Option

In the context of CRA debt, personal bankruptcy is a legal process allowing individuals to be discharged from most unsecured debts, including tax debts. CRA debt is typically included and eventually discharged during this process. Some tax obligations, including recent income tax debts or fraud-related liabilities, may survive the process.

Filing for bankruptcy involves consulting a Licensed Insolvency Trustee. They assess your financial situation, assist in preparing bankruptcy documents, ensure compliance with legal requirements, and notify creditors. LITs help resolve outstanding tax issues with the CRA.

Bankruptcy can provide financial relief by eliminating tax debts. Drawbacks include surrendering non-exempt assets, impacting credit negatively, and staying on credit reports longer than a consumer proposal.

Rebuilding Your Financial Future After CRA Debt Forgiveness

Rebuilding your financial standing after CRA debt forgiveness is vital for a fresh financial start. Here are some practical tips to help you regain and retain financial control:

• Create a budget that prioritizes household expenses while setting aside savings.
• Set realistic goals and consult a professional for tailored financial planning strategies.
• Rebuild credit by making timely payments and keeping utilization low.
• Build an emergency fund for unforeseen hardships.
• Make a conscious effort to live within your means.

Experts, like Licensed Insolvency Trustees, can provide personalized guidance to help you maximize your newfound financial stability.

CRA Debt Forgiveness: The Road to Financial Recovery

CRA debt forgiveness is a complex process. Understanding your rights and obligations when dealing with the Canada Revenue Agency (CRA) is crucial for resolving your debt and regaining financial security. In all cases, remember to address CRA debt with careful consideration. 

The road to financial recovery is within reach, and professional assistance can make a significant difference in your journey. If you’re ready to embark, Powell Associates Ltd. can help. 

As Licensed Insolvency Trustees, we offer a free initial consultation, including CRA debt forgiveness assessments, in all cities in the Maritimes, including Saint John, New Brunswick; Fredericton, New Brunswick; Moncton, New Brunswick; Miramichi, New Brunswick; Dartmouth, Nova Scotia; and Charlottetown, Prince Edward Island.

Robert Powell is pleased to announce that Angela Rodgers and David Moffatt have become part owners of Powell Associates Ltd. Together, Angela, David and Robert now own the firm and will manage it together. Angela is now the President of the firm and David and Robert are Vice Presidents.

Robert founded Powell Associates in 2010 after being a partner in A.C. Poirier & Associates Inc., another Maritime insolvency firm, since 2003. Angela also worked at A.C. Poirier & Associates Inc. from 2000 until she joined Powell Associates in 2016. David was in the Canadian Military before starting his own business in 2016 offering assistance to consumers facing financial stresses. It was through this business that David began his relationship with Powell Associates and then joined the firm in early 2022.

Powell Associates is solely focused on providing insolvency services to consumers and small businesses. We are a small firm of experienced insolvency professionals providing practical options for debtors to obtain freedom from unmanageable debts.

Powell Associates Ltd. – Licensed Insolvency Trustee

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

• You won’t be stuck in an assembly line process.
• You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
• We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
• We help Canadians with overwhelming debt get fresh financial starts.

Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free, no-obligation consultation.

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.

If you are a Canadian with outstanding student loan debt, you may be eligible for student loan forgiveness.

There are many repayment assistance programs that exist both federally and provincially, but most of these programs focus on reducing your student loan debt payments which still leaves you with an outstanding balance on your student debt. If you have researched the topic of student loan debt forgiveness or relief programs, you have undoubtedly run across the national repayment assistance plan and those in your applicable province.

By and large, these programs are income-tested. This means that they are based on how much money you earn, disregarding how much your expenses may be. This system affords many people relief, but of course, life is complicating and with the rising costs of living you may still be struggling with your student debt.

Thankfully, there are ways you can have your student debt reduced, or eliminated altogether. The two primary options are a consumer proposal or bankruptcy. Both of these can be used to have your Canada student loan or your provincial student loan forgiven, provided that you meet certain criteria.

In this blog post, we will discuss how this works and how the consumer proposal and bankruptcy options can help those struggling with student loan debt.

What is student loan forgiveness and how does it work in Canada?

Student loan debt can be a difficult burden to bear, especially for students who have limited employment income or those facing unusual financial hardships. This leads to many seeking relief and forgiveness from their debt.

Student loan forgiveness is the process by which a part or all of an individual’s student loan debt is reduced or eliminated entirely. Similar to the concept of debt consolidation, there are many methods and programs available to obtain relief.

So, can I get my Canada Student Loan forgiven?

Fortunately, there are options available for repaying one’s student loans and even potential canada student loan forgiveness of some or all of the debt owed. However, the only real way to see student loan debt forgiven (having the principal balance owing reduced) is by filing either a consumer proposal or bankruptcy. Both programs are debt relief options that are regulated by the Federal Government to assist struggling Canadians. They are often referred to as government debt relief programs, despite them not actually being offered by the federal government.

But of course, there are certain eligibility requirements that must be met.

Who is eligible for student loan forgiveness in Canada and what are the conditions for eligibility?

In order to be eligible for student loan forgiveness you must meet the following parameters:

1. You must have been out of school for at least 7 years*, and
2. You must be eligible to file a consumer proposal or bankruptcy.

*If you have received multiple student loans and have different end-of-study dates associated with each you may be eligible to have some of the student loans forgiven even if you have been a student in the last 7 years. Contact us for a detailed assessment.

Conditions that must be met to file a consumer proposal or bankruptcy

In general, any insolvent person can file a consumer proposal or bankruptcy. The definition of an insolvent person in accordance with the Bankruptcy and Insolvency Act is:

The definition is fairly broad and so most individuals who owe more than $1,000 in debt would be eligible if they are struggling to keep up with their debt.

Note for those who owe more than $250,000 of debt, excluding your principle residence mortgage: You will be required to file a Division 1 Proposal instead of a consumer proposal. This comes with its own set of rules and considerations.

How to apply for student loan forgiveness in Canada

True student loan forgiveness, as mentioned above, is only really possible by way of filing a consumer proposal or bankruptcy.

If you are considering these there are a few steps you must take:

• Locate a Licensed Insolvency Trustee: In order to apply for either consumer proposal or bankruptcy, you must first contact a Licensed Insolvency Trustee.
• They will discuss all your options: Your Licensed Insolvency Trustee will discuss with you all the options to deal with the debt, and cover the benefits and consequences of filing bankruptcy or a consumer proposal as they relate to your specific situation.
• The decision is up to you: After you have had a chance to review all the options, it will be up to you as to whether or not filing a consumer proposal or bankruptcy is in your best interest.
• File the option you desire: Once you have decided, your Trustee will prepare all the required paperwork and assist you in filing your chosen option.

What are the benefits of getting your student loans forgiven in Canada?

As a previous student, you are likely aware of the financial stress that often comes with your student loan debt. However, there is hope!

There are several benefits to getting your student loans forgiven. The obvious benefit is that the payments you make towards your debt will likely be much lower than they previously were, as well as a reduction in the principal amount owing on your student loans and other debt.

Other benefits include less stress, better sleep, and generally just a better quality of life.

It does not hurt to seek out information regarding student loan forgiveness. If you want to learn more, do not hesitate to contact us.

How to prepare for student loan forgiveness if you’re approved

If you’ve been approved for student debt forgiveness either by the process of discharging your eligible student loans through bankruptcy or via a creditor-approved consumer proposal, congratulations!

It’s important to take a few steps now to make sure that you are prepared so that the process goes smoothly and you’re able to successfully manage your finances moving forward.

To give yourself the strongest foundation possible, start by developing smart money management practices such as keeping a budget that puts your income and expenses into clear perspective, creating an emergency fund, and saving for future goals or purchases.

Additionally, it can be helpful to create other forms of support around your financial needs such as enrolling in courses on personal finance or working with a financial advisor. There are many free courses and resources available online.

As long as you’re diligent and mindful about building these habits and systems now, it will help you reach greater levels of financial freedom in the future.

What are the risks associated with student loan debt forgiveness in Canada

Obtaining relief from your student loan debt can work wonders, but of course, it is not without its risks.

The main risk is that you miscalculate the last date of study, as this will make you ineligible to discharge your student loan debt in both a consumer proposal and bankruptcy.

Thankfully, there are ways to mitigate this risk. To ensure you have accurately calculated the last date of the study, it’s important to call the student loans office and inquire. Even if you are 100% sure in your mind about when you finished school, we have seen different dates reported to the student loan office. A simple call can save you a great deal of stress in the long run!

What if I am not eligible to have my student loans discharged?

If you are not eligible to have your student loans discharged in a consumer proposal or bankruptcy, you have other options.

One of the best places to start is researching repayment assistance, which you may be entitled to if you meet certain criteria set out by the provincial and federal governments. Repayment assistance can adjust your payments to a level that fits with your income and family size, making it easier for you to pay back your loan.

Another option if you have good credit is to consider refinancing/consolidating your student loans and other debt into a new single bank loan. This can sometimes lead to reduced payments and reduced interest. Ensure you read the terms you agree to as there are many lenders out there who claim to assist and push high-interest products.

Even if you can not discharge your student loan debt a consumer proposal or bankruptcy may still help

In the event you are struggling with debt in general and have student loans that do not meet the 7-year test, a consumer proposal or bankruptcy may still be viable options.

Because both options deal with all of your other dischargeable unsecured debts they can provide relief on the other debts which can allow you breathing room to better tackle your student loans. We have seen many people file and shortly afterwards increase their monthly payments on their student loans to pay the debt down faster.

In addition, and should you choose, while you are under the protection of a consumer proposal or bankruptcy you are not required to make your student loan payments. The loans will still have interest applied to them, so we do recommend continuing to make interest-only payments if you are able. However, the relief of your other debt, along with the elimination (or reduction, should you choose to pay interest-only monthly payments) of your student loan payments may be enough to get you ahead.

Consult with a professional Licensed Insolvency Trustee

It’s important to understand that help is available. Consulting with a Licensed Insolvency Trustee (LIT) is an excellent first step in creating a plan for managing your debts and understanding the options available to you.

An LIT is a professional and impartial debt specialist who can provide advice, counsel and guidance on personal insolvency matters. They have the knowledge and experience needed to help you design a solution that fits your unique financial situation.

Don’t continue to struggle alone – consult with our team today to get back in control of your debt.

Conclusion: You do not need to struggle with student debt

Student debt can feel very daunting and it may seem like you’re never going to be able to pay off your loans. It can be a source of stress that interrupts your life. But there is hope; with dedication and commitment, you do not have to struggle with student debt any longer. Having already graduated, you have made a big step towards financial security and beginning the journey towards eventual debt repayment. There are many strategies and services that can help ease the process, making sure that the loans are repaid in full in the long run ends up being well worth it in the end.

This article was written by Angela Rodgers, CIRP, LIT. She is a Licensed Insolvency Trustee and the President of Powell Associates Ltd. She has worked in the insolvency industry for over 20 years. No matter if you are looking at filing bankruptcy, a consumer proposal, or simply looking for debt management advice, Angela can help.

A very effective way to avoid bankruptcy and negotiate a settlement with your creditors. Payments are generally over time at less than the full amount owed as long as more than 50% of your creditors agree.

A consumer proposal can be a much better and more manageable solution than bankruptcy to resolve your debts, particularly if:

• You want to pay your creditors more than they would get in bankruptcy.
• You have a high income and could not manage the surplus income payment required in a bankruptcy.
• You have equity in assets that would take too long to pay within a bankruptcy.
• You have been bankrupt previously.
• You want to take advantage of a potentially shorter impact on your credit score.

You can be as creative as you want in determining the terms of a settlement put forth in a consumer proposal as long as it is fair and reasonable and you can get more than 50% of your unsecured creditors (by dollar-value of claims) to accept it. As long as you get over this 50% threshold, it will be binding on all unsecured creditors whether they like it or not. And once it is fully paid, you will be released from nearly all types of unsecured debts.

Most consumer proposals are structured as monthly payments over time at less than the full amount owed. Generally, a consumer proposal should provide a higher return or recovery to the creditors than they would obtain in bankruptcy or there is no incentive for your creditors to vote in favour of it. Once the total amount of the settlement is determined and approved, you can pay it out early if you are able to do so and this would accelerate rebuilding your credit.

You Have Options

In order to qualify to file a consumer proposal, you must have debts of less than $250,000, excluding the mortgage on your principal residence. If you are over this limit, there is another form of a proposal that can be filed.

When we review your individual situation, we will consider whether or not a consumer proposal (or another form of a proposal) makes sense for you and review the pros and cons of a proposal as compared to bankruptcy and other non-legislated options.

Good to know! The fact that you filed a Consumer Proposal will stay on your credit bureau report for a maximum of 6 years (including the time during your consumer proposal). That means a 5-year consumer proposal will stay on your credit report for 1 additional year after you have completed all of the terms of your Proposal. Equifax Canada – How Long Does Information Stay on My Equifax Credit Report?

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

• You won’t be stuck in an assembly line process.

• You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.

• We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.

• We help Canadians with overwhelming debt get fresh financial starts.

Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free consultation.

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.

Workers of companies that have gone bankrupt or under receivership may qualify to receive unpaid wages, vacation pay, and termination/severance pay.

WEPP is a program that was established by the Federal Government in July 2008.  WEPP provides employees of bankrupt employers, or employers subject to a receivership, with the ability to recover up to approximately $7,578 (2021) for unpaid wages, vacation pay, pay-in-lieu of notice, termination pay, and severance pay.

It is the Trustee’s or Receiver’s obligation to advise the employees of their rights under WEPP and to make the calculations of the amounts due to employees.  The Trustee or Receiver reports these figures to Service Canada and the employees file their claims with Service Canada who makes the necessary payments directly to the employees.  Service Canada may be able to recover some of the funds paid to employees from the assets of the company that is bankrupt or subject to a receivership.

The claims of employees for unpaid compensation and vacation pay earned in the six months preceding bankruptcy or the appointment of a receiver form a secured against Cash, Accounts Receivable, and Inventory of the company, in priority to the interests of secured creditors.

Receivership happens when a Receiver is appointed by creditors or the Court to control a company and/or its assets.

Receivership is a remedy typically used by a secured creditor but it is also possible for the Court to appoint a Receiver at the request of a secured creditor or another party with just cause.

Notice of Intention to Enforce Security

Prior to the appointment of a Receiver by a secured creditor, the creditor must give the debtor company a 10-day Notice of Intention to Enforce Security (NITES).  The secured creditor is not entitled to appoint a Receiver until the 10-day period specified in the NITES has expired unless the debtor company consents to an earlier appointment.

During the 10-day period, the company can file a Notice of Intention to Make a Proposal (NOI) and commence the restructuring process and stop further enforcement action.  If the 10-day period under the NITES is allowed to expire, the company will no longer be able to stay actions by that secured creditor.  If the secured creditor has legitimate concerns about the security of its collateral during the 10-day period under the NITES, the secured creditor could apply to the Court for the appointment of an interim receiver to preserve and protect the collateral, pending expiry of the 10-day notice period.

Court-Ordered Receivership

If the Court grants an application and appoints a Receiver, that Receiver is an officer of the Court and has responsibilities to all stakeholders, not just the creditor or stakeholder who sought the appointment.  In this case, the powers, duties and obligations of the Receiver will be defined in the Court order that appoints the Receiver.  The application to the Court for the appointment of a Receiver can be made on an ex-parte basis (without notice to the debtor company) or with notice to the debtor company.

Good to know! A Receiver is required to provide notice of its appointment to all known creditors of the debtor company within 10 days after appointment.  Also, the Receiver must prepare interim reports at least every six months after its appointment and a final report at the conclusion of their engagement.  These reports are available to any creditor who requests the report within six months after the report was completed.

A company can face Corporate Bankruptcy either voluntarily or involuntarily.

In order to become bankrupt voluntarily, the board of directors passes a resolution authorizing the company to file for Bankruptcy. Any company that owes at least $1,000 and is unable to pay its debts as they become due, or that has assets which at fair value are insufficient to discharge all of its liabilities, can file for Bankruptcy. A company becomes bankrupt involuntarily when a proposal put forth by the company is rejected by its creditors, or if one or more creditors apply to the Court for an order to put the company into Corporate Bankruptcy.

Regardless of how a company becomes bankrupt, it is necessary to have a Licensed Insolvency Trustee in Bankruptcy directly involved in the process.

Corporate Bankruptcy Will be the End of the Company’s Existence.

Generally, upon the company becoming bankrupt, the Trustee will take possession or control of the company’s assets. Secured creditors, providing that they have properly registered their security are generally entitled to obtain possession of their collateral from the Trustee and then proceed to realize (sell or liquidate) that collateral to recover their loans.

The Trustee will proceed to “realize” upon the company’s other assets (those not held as security for a loan) in consultation with the inspectors of the bankruptcy estate. The Trustee will also review all claims filed against the bankruptcy estate and admit them or disallow them, in whole or in part. Once all of the assets have been liquidated and claims determined, the Trustee will make its final distribution to creditors and proceed to close the administration of the bankruptcy estate.

Good to know! In exceptional circumstances, a bankrupt company could make a proposal in order to exit bankruptcy. Creditor approval is required for this to occur.

A corporate proposal is filed with the intent of restructuring the debt of a company and allowing the company to continue in productive existence. Any corporation that is unable to pay its debts as they become due, or that has assets, which at fair value are insufficient to discharge all of its liabilities, can file a proposal.

It is necessary to have a Licensed Insolvency Trustee involved with the corporate proposal. The Trustee will generally assist the company in the formulation and filing of the proposal and dealing with creditors. In a proposal, the company remains in control and possession of its assets pending acceptance or rejection of the proposal. However, the Trustee must monitor the operations of the company up to the time of the vote on the proposal.

Terms of a Corporate Proposal

The terms of a corporate proposal can be as creative as required in the circumstances but are generally  focused on an extension of payment terms and/or settlement of debts at less than full value. The actual formulation of the terms of a corporate proposal can take some time; the business must be analyzed to determine if all or only some parts of it should continue, whether equity investment or new financing is required, and the position of secured and unsecured creditors, among other matters.

Notice of Intention

In order to provide some relief from creditors actions, and time to formulate a proposal, a company can file a Notice of Intention to Make a Proposal (NOI) prior to actually filing a proposal.

Once filed, there is an immediate stay of proceedings and no creditor (secured or unsecured) can take or continue any action against the company without first seeking leave of the court. This stay of proceedings is for an initial 30-day period and allows time for the company to stabilize its operations, assess its restructuring options and formulate a proposal.

Good to know! If the initial 30-day stay period is not sufficient, it is possible to apply to the Court for one or more extensions of time of up to 45 days each, but the total stay period cannot exceed 6 months, and creditors may oppose the requests for extension in court.

Bankruptcy is the last choice for most individuals but, it is good that this process is available because without it, there might be no relief from the stress of unmanageable debt.

Personal bankruptcy provides a financial fresh start when other options are not practical. Even if you don’t want to use bankruptcy to resolve your situation, you should still understand how it works and don’t ignore the option just because of the “B” word. When assessing an individual situation, we review all relevant facts about assets, liabilities, income, family situation, cause of financial difficulty and outlook for the future. These are all considerations in determining what options are practically available so that you can choose the one that is best suited to you.

Will I have to give up my assets?

In most cases, you do not have to give-up any assets (unless you want to) if you go through bankruptcy. For example, it is uncommon to lose your house in bankruptcy. If there is equity in assets, you will have to settle the equity with the trustee. If your income is above a certain threshold, you will have to make payments based on your income level. How your assets will be dealt with and how much you will have to pay will be reviewed with you before you file for bankruptcy so you understand exactly how bankruptcy would work for you.

The bankruptcy process also provides individuals with two mandatory counselling sessions to help you understand how you got into financial difficulty, improve your basic budgeting skills and provide you with information on understanding and starting to re-build your credit.

Sometimes, bankruptcy can actually be the most efficient way to get back on your financial feet and start to rebuild your credit.

Good to know! At PAL, our Licensed Insolvency Trustees are members of the Canadian Association of Insolvency and Restructuring Practitioners (CAIRP), a professional body providing additional education, professional standards and disciplinary processes for its members.

Did you know you can avoid bankruptcy by filing what is known as a consumer proposal?