Debt Problems Frequently Asked Questions
FAQs on Debt Problems
If you want to get your questions about debt answered, then you have certainly come to the right place.
Here you can find out everything you need to know about filing for bankruptcy, as well as having the peace of mind and confidence you need to push forward.
Who can File for Bankruptcy?
If you want to file for bankruptcy in Canada then you have to live in Canada, or do business there.
You also need to be insolvent.
If you aren’t sure if you qualify as being an insolvent person, then you need to owe around $1000 and you also need to be unable to pay your debts when they are due.
You also need to have ceased your payment obligation.
How do I Become Bankrupt?
If you want to become bankrupt then you will need to meet with an insolvency trustee.
They will then work with you to assess your financial situation and they will explain the options that are available to you.
You will also need to complete an application form.
This will provide the trustee with detailed information about the financial affairs you have and what you are currently making payments for.
What Will Happen to my Debt?
When you are discharged from bankruptcy, all of your debts are then extinguished.
You should know that not all debts can be solved through bankruptcy.
Some of them include child support payments, alimony, penalties that have been imposed by the court or even debts that you have obtained by fraudulent means.
What Assets Can I Keep?
You will be allowed to keep some of your assets when you file for bankruptcy.
There are exceptions which are set by provincial laws.
If you have $10,000 worth of tools for trading, then this won’t be included, and neither will your motor vehicle if it is worth $5,000.
Equity in a home that is valued at $9,000, or $12,000 if you live in the district of Greater Vancouver will also not be included.
If your creditor holds a security against your asset, then they will be allowed to exercise their right to hold onto this security.
You can however make arrangements if you want and this will help you to keep possession of the item so you can carry on making payments against a secured loan.
What is Going to Happen to my Income?
During your bankruptcy, your income has to be reported to the trustee.
A standard level of income will be set by the Superintendent of Bankruptcy and this will be based on the amount of dependents who you have in your home.
Any income that you earn above this amount will be considered as being surplus income and therefore will need to be paid to the trustee.
What are your Duties During Bankruptcy?
It is your duty to try and make sure that you disclose and deliver to the trustee any property that is not exempt.
You also need to make any books, relevant documents and records that relate to your assets available as well.
If required, you will need to attend a meeting with your creditors, and you will also need to disclose your trustee details of any property that you have during the 12-month period prior to your bankruptcy.
Can I Be Denied Bankruptcy?
If you are insolvent and if you have been discharged from a previous bankruptcy, then you will have the right to file.
You will however need to have a licensed insolvency trustee who can act for you during your administration.
You may qualify for bankruptcy but at the end of the day, your creditors and your trustee will have the right to oppose your discharge.
This usually happens if you have not complied with your duties or if you happen to have surplus income.
When will I Get Discharged from Bankruptcy?
An automatic discharge will usually happen 9 months after the initial filing.
This is if you have no surplus income.
If you have surplus income, then you will need to wait longer.
If you have filed for bankruptcy already, then your discharge will take place after 24 months.
These automatic time periods will apply if you have met all of your requirements, so you need to keep this in mind.
If you have a very large income tax debt, which is greater than $200,000 and if this accounts for more than 75% of your total debt then there is a high chance that you will not be eligible for an automatic discharge.
If this is the case, then you will need to apply for a discharge in court.
How Much is a Consumer Proposal?
You have to offer more than what creditors would expect to get if you went into total bankruptcy.
When you are trying to work everything out, you have to make sure that you are able to afford the payments.
There will be no up-front fees and there won’t be any extras either.
Your administrator will be paid out of the sum you agree to pay your creditors.
How do I Make sure that my Consumer Proposal is Successful?
If you want to get accepted, then you just need to make sure that you are offering the creditors more than they would have if you declared bankruptcy.
You also need to meet the minimum amount set out by your creditors, while making sure that you work with your advisor as much as possible.
When will my Proposal be Approved?
Once all of your documents are signed, they will then be filed with the government and your protection will then start.
During this time, you will stop making any payments to your creditors.
A consumer proposal will be approved if the majority of creditors vote yes, and if it is approved by the court.
You will need to have a meeting if at least 25% of your unsecured creditors happen to ask for a proposal.
Can I Omit a Creditor from My Proposal?
It’s important to understand that you cannot leave a creditor out of your consumer proposal.
Your consumer proposal will eliminate the unsecured debts you have.
This will include your payday loan, tax debt and even your lines of credit.
Consumer proposals will not affect your secured creditors and you are not able to modify the terms of the debt.
There are of course some debts that cannot be settled via a consumer proposal.
This includes a student loan that is over 7 years old and alimony obligations too.
How long does A Consumer Proposal Last?
Payments that are made for a consumer proposal can easily be spread over 60 months.
If you are able to afford more every month, then you can shorten the proposal term you have.
It’s important to know that your consumer proposal payments will be interest-free regardless of how long your term is.
Can I Pay My Proposal Early if my Circumstances Change?
Yes, even though your payments are fixed, when you have had your proposal accepted, you can then pay off your proposal early.
You can then begin the process of recovery.
Can my Debts be Settled through a Consumer Proposal?
Yes you can settle any unsecured debts through a consumer proposal.
If you have secured debt on the other hand then this will not be covered by your proposal.
Will a Consumer Proposal Stop Wage Garnishment?
Yes, if you do take out a consumer proposal then this will be legally binding.
It means that a stay of proceedings will stop any creditor action, and this includes wage garnishments from collection agencies or even creditors.
When you sign your proposal documents, you will then be filed electronically through the government and you will also gain protection.
Will I Have any Duties with a Consumer Proposal?
If you do make the decision to go ahead with a consumer proposal, then you will need to complete similar duties when compared to someone who is bankrupt.
During your proposal, you will need to make all of your payments.
You will also need to attend two counselling sessions.
You will need to report any income and expenses.
On top of this, you will need to include tax refunds that might be owed.
What if I Miss Some Payments?
If you miss any payments, then you need to tell your agency as soon as possible.
You can defer two payments but if you fall three or more payments behind, then your proposal will then be annulled.
Any debts that you have will be reinstated and you may even find that you lose out on your creditor protection too.
This is the last thing that you need, so it’s important that you do everything you can to keep up with the payments that have been outlined in your agreement.
If you have any questions about your credit agreement or if you need some support with making your decisions, then Bankruptcy Canada can help.
Contact us today by phone or even by email to see how we could give you the support you need to navigate the process of debt relief.