Below are the most recent personal bankruptcy questions. Be sure to check out our Frequently Asked Questions page for answers to more common questions about personal bankruptcy in Ontario. Remember, you can always post an anonymous question, as well as arrange for a free consultation with a personal bankruptcy expert near you.
How do we deal with student loans? How do we get the best credit cards after bankruptcy? How do we approach credit counselling and bankruptcy in Canada? How do I find bankruptcy facts (Canada)? Do you need bankruptcy help/advice? Can I file for bankruptcy? For free information, please contact an Ontario bankruptcy expert near you today. Bankruptcy Ontario provides more information about bankruptcy alternative solutions for residents of Ontario. Or try our on-line bankruptcy evaluation and get expert advise on what option is best for you.
June 12th, 2013
Question: My wife and I recently separated and directly after separation she filed bankruptcy. One of the creditors listed in the bankruptcy is now coming after me for the money however the bankruptcy on her end has not been finalized. Do I have any options?
Answer: If the debt was joint, then the creditors are able to pursue you for the debt, since you did not go bankrupt. It does not matter that she is not discharged from bankruptcy.
You have a few options.
First, you could talk to the creditors and make payment arrangements, or attempt to negotiate a settlement with them.
Second, you could no nothing, but that will damage your credit, and may lead to them suing you and attempting to garnishee your wages.
Third, you could file a consumer proposal or bankruptcy to deal with the debt, but that option only makes sense if you have more debt than you can afford to repay.
June 3rd, 2013
Question: can a creditor re apply that is already taking 20% for a larger % ?
This is not for child support or spousal support, it is for credit card & credit line.
Answer: The short answer is “no”.
According to the Ontario Wages Act:
Exemption from seizure or garnishment
(2) Subject to subsection (3), 80 per cent of a person’s wages are exempt from seizure or garnishment.
In other words, you get to keep 80% of your wages, so the maximum garnishment is 20%.
If your wages are being garnisheed, and if it will take a long time to pay off the garnishment, and if you have other debts, it may be prudent to consider filing a consumer proposal or bankruptcy to immediately stop the garnishment.
May 27th, 2013
Question: My husband’s name is not on the title of our house but the mortgage is in both our names. If he declares bankruptcy, would it affect our house if his name is not on the mortgage?
Answer: If your husband does not own the house, the house is not an asset of his, so it would not form part of his bankruptcy.
There are two other points to consider:
First, if he transferred his interest in the house to you recently, that would have an impact on his bankruptcy.
Second, it is possible that his bankruptcy may impact your ability to renew the mortgage when it comes up for renewal in the future.
Before deciding if bankruptcy is the correct option, we suggest you consult a bankruptcy trustee for a no obligation initial consultation.
May 24th, 2013
Question: Does going bankrupt also cover your debt if its been a judgement? I have a judgement against me with no required date to pay by. I have other debts and I just cannot sleep at night. I am also on Ontario Works.
Answer: Yes, in most cases a judgement is discharged if you file bankruptcy in Ontario. The only exceptions would be items like criminal matters (like a restitution order) or child or spousal support orders.
If you have other debts in addition to the judgement, a bankruptcy would be an option to consider.
However, if you are on Ontario Works, you have no wages to garnishee, and if you have no other assets, you could also simply do nothing until you are working again.
This is just a basic overview of your options, so for peace of mind we suggest you talk to an Ontario bankruptcy trustee to review your options in more detail.
May 8th, 2013
Job insecurity, housing costs and mounting debts have a devastating effect on families – not only emotionally but financially.
In a recent study conducted by Hoyes, Michalos & Associates, one of Ontario’s largest personal bankruptcy and consumer proposal firms, six in ten insolvent debtors were families with an average household of three people. Tragically, 16% are also lone parents.
Even if your income is growing during your 30′s and 40′s, typically so are your debts. One in three insolvent debtors will have purchased a home and will see a dramatic increase in credit card use to cover home costs and family expenses. The average debtor between the ages of 30 and 49 has an unsecured debt burden (excluding mortgage debt) of almost $58,769. This includes a staggering $22,505 in credit card debt.
The average insolvent debtor is most likely to be married, however he has a higher than average chance of being divorced or separated at the time of his (or her) filing. While only 9% of Canadian adults were divorced or separated in 2012, 28% of insolvent debtors experienced a marital breakdown, three times the Canadian average. This is likely why 18% of all insolvent debtors in the study cited marital or relationship breakdown as a cause of their financial difficulties.
Financial problems and stress over money are one of the top causes of divorce. It is a myth however that bankruptcy causes divorce. The truth is that bankruptcy is all too often the financial outcome of divorce. Faced with overwhelming debt, couples begin to argue about money. When the stress leads to divorce or separation, the debt-divorce-debt cycle continues. Now separated, each ex-spouse finds themselves setting up their own household. They are now managing on one income rather than two and their costs have increased. Each partner now has their own rent, utilities and other expenses. Some may eat out more often than before. While adjusting to their new life, recently separated people often rely on credit card debt to pay the bills. Combine these added debts with the legal costs of a marital breakdown and debts grow even large. The end result all to often is the need to file bankruptcy or a consumer proposal to deal with resulting debts before they can move on.
Dealing with overwhelming debt causes both stress and anxiety for both you and your family. Talking to a professional is the best first step in taking charge of your financial situation so you can develop a plan to eliminate your debts and start over. Contact a professional Ontario bankruptcy trustee for a free, no obligation evaluation today and get some debt relief.
March 25th, 2013
The amount you are required to pay if you declare bankruptcy is based on your income. The more you earn, the more you are required to pay. This limit is adjusted each year, and the Office of the Superintendent of Bankruptcy has released the Surplus Income Limits for 2013, based on family size:
The bankruptcy surplus income limits for 2013 may look complicated, but the math is relatively simple.
If you are a family of two (such as a single parent with one child) and you earn $2,897 after tax each month, you are $400 over the limit for a family of two of $2,497, so you are required to make a surplus income payment of half of the amount you are over, or $200 per month.
If this is your first bankruptcy and your average income is more than $200 over the limit each month, your bankruptcy is extended for an additional year, so you would be bankrupt for a minimum of 21 months (instead of the basic 9 months).
Each situation is different, and in many cases a consumer proposal is a better option, so we suggest you contact a licensed Ontario bankruptcy trustee for a complete, no charge, no obligation review of your options.
February 11th, 2013
Two new reports came out today that show Canadians may be focusing more on debt reduction than retirement planning.
A Bank of Montreal survey found that 80% of young Canadians are more focused on debt reduction than savings but have little confidence that they will have enough money for retirement. And with the recent RRSP contribution numbers just released by Statistics Canada showing that the median RRSP contribution in 2011 was only $2,830 and that less than 1 in 4 taxpayers made an RRSP contribution last year, it’s no surprise that people are worried that they will outlive their retirement savings.
The take away from the article, according to the Bank of Montreal, is that it’s critical to start saving for retirement at an early age. But is that the case? Focusing on paying off debt early is also a good thing. With a tight job market for recent graduates, high student loan debt and the high costs associated with entering the housing market, it is no wonder that younger Canadians are concerned about their debt levels before their retirement. The security of having a good education that will eventually lead to a well paying job appears to be a thing of the past, at least for now.
What is your priority – pay off debt or build your RRSP savings? Here are some considerations:
- How expensive is your debt? If the debt you are carrying is primarily high cost credit card debt then paying that off should be your first priority, even over retirement savings. Carrying a debt burden that holds an 18% or more interest cost will keep you in debt for years – costing you future potential RRSP savings.
- What is your income level today? If you are not yet in your prime earning years then paying off debt now makes sense for two reasons. First you probably don’t have a lot of surplus cash flow right now so reducing your debt early will reduce your interest costs, and your total monthly debt payments. This will free up cash flow down the road that you can apply to your RRSP savings. Second, if you are relatively young and your income low, your potential tax refund may not be as financially beneficial as the savings associated with paying down your debt early.
- Contributions made in the last 12 months will be seized if you have to file bankruptcy. While your existing RRSP savings are protected in a bankruptcy, any contributions you have made in the last 12 months are not. If your debts are currently out of control, it may make more sense to talk to a Trustee in Bankruptcy about your debt reduction options before you make that contribution. The funds you have available may be more wisely used in a Consumer Proposal settlement with your creditors. Once you deal with your debts, then you can begin to save for your retirement in earnest.
Does this mean you have to wait to save for your retirement until you are debt free? No. But if your current debt levels are starting to get out of control, then you should consider talking to a Trustee in Bankruptcy to see how you can put your debts behind you, so you can put your retirement in front of you.
Contact us today at 310-PLAN, we can help you decide.
January 14th, 2013
Do you want to know how to pay off a credit card and get out of debt sooner? Here are some debt repayment strategies, do’ s and don’ts to get you out of credit card debt sooner.
#1 Tip On How To Pay Off A Credit Card?
Pay more than the minimum. Did you know that almost 50% of Canadians with a credit card balance say they always or often carry a balance on their credit card? More than 1 in 8 of those pay only the minimum balance or less. This is a sure-fire way to keep you in debt longer and cost you a lot of money. If you want to know how to pay credit card debt faster you should understand how minimum payments work and how much they will cost you. Most credit cards calculate their minimum payment as a percentage of your balance — usually between 2% and 3% — or $10 whichever is less. If you pay only the minimum on your credit card each month you will end up paying almost DOUBLE the amount of your original debt. Here are some examples:
|Original Credit Card Balance
|Years in Debt
||28 years 4 months
||22 years 8 months
||18 years 10 months
||13 years 10 months
#2 Use A Credit Card Repayment Calculator
The best way to pay off a credit card is to pay your balance in full by the due date each month. But if you can’t afford to pay off your credit card in full each month, a better option is to pay a fixed amount each month, as much as you can afford. To keep you on track, use a credit card repayment calculator to understand how long it will take to pay off your credit card under different payment options. This will help keep you motivated. For example, let’s say you owe $10,000 on your credit card. Paying only the minimum payment we know it will take you almost 23 years to pay off your credit card. But if you are able to pay $300 each and every month (the same amount as your first minimum payment would be) then you would pay off your entire credit card debt in just 5 years and 3 months saving a significant amount in interest.
#3 Consider A Consumer Proposal
If you find yourself unable to make reasonable fixed payments each month to pay off a credit card and are looking at years of credit card debt then your next alternative is to talk to a professional to see if a consumer proposal would be a way for you to settle your credit card debt. Your payments under a consumer proposal would be considerably less than they would be under any self-repayment program and often less than those negotiated by credit counselling agencies. If you are having difficulty paying off a credit card, contact one of our experts at 310-PLAN or complete our free, on-line consumer proposal evaluation form and see how a consumer proposal can help you discover how to pay off a credit card debt.
January 4th, 2013
The Ontario government has announced proposed legislation to prevent debt settlement companies from charging consumers huge up front fees for doing nothing. According to the government press release:
Through new regulations, the government will:
- Ban debt settlement companies from charging up-front fees
- Limit the amount of fees consumers are charged
- Require clear, transparent contracts
- Implement a 10-day cooling-off period.
Under current law, bankruptcy trustees in Ontario are regulated by the federal government, so we support legislation that will “level the playing field” and prevent others from making promises that they can’t keep.
If you have debt, instead of paying a lot of money to a debt settlement company that won’t talk to your creditors at the start of the process, a better option may be a consumer proposal, where your trustee makes a deal with your creditors at the start of the process.
Even better, there are no up front fees. You don’t pay anything until the proposal is filed, and you have received protection from your creditors.
We will monitor this legislation and post more news as it is available. For further information, contact an Ontario consumer proposal administrator for a no charge initial consultation.
December 5th, 2012
Question: My wife and I ran a small management firm, but our client base dried up. We both have jobs as employees of other companies now and our corporation owes the CRA approx $17,000 in HST and Payroll taxes.
We would prefer to resurrect our business, but don’t see that as a viable option in today’s market.
If we let the corporation go into bankruptcy, could the tax department garnish our wages to recover the taxes owing?
Answer: If the corporation declares bankruptcy, any assets in the corporation would be liquidated and used to pay the corporate debts, including the debt owed to Canada Revenue Agency (CRA).
If there are not sufficient funds in the corporation to pay CRA, the director’s of the corporation become personally liable for all “deemed trust” amounts owing to CRA. In simple terms a deemed trust is any amount that the business has collected on behalf of CRA and not remitted to CRA.
HST is money collected from customers on behalf of CRA, and the employee portion of payroll taxes are amounts collected from employees that should be remitted to CRA, so both of those amounts are deemed trusts. If they are not paid, CRA can pursue the directors for payment, and CRA does have the power to garnishee wages.
The answer is the same whether or not the corporation declares bankruptcy; CRA can still pursue the directors for unpaid deemed trust amounts.
If possible, you should work out payment arrangements with CRA to pay the amount owing. If that’s not possible, you should consult with a licensed trustee for further options.