February « 2009 « Bankruptcy Ontario: Free Information about Bankruptcy in Ontario

bankruptcy mediation

Wednesday, February 11th, 2009

Question: Hi, if you have surplus income, and are paying the trustee $650 every month, will the trustee automatically extend the bankruptcy by 12 months? If I seek mediation, is it like that the trustee can meet half way for extending it 6 months? I have heard horror stories about people being bankrupt for 2-3 years because their trustee kept extending their bankruptcy.

Answer: As of February 2009, if the bankrupt is paying $650 per month in surplus income payments, it is standard practice for a trustee to extend the bankruptcy for 12 months. However, the bankrupt person has two options:

First, they can request mediation. In mediation, the bankrupt can make the case for paying a lesser amount. Ultimately the mediator does not make a decision; it is still the trustee’s decision.

The second option is to request a discharge hearing in bankruptcy court. The bankrupt can give reasons why their bankruptcy should not extend for an extra twelve months. The trustee, and any creditor, can also present their opinions. Ultimately, the bankruptcy registrar or judge will decide.

It should also be noted that under new bankruptcy rules, which as of today have not yet become law, if you are a first time bankrupt and if you have surplus income, you will be automatically bankrupt for 21 months, so it is likely that even if you went to court today your bankruptcy would last for 21 months. Your trustee, or a bankruptcy lawyer, can provide you with more details.

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Is bankruptcy the best way to go?

Tuesday, February 10th, 2009

Question: I’m emailing for a family relative. She is on disability, receives approx $900 monthly and owes approx $6000 in credit card debt. She is staying with family but has applied for housing and is waiting to get into apt. She is 52yrs old, has OCD and Rheumatoid Arthritis which has prevented her from working. Is Bankruptcy the way to go or is there a way to have her credit card dealt with by lower interest? Any advice appreciated.

Answer: She has a few options.

First, she could open a new bank account at a new bank, to prevent her existing creditors from taking money automatically from her account, and then she could simply stop paying her credit cards. They will call and send letter, but if she has no assets to seize and no wages to garnishee, there is virtually no way for the creditors to get anything from her.

Her second option would be to talk to a credit counsellor about making a debt management plan. Credit counselling is a plan where she repays her debts in full, but at a reduced or zero rate of interest. However, if she is living on $900 per month this may be difficult.

A consumer proposal is another option, but again, on $900 per month that may be very difficult to afford.

If she wants to stress relief of dealing with her debts, a personal bankruptcy is an option. However, there is a cost to filing bankruptcy. She will be required to make a monthly payment to her trustee, and she will lose her tax refunds and GST credits while bankrupt. A trustee can provide more information. Ultimately she must decide if she wants to incur the cost of a bankruptcy to get stress relief from her creditors.

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co signer

Monday, February 9th, 2009

Question: Hi,

Co signer on vacant land, ex claimed bankrupcty. Trustee is stating I am responsible to pay for the evaluation of the property and the arrears and then pay the equity in the property. I dont’ understand if I pay the arrears why does the bankrupt get my money and also why I am solely responsible for the costs associated to selling or purchasing this property. I have people willing to buy for the balance of the mortgage. Is this not fair as then all his debt and my debt is cleared?

Answer: It’s impossible to fully answer your question without more information, but here’s a simple explanation: One of the trustee’s jobs is to turn the bankrupt’s assets into cash. If the bankrupt has equity in the property, the trustee proposes to have you purchase that equity. Those funds then go into the bankrupt’s estate, and are distributed to the bankrupt’s creditors. The bankrupt doesn’t get the money.

We suggest you discuss this directly with the trustee. If you are not satisfied with the explanation you get from the trustee, you should discuss it with a lawyer who can advise you on how to protect yourself in this situation.

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Maximum length of Bankruptcy

Friday, February 6th, 2009

Question: Is there a maximum length of time a bankruptcy can run after it exceeds the minimum nine months?

Answer: There is no maximum bankruptcy period. In theory the bankruptcy court could extend a bankruptcy indefinitely. However, in practice, it is unusual for a bankruptcy to be extended for more than an additional 12 months (or 21 months in total), except in exceptional circumstances.

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Separation and Bankruptcy

Wednesday, February 4th, 2009

Question: My husband left me a year ago and left me essentially with all our debt inclusive of 2 mortgages (joint), loan (joint), line of credit (joint), credit cards (my name, actual joint debt). I sought a spousal support order which was granted until our house sold. He is in default 8000$ and Family Responsibility is involved. The house is pending sale, however there is a shortfall of 15000$, which I proposed we split. He has a new girlfriend. He has just claimed bankruptcy. How does the process work for me?

Answer: If your ex-husband has claimed bankruptcy, you remain liable for all of your joint debts. Since he is bankrupt the creditors cannot pursue him, but they can pursue you.

We suggest you discuss this with your lawyer, who can advise you what is likely to happen with your joint assets. Your ex-husband is no longer liable for the shortfall on the house, since it will be included in his bankruptcy.

However, if the court orders him to pay you support, that is an obligation that is not discharged in a bankruptcy; he must continue to pay it, even if he is bankruptcy. A bankruptcy trustee can give you more details on your specific situation, and help you decide whether or not it is necessary for you to file a consumer proposal or bankruptcy as well.

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walk away from mortgage

Monday, February 2nd, 2009

Question: I have had my condo up for sale/rent for several months, with no luck. I am now living in a different city and paying double housing costs. Even if I do sell this condo for the asking price I will owe $5000 as I did not pay any down payment and what i have paid off ($300 every 2 weeks) has merely been taken off the interest. I can’t keep this up.

What happens if I just turn in the keys to the lender?

Answer: This is a very common question given the weak real estate market across Ontario. If you simply stop paying the mortgage and surrender the keys to the mortgage holder, the lender will eventually foreclose on the property and sell it. They will then pursue you for the shortfall. The shortfall could be large, because in addition to the outstanding amount on the mortgage they will add in their legal costs, outstanding condo fees and property taxes, and other costs. If you can pay them, that’s your best option.

If you are unable to make the payments, you should consult a trustee for further options.

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