Ontario Personal Bankruptcy Blog

Question: I have a healthy enough RRSP. I had repeatedly been told it was protected because it was "locked-in" and I could not touch it.

When we asses risk it is these pieces of information we consider. Is my RRSP available to creditors in my bankruptcy? It is locked in until 2015 (or longer). Once someone suggested I put it under an insurance but that seemed overkill.

Is it at risk if I go bankrupt?

Answer: Probably. If an RRSP is "locked-in" as a result of previous employment, where your pension is converted to an RRSP, it generally cannot be seized by the trustee. If there is a life insurance component it also is generally not seizable.

However, if your RRSP is invested in a locked in GIC that doesn't mature until, say, 2015, the trustee would be able to seize it.

An added twist is that the rules regarding RRSPs will probably change later this year.

Given these complexities, you should gather all applicable RRSP documents and bring them in to your initial consultation with a trustee, who will be able to advise you on whether or not you will lose your RRSP in a bankruptcy.

Labels: bankruptcy Ontario, bankruptcy trustee, what do I get to keep if I go bankrupt?

Question: Are my exemptions specific to me or do my children have to include their personal clothing, computer etc. in with my assets?

And on the same topic. If my husband has assets and I have assets, is the bankruptcy only interested in my assets?

Both of our cars are in his name, does that mean one must be assigned to me?

My husband guaranteed a percentage of some of my loans. Our house is in his name and has little or no equity. Does my husband also have to declare personal bankruptcy? Can he make a proposal to pay his portion over time?

Answer: Only the bankrupt's assets are considered in a bankruptcy. If a wife goes bankrupt, her husband's and children's assets are not considered (unless she transferred significant assets to them just prior to the bankruptcy).

If your husband has guaranteed some of your loans and you go bankrupt, he could either continue making payments on the loans, or go bankrupt or file a proposal. IF most of your debts are in common, a joint proposal may also be an option.

It's impossible to cover all possible scenarios in a short answer on this web site, so we suggest that you consult a trustee for a free initial consultation.

Labels: bankruptcy Ontario, what do I get to keep if I go bankrupt?

Question: my ex husband and i got divorced a year ago. Neither he or i had good enough to assume or even split the $20,000 line of credit . He was maintaining the interest on it. I just found out he has gone bankrupt and the bank is coming after me for the money. I cant afford to pay all of that and I am drowning in debt as it is, what is my options?

Answer: If you can't afford to pay the bank in full, you have four options:

First, you could do nothing, or pay them what you can afford. Unfortunately you run the risk that they take you to court and attempt to garnishee your wages.

Second, you could attempt to file a Debt Management Plan through a non-profit credit counsellor. Under a Debt Management Plan you are required to pay the debts in full over a two to five year period, which may not be possible in your case.

The third option would be to file a consumer proposal, where you offer to pay some, but not all, of the amount owing.

If you can't afford that, the final option is to declare personal bankruptcy. Bankruptcy eliminates your debts, but also impacts on your credit rating.

The correct option for you will depend on your monthly income, and whether or not you own any assets, like a car, house, or RRSP.

To find the answers in your specific case we strongly recommend that you arrange a no charge initial consultation with a trustee in bankruptcy licensed by the federal government so that they can review all of your options with you, and then you can make an informed decision.

Labels: bankruptcy Ontario, consumer proposal

Question: I am currently sending out resumes and applying for new employment. Will a new employer or potential employer be able to obtain information concerning my recent bankruptcy and will a recent bankruptcy have any bearing whatsoever on my obtaining employment?

Answer: It depends on the employer. If you are getting a job where you must be bonded, it may be more difficult to get bonded if you are an undischarged bankrupt. Other professions, such as investment advisors, may not employ you while you are bankrupt in Ontario.

However, in the vast majority of cases being bankrupt has no impact on a potential job. Most employers don't do credit checks as part of the hiring process, so they probably won't even know you are or were bankrupt.

To avoid surprises, if you are offered a job and the employer requests permission to do a credit check on you, be sure to disclose to them in advance that you are bankrupt; they will find out if they do a credit check, so in most cases it's better if they hear about your bankruptcy from you first.

Labels: bankruptcy Ontario

Question: I am no longer able to keep up with costs of maintaining my home - due to many factors. I am one month behind on a mortgage payment and was told by my real estate agent that he does not take these kind of sales because the broker is afraid they will not get their money if there is a lot owing to the mortgage company. Can I surrender my home to the mortgage company without claiming bankruptcy in Ontario and/or damaging (further) my credit rating?

Answer: The answer depends on the value of your home. If you surrender the house to the mortgage company and stop making the mortgage payments, the mortgage company will eventually foreclose on your home and sell it. If they get enough money to completely pay off the mortgage and associated costs, you won't owe them any money, so there won't be any long term damage to your credit rating.

However, if there is a shortfall on the mortgage when the house sells, your credit rating may be negatively impacted if you are not able to pay the shortfall.

If you believe you will lose your house, it is often better, if possible, to sell it yourself to maximize the proceeds. If there is a shortfall that you can't pay, bankruptcy or a consumer proposal may be options to deal with the debt.

Labels: bankruptcy Ontario, consumer proposal

Question: If I considered going bankrupt and made an appointment to see a bankruptsy professional what materials am I expected to take with me?

Answer: For your first meeting with a bankruptcy trustee you should bring with you a list of all of your debts (including your most recent statements if you have them), a list of assets you own (such as a house, car, or RRSP), and a budget (a list of what it costs you to live each month). Based on that information your trustee will help you review your options and determine what course of action is best for you.

Labels: bankruptcy trustee

Question: Hello, I am currently in pretty serious financial trouble. To make my question quick, basically I lost a fortune on my home in a short time due to injury and divorce. I have sold the home and also purchased another (my home is co owned by my father, both the one I sold and purchased) and the deal is supposed to close soon. All I have done is transfer the equity.

One of my creditors has just told me they intend to lien my home. How long does this process take? I am afraid of jeapordizing the deal to sell my home.

Regards,
Josh

Answer: If you owe money to a creditor (say a credit card or bank), to place a lien on your home they must first take you to court, sue you, obtain a judgement, and then enforce that judgement by placing a lien on your home. In most cases that process takes a few months. In Ontario, to sue someone you must give them 21 days notice, so with court delays the entire process usually takes a few months.

However, sometimes actions move quicker than aniticipated, so you should consult a lawyer or bankruptcy trustee for further advice on dealing with your financial situation.

Labels: bankruptcy trustee

Question: I graduated in 2001 and in 2006 I filled a consumer proposal. By the time my 5 years is done, it would be 10 years passed form my graduation.

Large portion of my proposal was due to my student loan.

What will happen at the end of the proposal with my student loan considering that it would be 10 years passed from my graduation?

I have heard that soon the law in this regard would change to 7 years? is that true? and if it is, then what should I do in order to get rid of this student loan?

Thanks a mil.

Answer: The answer depends on your proposal. Under rules in effect now (spring 2008) a student loan is only automatically discharged in a bankruptcy or consumer proposal if you have been out of school for ten years when you file the proposal, unless the student loan creditor specifically votes in favour of the proposal. You should contact your trustee (the proposal administrator) to ask how the student loans people voted.

If they did not vote in favour, it is possible that they will pursue you for the loan once the proposal is completed. You may then need to go to bankruptcy court and ask the bankruptcy judge to discharge your student loan (which he may or may not do).

New student loan rules have been proposed, which will lower the waiting period from 10 years to 7 years; those rules are expected to come into force later in 2008. Full details on student loans and proposals and bankruptcy can be found on the student loan bankruptcy Canada web site.

Labels: student loans

Question: If i go bankrupt then recieve an inheritance will it affect my bankrupcy? will i have to pay?

Answer: If you receive or become entitled to receive an inheritance while you are an undischarged bankrupt, the trustee will seize the inheritance and distribute the proceeds to your creditors. If the inheritance is large enough to repay your creditors and all costs in full, your trustee will pay the creditors in full, then annul the bankruptcy and return the balance of the funds to you.

Labels: bankruptcy Ontario