Ontario Personal Bankruptcy Blog: July 2007: Answers to Personal Bankruptcy Questions

Using credit cards prior to bankruptcy

Question: As a result of heavy debt and a drastic cut in income, I recently spoke to a bankruptcy trustee. We determined that bankruptcy is the only realistic option available to me, and I've decided to take that step. In the meantime, however, day-to-day bills and expenses have been piling up. I have a bank-issued credit card that's been sitting around unactivated for several months (the only one that isn't maxed out, I hate to admit); is it fraudulent if I activate the card and use it while I know full well that I'll be declaring bankruptcy two or three weeks later? Can it affect the bankruptcy process in any way?

Answer: Yes, using a credit card that you have no intention of repaying is fraud. It is a criminal offense, and if the amounts are significant you could face severe penalities. If the amounts are not large, it is likely that the creditor would request that you repay the money you spent on the credit card in the three months before your bankruptcy. If you don't repay the money, the credit card company could pursue you for fraud after your bankruptcy is finished.

If you are going to go bankrupt, stop using your credit cards immediately. You will also stop making payments on your debts, which should free up enough cash for you to pay your day to day living expenses.

Using credit cards before a bankruptcy is a serious issue, and one you should discuss with your bankruptcy trustee.

Labels: bankruptcy Ontario, bankruptcy trustee

property in the United States

Question: I own property in the United States - if I claim bankruptcy in Ontario will I lose my property in the United States?

Answer: If there is equity in the property, yes, it is likely you will lose it, or be required to pay to the trustee the value of the property if you wish to keep it.

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

RRSP and Bankruptcy in Ontario

Question: can I redeem an rrsp before going bankrupt in Ontario?

Answer: When you file for bankruptcy in Ontario, you are required to disclose to your bankruptcy trustee all assets you have disposed of or redeemed in the previous twelve months (or up to five years in certain cases). Thus if you cashed in your RRSP today, and went bankrupt tomorrow, you would have to provide your trustee with details of how much you received, and what you did with the money.

If you cashed in a $500 RRSP because you were behind on your rent and were about to be evicted, it probably won't create any issues.

However, if you cashed in a $10,000 RRSP and gambled the money away, your creditors will probably oppose your discharge from bankruptcy and ask the bankruptcy court to extend your bankruptcy until you have paid some or all of the money back.

Since your RRSP is on file with Revenue Canada, there is no point in hiding something like this from the trustee; they will find out directly from Canada Revenue Agency. We suggest you discuss this with your trustee prior to making the decision to file for bankruptcy.

Labels: bankruptcy Ontario, bankruptcy trustee

court costs and bankruptcy in Ontario

Question: I am considering declaring personal bankruptcy in Ontario; I have court cost owing against me from a divorce action what happens with these outstanding court costs. have no money and dont work to pay them

Answer: Most debts are discharged in a bankruptcy, which includes court costs. One type of debt that is not discharged in a bankruptcy is court ordered child support or alimony. If in your divorce the court ordered you to pay the court costs, than it is likely that these costs are considered to be part of the support you owe, and therefore would not be discharged in a bankruptcy.

If the court did not order you to pay these costs, they probably would be discharged in a bankruptcy. You should discuss this with your lawyer, or consult a bankruptcy trustee for more information.

Labels: bankruptcy Ontario, bankruptcy trustee

Can your wages be garnished for student loans if you live in the U.S. now?

Question: Can the collection agency that currently holds my student loan in Toronto garnishee my wages if I now live and work in the United States?

Answer: To garnishee wages in the United States that would have to sue you and get a judgement against you in the United States, which is an expensive procedure, and therefore unlikely to happen.

Labels: student loans

Computer I purchased and bankruptcy

Question: I recently was discharged from bankruptcy and now a computer company has informed me that I still owe them money for the computer that I bought from them prior to my bankruptcy in Ontario and that they were never informed by my trustee that I was bankrupt.....they claim that because I didn't voluntarily surrender the computer that I still have to pay even though they were on my list of debts included in the discharge. This is the first time I have filed for bankruptcy and I did everything that was required of my by the trustee .....since the computer company NEVER contacted me or the trustee during my bankruptcy ..... even though they have not received any payment during that time....am I free of them or are they correct in saying I owe still?

Answer: The debt to the computer company was probably discharged in your bankruptcy. There are two types of creditors: secured and unsecured. A debt to a secured creditor is not automatically discharged in a bankruptcy. For example, if you have a car loan, the car loan is not eliminated just because you went bankrupt. If the computer company registered a lien on your computer prior to the bankruptcy, they would be a secured creditor, and would therefore not be discharged in a bankruptcy.

However, in most cases in Ontario, computer companies do not register liens on computers they sell, since there would be no point in repossessing a two or three year old computer; they could never resell it, so there would be no point in seizing it.

We suggest you contact your trustee to confirm that the creditor was not a secured creditor, and request that the notice of your bankruptcy be resent to that company so that they will stop bothering you.

Labels: bankruptcy discharge, bankruptcy Ontario, bankruptcy trustee

Second Bankruptcy in Ontario

Question: What happens after a second bankruptcy in Ontarioand how common are they? Can you ever get credit after a second bankruptcy?

Answer: Exact statistics are not available, but experts estimated that over 10% of all people who declare bankruptcy will do so more than once.

In a first bankruptcy in Ontario you are eligible to receive an automatic discharge after nine months, if you have completed all of your duties, and if no creditor objects.

In a second bankruptcy in Ontario (the rules may differ in other provinces) a discharge hearing is held in Bankruptcy Court, and the bankruptcy judge or Registrar will determine how and when your bankruptcy will end. Since it takes time to schedule the court hearing, a second bankruptcy will last for at least 12 months, and 21 months is not uncommon.

It is possible to get credit after a second bankruptcy, although it is more difficult. According to Equifax, "If the consumer declares several bankruptcies, the system will keep each bankruptcy for fourteen (14) years from the date of each discharge".

If you believe you will need to declare bankruptcy in Ontario for a first or second time, you should consult a licensed Ontario bankruptcy trustee to explain the process in detail, so you can decide whether or not bankruptcy is the correct option for you.

Labels: bankruptcy, bankruptcy Ontario, bankruptcy trustee

Ontario Personal Bankruptcy Blog

Posted on Saturday, July 28, 2007

Using credit cards prior to bankruptcy

Posted on Friday, July 27, 2007

property in the United States

Posted on Wednesday, July 25, 2007

RRSP and Bankruptcy in Ontario

Posted on Sunday, July 15, 2007

court costs and bankruptcy in Ontario

Posted on Friday, July 13, 2007

Can your wages be garnished for student loans if you live in the U.S. now?

Posted on Thursday, July 12, 2007

Computer I purchased and bankruptcy

Posted on Wednesday, July 04, 2007

Second Bankruptcy in Ontario