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Bankruptcy in Ontario: What Happens to My House and Car?

Thursday, March 11th, 2010

Question: Hi, my boyfriend is heavily in debt and we would like to seek some advise. He has $70,000 in credit card and line of credit debt and is having a hard time coping up with the payments since he only works part time. The only assets he has is his car that he has paid off a long time ago and the house his parents bought which is named after him, his sister and brother. If he decides to file for bankruptcy in Ontario what will happen to the house that is house and also to his car? I hope you can help us. Thank you very much!

Answer: If you file bankruptcy in Ontario, you are required to either surrender your house to the trustee, or pay to the trustee the equity in your house. Equity is the value of the house (the difference between the value of the house, and the amount owing on the mortgage and other charges). If there is no equity, you could keep your house (provided you keep the mortgage in good standing). In your brother’s case, if the house is owned jointly by him, his sister, and his brother, he would only be required to pay his share of the equity (presumably one third).

He should get an appraisal on the house, and confirm the balance owing on the mortgage, and then meet with a trustee to discuss his options.

For the car, if there are no loans against it, you can keep a car worth up to $5,650 if you go bankrupt. Since his car is old, it is probably not worth more than that amount, although again he can have it appraised to be sure.

More information can be found in this article on what happens to your house if you file bankruptcy in Ontario, and what happens to my car if I file bankruptcy in Ontario.

For a review of his exact situation, he should consult an Ontario bankruptcy trustee for a no charge initial consultation.

Tags: bankruptcy Ontario, bankruptcy trustee, car, house
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Bankruptcy Lawyer or Trustee?

Thursday, March 4th, 2010

Question: It is my understanding that the bankruptcy trustee works mainly for the creditors. Does that mean that I should see a lawyer before I consider discussing my debt and credit issues?

Answer: Good question. It is a common misconception that a bankruptcy trustee works for the creditors. A bankruptcy trustee doesn’t work for the creditors, but they also don’t “work” for the debtor.

A bankruptcy trustee in Ontario is appointed by the court to administer the bankruptcy. The trustee’s job is to ensure that all rules are followed, by both the creditors and the bankrupt person. For example, the bankrupt is required to report their income each month, and to provide the trustee with information to file their taxes, so the trustee makes sure all information is provided.

However, if a creditor was to try to garnishee the bankrupt’s wages after the bankruptcy starts, that’s against the rules, so the trustee would obtain a court order to stop that.

The bankruptcy trustee is the “middle man”, like a referee in a hockey game, making sure both sides follow the rules.

Your question is: should I talk to a lawyer before I talk to a bankruptcy trustee? A lawyer works entirely for you, so if you want someone just to advise you, then yes, you can see a lawyer. However, for a lawyer to review your situation and advise you may cost a lot of money, and most people in financial trouble can’t afford the cost of a lawyer.

Our advice is to do your own research first, before visiting a trustee. There are many web sites that discuss ways to deal with deal with debts. Some sites focus on consumer proposals; others discuss personal bankruptcy in Canada. By researching your options, you will have a list of questions to ask your trustee, which should allow you to decide for yourself which option is best for you.

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Advice for Possible Bankruptcy Situation

Wednesday, March 3rd, 2010

Question: I need advise on this situation. I have a house with a mortgage with very little equity. It is for sale. If sold the sale proceeds probably wouldn’t cover more than the mortgage penalty, real estate fees and outstanding property taxes. Part 2 – I have a line of credit/credit card debts/CRA debt (also GST for my corporation). These would total approximately $75K. I also have a van with a loan of $512 per month and it has no equity.

If I claim bankruptcy, I want to keep the van and continue to make the payments.

Do I claim bankrutpcy for just my corporation or personally too. The one credit card is in the business name; the line of credit is personal and two other credit cards are in my name personally.

I am also paying child support monthly. Any income I earn each month is paid to my corporation. My debts exceed any income.

What will happen potentially if I claim bankruptcy and if I earn sales commissions in the future under a new company/corporation which I will open after bankrupting this one? Would they take the house if I don’t sell it? What else do I need to consider and how much would it cost to go through bankruptcy and how are those fees paid? Thanks for your advice.

Question: You are asking many complicated questions. To fully answer the questions we would require more information. We suggest you contact an Ontario bankruptcy trustee who will give you a free initial consultation, and review all of your options in detail.

In general, yes, you can keep your van and keep making the payments on it, even if you go bankrupt.

In general, it would be you personally that would go bankrupt, not your corporation.

As for your income, when you are bankrupt you report your income each month to your trustee, and you are required to pay half of your surplus income into your bankruptcy estate. If you earn large commissions, the cost of your bankruptcy goes up.

Again, due to the complexity of your situation, a face to face meeting with a trustee is essential to fully explore all options.

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Personal Bankruptcy in Ontario for Pensioner

Monday, February 22nd, 2010

Question: My husband is 70 yrs old and is collecting cpp and old age pension. Up to last November 2009 he was employed and was paying his credit card debts faithfully, even more than required because he wanted to get them paid off. Unfortunately the company he was working for no longer required his services and he found himself unemployed. Due to his age, he cannot find another job to pay his debts. He owes quite a substantial amount of money to 2 credit cards. He has absolutely no assets other than a 13 yr old car, which has approx 116,000 kms. His pensions pay his rent and food. Because he has to file income tax for 2009 he will owe the government taxes he cannot pay. Will he be able to claim bankruptcy on the credit card companies (banks) and the government income tax owed without the government taking his pension? Also, will he be able to get assistance from the government to help pay for bankruptcy costs? I am not working and collect a small cpp so cannot help him. My name is not on either credit card forms. He doesn’t know what to do. Right now he is receiving threatening letters and phone calls from the banks and is getting dangerously depressed. Please help with his situation in any way you can.
Sincerely
Shirley

Answer: Your husband has two options. First, he could open a new bank account at a new bank, and not pay his credit cards. The credit cards cannot garnishee his wages if he is not working. The government, however, can reduce what they pay him for CPP if he doesn’t pay them.

His other option would be to file bankruptcy in Ontario. The bankruptcy would discharge his credit card debts, and the taxes he owes to Canada Revenue Agency. All trustees offer payment arrangements, so cost should not be a problem. A typical bankruptcy for a resident of Ontario with no assets would cost approximately $180 per month for nine months, although costs will vary depending on the circumstances. He should talk to an Ontario bankruptcy trustee for more information.

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If I only have one creditor, CRA for tax debt, can I still consider bankruptcy in Ontario?

Wednesday, February 17th, 2010

Question: I’ve gotten myself into a situation where I owe several years of back taxes to the CRA and they are the only creditor I have. Due to the penalties and interest it will be impossible to pay them. Can I still make application for bankruptsy if I only have one creditor? I’ve been told you can’t go bankrupt unless you have multiple creditors?
thanks

Answer: Yes, you can declare bankruptcy anywhere in Canada, even if you have only one creditor.

There are a number of options for dealing with tax debt. Bankruptcy is one of them. It may also be able to make repayment arrangements directly with Canada Revenue Agency.

You should also be aware that if you owe more than $200,000 in tax debt, and that debt is 75% or more of your total debt, a court hearing will be required to discharge your tax debt. A bankruptcy trustee can provide you with more information.

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Credit Card Addict – Is Bankruptcy in Ontario My Only Option?

Wednesday, January 27th, 2010

Question: I have been employed only 6 months in the past 8 years and have been living with close relatives for free. I have been living off my credit cards and line of credit and have reached/exceeded the credit limit. I owe over $40,000. I have no money. My relatives do not know I owe this much money. I have trouble getting a job in my former profession. Can I qualify to file for personal bankruptcy? What else can I do?

Answer: Yes, you would qualify to file bankruptcy. As for other options, that would depend on your future job prospects.

While you may be unable to find a job in your profession, if you are able to find any job, it may be possible to file a consumer proposal as a way to avoid bankruptcy. To file a consumer proposal you would either need your own income, or help from family, to fund the proposal.

An Ontario bankruptcy trustee can provide you with a more detailed explanation of your options.

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Plan on going back to school after filing a proposal

Thursday, December 31st, 2009

Question: I’m planning on doing a consumer proposal and planning on going back to school and would probably need to apply for a student loan. On top of this I have a 6-7 year old student loan with up to date payments on it. How do you assess this situation?
Thank You

Answer: A student loan is only automatically discharged in a consumer proposal or bankruptcy if it is more than seven years old at the time of filing. If yours is six years old, it would not be discharged. You are still able to apply for a new student loan, and in most cases you would be accepted even if you file a proposal.

In most cases a proposal is filed because the debtor has surplus income, which makes a bankruptcy in Ontario more expensive. If you return to school full time you would probably not have surplus income, so for you a bankruptcy would also be an option (assuming you have debts other than a six year old student loan).

As you can see there are a number of factors to consider, so your best option would be to consult a licensed Ontario bankruptcy trustee for a free initial consultation to review your specific situation.

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trustee complaint

Tuesday, November 17th, 2009

Question: I am an in a secured position to received monies that the trustee had in their accounts. They are holding these funds and I would like to know WHEN and how long can he hold these funds.

If I feel a trustee is not being above board who can I contact???

Answer: You have three choices. First, you can contact the trustee, in writing, and ask for their position on the matter. It is very unusual that a trustee would be holding funds for a bankrupt, but the starting point would be to get the facts in writing.

Second, you could contact a lawyer and ask them to discuss the matter with the trustee on your behalf.

Finally, you could contact the Office of the Superintendent of Bankruptcy with your concerns. The regulate all trustees, and can intervene if an issue arises.

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first time and scared and feeling stupid

Friday, September 4th, 2009

Question: I have recently filed a consumer proposal and went for my two counselling sessions during which I learned that I was $450.00 short income each month. I have listed my house for sale and am in arrears with the bank for 4,444 plus now I have 3,500 bank fees on top. I was told by friend to vacate my house–but how does this help. I am drowning and can’t get out— is vacating an appropriate option and where/how can I rent with a proposal and potential vacating?–please help–I am desperate.

Answer: You should immediately contact your trustee and ask for a meeting to review your options. If your cash flow is short by $450 each month, your proposal is not viable; you will get behind on your payments, and it will fail.

The first option is to either increase your income or reduce your expenses to eliminate your cash shortfall each month. If you can do that, it’s possible that you can continue with the proposal.

If you vacate your house to save money, and there is a shortfall, you will probably be liable for the shortfall, since the shortfall has arisen after you started your proposal. If you intended to surrender your house, you should have vacated and stopped making payments prior to filing your proposal.

If you can’t afford to keep the house, and if you can’t afford your proposal payments, your only other option may be personal bankruptcy in Ontario. Again, you should either contact your existing trustee, or if you are not satisfied with the advice they have given you contact another Ontario bankruptcy trustee for a second opinion.

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Child support and bankruptcy in Toronto Ontario

Saturday, July 18th, 2009

Question: My ex and I have signed agreement through a mediator for me to pay her 250 a month in child support. I am currently in my 3rd month of bankruptcy in Toronto and cannot afford the support payments and falling behind on my bills. What should I do?

Answer: You are in a very difficult position. You should follow the following approach.

First, take a close look at your monthly budget and cut your monthly expenses by as much as possible. Eliminate all unnecessary expenses, such as cable TV, eating out, and anything else that can be cut. You must get your expenses down as low as possible.

Second, talk to your family and friends to see if anyone can help you meet your expenses.

Your goal is to stay current with your monthly living expenses, your child support payments, and your bankruptcy payment. If you fall behind on child support the FRO has the power to suspend your driver’s license and garnishee wages. If you fall behind on your bankruptcy payments and you don’t get caught up your bankruptcy period will be extending, increasing the cost of the bankruptcy.

If these steps do not allow you to get caught up, you should discuss your child support situation with your ex wife, or with your lawyer. At the very least making partial payments may keep you from getting too far behind.

You should also discuss your situation with your bankruptcy trustee. If you will be falling behind on your payments your trustee will be more willing to work with you if they understand your situation, and if you keep them informed. They can explain in more detail all of your options.

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