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Archive for the ‘consumer proposal’ Category

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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Divorce, Home Reposession, etc… and personal bankruptcy.

Monday, February 22nd, 2010

Question: I am in a very difficult situation. I am recently separated from my wife of 21 yrs. She has filed for divorce. She left me with all of the bills, two mortgages, etc… and also has petitioned for spousal support.

Based on my current income here is my situation:

- I take home slightly more than $6500/ month
- My ex-wife is entitled, per the courts, to $2900/ month in spousal support.
- I give her $1100 per month in child support.
- Between the two mortgages, I owe approximately $130,000 more than the house could be expected to get on the open market. I have defaulted on the two mortgages, and the mortgage companies have threatened to garnish my wages.
- I also have over $10,000 in credit card debt.

Between all the debts I owe, the spousal and child support, the credit card bills, my living expenses, etc… I do not take home nearly enough to live on.

What are my options?
Is bankruptcy my only alternative?
If I declare bankruptcy, what will follow?
Should I take a job in another country, can my creditors and ex-wife compel payment still?

I need help.

Answer: You should start by talking to two professionals: a divorce lawyer, and a bankruptcy trustee. Your divorce lawyer can advise you on what you will be required to pay in child and spousal support, and can advise you on whether or not you are required to continue paying if you live the country.

Even though your house is worth $130,000 less than the amounts owing on the mortgages, you could keep the house, and keep paying the mortgages. Whether or not you can do that will depend on whether or not you have the cash flow to carry the mortgages.

Alternatively, f your house is worth $130,000 less than what is owing on the mortgages, there is probably no financial reason for keeping the house. Your best option may be to surrender the house to the first mortgage holder, and let them sell it. You will then be liable for the shortfall of perhaps $130,000, which may be more than you can service.

You could then file either a consumer proposal or bankruptcy in Ontario to deal with the debts. The correct option will depend on what you can afford to pay each month, which will depend on what you are paying in child and spousal support. This analysis is somewhat complicated, so you should discuss this with an Ontario bankruptcy trustee.

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I don’t want to go Bankrupt in Ontario; What are my options?

Tuesday, February 16th, 2010

Question: Hello, I have about 40,000.00 in credit card debts, I don’t want to claim bankruptcy. Do I have any options??? Thanks.

Answer: Yes, you have a few options.

First, you could attempt to continue to service your debts on your own. If your income improves, you may be able to pay your debts. If you still have reasonably good credit a debt consolidation loan is another possible option. If you can consolidate and lower the interest rate, you may be able to repay your debts on your own.

A debt management plan through a not for profit credit counsellor is a possible option, if you can afford to repay the debts in full, but need a break on the interest charged. If you can raise a lump sum of money, say $20,000, the creditors may accept a lump sum debt settlement, particularly if you are already six months or more in arrears with them.

If those options don’t work, the next option is a consumer proposal. In a consumer proposal you offer to pay a portion of the amount owing over a three to five year period, and the creditors agree to write off the rest. If you have a job, but can’t repay the debts in full, a consumer proposal is an excellent solution.

To find out which option is best for you, you should arrange a no charge initial consultation with an Ontario bankruptcy trustee and proposal administrator, and they will explain the options in detail, and help you make a decision.

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In so deep a bankruptcy trustee said we have no options

Tuesday, February 16th, 2010

Question: Due failed corp. business we owe more than we are worth personally. The corporation and its bank accounts are closed. The house has 3 mortgages and the house is worth less than the morgage value. Personally we are living on disability income (CPP and a former employee medical plan.) When we went to a trustee we found that we had a short fall of $600.00 per month hence eliminating a proposal or bankruptcy as there is no money left. If we walked away from the house we are no better off. The only bills being paid are the morgages and a car loan which has no equity. We have changed banks and withdraw the money as it comes in and redeposit it to cover debts. We want to know if we are protected and is there any possible way to resolve this issue. I have already had a failed business and went bankrupt once. We are 60 yrs old and in 5 yrs we will be on old age pension. Will our pensions be protected as they would be lower than the individual monthly allowance?

Answer: The trustee you met with has identified the correct issue: your most significant problem is that your monthly expenses are larger than your monthly income. Your first project is to eliminate that deficit. The two obvious solutions would be to give up the house, and perhaps the car.

If your house has three mortgages you are paying a lot to live in the house. Since the house is worth less than what is owing on the mortgages, there is no point in fighting to keep the house; it has no financial value. The logical option is therefore to surrender the house to the mortgage holder, and find a place to rent. That should eliminate your monthly deficit.

You are correct that a consumer proposal is not a viable solution, since you don’t have the income to support the monthly payments. A bankruptcy is a possibility, but because it would be your second bankruptcy, it would be more expensive, and last longer than a first bankruptcy.

Your final option is to do nothing. You have already opened a new bank account at a new bank; that’s good, because your old creditors are not aware of the new account. Banks and credit card companies are generally unable to get a garnishment order against government pensions, so that income is probably safe. You could therefore live off of your pensions, and not deal with the debts.

If you return to work a proposal or bankruptcy may be necessary in the future. Your trustee can provide you with more detailed information.

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consumer proposals and credit

Tuesday, February 16th, 2010

Question: If I file for a consumer proposal will it effect my credit ratings, credit cards and my chances of getting a mortgage with my bank? please and thank you

Answer: Yes, a consumer proposal will appear on your credit report. You lose all credit cards when you file a proposal. It is difficult to qualify for a mortgage while you are in a consumer proposal.

However, a consumer proposal discharges all debts, which begins the process of repairing your credit. If you are able to save money, and have a good income, once the proposal is finished you will be able to borrow again.

A consumer proposal administrator can explain the implications in more detail.

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consumer proposals and credit ranking

Saturday, January 30th, 2010

Question: If I do consumer proposal with my credit cards, what does it do to my credit ranking? and for how long?

Answer: According to Equifax, a consumer proposal remains on your credit report for three years after all of the payments are made, and you would be coded as an R7 (a bankruptcy is an R9).

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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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Collection Agency Demands: Should I go bankrupt in Ontario?

Monday, December 7th, 2009

Question: Obviously I’ve run into some financial difficulty… and I’m wondering if I should look at bankruptcy.

After my necessities are taken car of (rent, car payment, car insurance), I have about $100 left over to pay my credit card. This didn’t cover the minimum payment by a long shot, so the credit card was turned over to a collection agency. I explained that I was paying all that I could, but the collection agency said it wasn’t enough and they would have to seek legal action. I can’t afford a lawyer, and I can’t make my necessities any less (I’ve gotten rid of cable, my cell phone, and my car is worth less than what I own on it so I can’t sell it… also, I wouldn’t have my job if I didn’t have a car).

Can a collection agency do this? Do I have to contact a lawyer or can I represent myself? Is bankruptcy the only way to get the collection agency to understand that I’m doing all I can?

Thanks for your help!

Answer: You have a few options. First, you can continue to pay what you can afford. In most cases the credit card company won’t refuse a payment. If you are paying it is less likely that they will take you to court.

Your second option is to “call their bluff” and let them take you to court. Depending on the amount you owe your case will probably be heard in small claims court, so you can represent yourself (or hire a lawyer if you wish). Since you owe the money, it is likely that the court will decide that you owe the money, and there will be a judgment against you, which may allow the creditor to garnishee your wages.

You could attempt to negotiate a settlement with them through a not for profit credit counsellor through credit counselling.

If those options don’t work, you could consider a consumer proposal or personal bankruptcy in Ontario. Whether a proposal or bankruptcy is the correct option will depend on your income, and your other debts, so we suggest you contact an Ontario bankruptcy trustee for a no charge initial consultation to determine which option is best for you.

Posted in bankruptcy Ontario, collection agencies, consumer proposal | No Comments »

cap on income in bankruptcy?

Tuesday, November 24th, 2009

Question: Why would my income be capped if I filed for bankruptcy? I don’t understand why that would matter.

Answer: Your income is not “capped” when you go bankrupt; you can earn as much as you want. However, you are required to pay 50% of your surplus income while bankrupt.

The concept is this: the more you earn, the more you are required to pay. The payments you make go into your bankruptcy estate, and are distributed to your creditors. People with higher incomes are required to repay a greater portion of their debt than people with lower incomes.

If you have high income, bankruptcy may not be the correct strategy for you. It may be better for you to file a consumer proposal, where a payment is negotiated in advance with the creditors, and if your income increases no extra payments are required. A consumer proposal administrator can provide you with more details.

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