bankruptcy alternatives « Bankruptcy Ontario: Free Information about Bankruptcy in Ontario

Debt Settlement Company vrs Trustee?

Monday, January 23rd, 2012

Question: My Husband and I are considering going through a consumer proposal. We originally went to a Debt Settlement company. Although the rep has been very helpful, there is a fee of $900.00 for their services. He said that although they are not licensed trustees, they look for the best interest of their client, Trustees don’t. Would we get a better results by paying the fee and going for the consultants or going directly to a Trustee or a company such as BDO Canada? Please help us!

Answer: Here are some facts you need to know:

First, all companies exist to make a profit. Whether you go see a debt settlement company, or a trustee, they exist to make a profit. They are private businesses. For a debt settlement company to suggest that “they look out for the best interest of their client and Trustees don’t” is ridiculous. They both exist to make a profit.

In addition, a debt settlement company is not required to follow any specific rules. Many debt settlement companies are based in the USA, and they only operate in Ontario by telephone, so they are not regulated in any way. In contrast, a trustee is required to be licensed by the federal government, and is required to follow all rules. They are required to discuss all of your options, including debt consolidation, consumer proposals, and bankruptcy. A debt settlement company is not required to tell you anything other than what they want you to hear. It is therefore the licensed trustees who act in the best interests of their clients, because they are required by law to do so.

Third, most debt settlement companies charge a lot more than $900, so be sure you fully understand the full cost you are paying.

Fourth, a trustee, by law, can only charge you money after you have filed your consumer proposal or bankruptcy. A debt settlement company can charge you $900, or whatever, up front, and then do nothing. At least with a trustee you know that your procedure has started before you start paying.

Fifth, you refer to “a Trustee or a company such as BDO Canada”. BDO is a trustee firm.

Here’s my advice: do your research. There are lots of debt consultant horror stories, so be sure you understand who you are dealing with. Talk to at least two different companies before you make a decision. By all means talk to the debt settlement company, and ask them what they can do, and what it will cost, and what are the chances of success. Then, talk to a licensed trustee (here’s a list).

Be sure that you meet with them in person; don’t do it solely over the phone, because a face to face meeting is the only way you can “look them in the eye” and know who you are dealing with (and you know then that they are actually based on Ontario).

Finally, here is a link to an article that answers the question Canada bankruptcy trustees work for the creditors, right? which addresses your question about whether or not the trustee works for you.

Tags: debt consultant, debt settlement company, trustee
Posted in bankruptcy, bankruptcy alternatives, bankruptcy Ontario, bankruptcy trustee | No Comments »

Loan While in a Consumer Proposal

Wednesday, September 21st, 2011

Question: If you are in a consumer proposal are you still able to get a loan?
Thanks

Answer: Legally, yes. Practically, it’s difficult.

Once you file a consumer proposal there is a note that goes on your credit report saying that you have filed a proposal. So, when you apply for a loan and the lender does a credit check, they will know you are in a proposal, which makes it more difficult to borrow.

If you are borrowing to finance a car, and you have a sufficient down payment, and a good income, you will probably still be able to qualify, although you may pay a somewhat higher interest rate.

One option, once your proposal is accepted, is to get a secured credit card as a way to start to rebuild your credit. Of course the best way to improve your credit is to repay your proposal as fast as possible, and then start saving money.

Tags: consumer proposal
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In proposal now wondering if bankruptcy is an option

Wednesday, February 2nd, 2011

Question: My wife and I are in the second year of a consumer proposal. She has recently lost her her job and acquired further debt over 40,000. Debt is in her name can she file bankruptcy in Ontario while still in proposal?

Answer: Yes. It is not uncommon to have a change in circumstances while you are in a proposal, and it is possible to file bankruptcy while in a proposal.

Your wife will have to explain to the trustee how she managed to acquire $40,000 worth of debt while in a proposal, since while you are in a proposal she would have already have surrendered all of her credit cards and bank loans. (It’s possible that the debt arose as a result of the repossession of a car or house that she had intended to pay for, so there might be a realistic explanation, but it’s a question the trustee will ask).

If she had not acquired new debt, another option is to ask the creditors to amend the original proposal so she can make lower payments. There is no guarantee the creditors would agree, in which case she would do the bankruptcy.

Tags: lost job, proposal
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Surplus Income Calculations and Bankruptcy in Ontario, But Should You Go Bankrupt?

Friday, November 12th, 2010

Question: I am preparing to file for personal bankrupsy in Ontario, in January, 2011. I have approx. $55,000 in unsecured debt, which includes student loans and credit cards. I have been a stay at home parent for more than 6 years, and as such, I do not have an employment income.

I married in 2008, and we have two children. Everything is in my spouse’s name. The house, vehicles…everything, and they were all purchased prior to the marriage. I have no assets, savings, life insurance..

My spouse made a little over $100,000.00 this year.

I received child support totalling $3500.

I am trying to determine what my monthly “bankrupsy” payment would be… Could someone help me?

Answer: Your best option is to contact an Ontario bankruptcy trustee, and have them walk you through the math to determine your surplus income payments in bankruptcy in Ontario. Even more importantly, you should ask the trustee to explain all of your options.

You currently have no income, and no assets. If you were to stop paying your debts, your creditors could not garnishee your wages, or seize your assets, because you don’t have any. So, for you, the first decision is to decide whether or not you need the protection from your creditors gained by going bankrupt. If you plan to be out of the work force for an extended period of time while you raise your children, one possible option for you is to do nothing.

However, if after reviewing all of your options you decide to file bankruptcy in Ontario, a trustee can explain the surplus income calculation for you. Here’s a simple example:

In 2010 a family of four is permitted to have income of $3,501 per month. If your spouse earns $5,800 per month after tax, and you receive child support of $300 per month, your family income is $6,100 per month, or approximately $2,600 over the allowable limit. If both you and your spouse were bankrupt, you would pay half of the excess, or $1,300 in surplus income payments each month.

However, your spouse is not bankrupt, so you are only required to pay your share of the penalty. In this example your income is 5% of the family total, so you would be assessed 5% of the penalty, or approximately $64 per month (because your share of the surplus income is $128 of the total).

Under current rules you are only required to make surplus income payments if your income is more than $200 over the limit, so if your income is only $128 over the limit you would not be required to make any surplus income payments.

However, this is a very simplistic explanation. We have not factored in whether or not you have previously been bankrupt, or whether or not your family income fluctuates.

So, again, to receive an accurate estimate of the potential cost of your bankruptcy, you must meet with a licensed Ontario bankruptcy trustee.

Tags: surplus income
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Too Much Debt and Low Income

Monday, November 8th, 2010

Question: I am dating a lady who is unable to pursue her chosen profession as a massage therapist due to a medical condition. Her employment provides an income of approx $1200 per month, and after rent, insurance, gas and student line of credit payments she is left with virtually nothing. Her income level is far below the poverty level. The RBC consistently freezes her account or takes double interest payments leaving her with nothing for food.
Can she declare bankruptcy on a student line of credit? Her debt is greater than it was 8 years ago.
The bank refuses to negotiate a fixed payment plan for her as she is considered a high risk. Is there anything we can do?

Answer: There is an obvious first step for your friend: open a new bank account at a new bank where she doesn’t owe any money. Then, close the bank account at RBC. If you owe the RBC money, and there is money in your RBC bank account, it’s easy, and legal, for them to simply take their payment out. However, if you are banking at a new bank that RBC doesn’t know about, they can’t take payments out.

Opening a new bank account eliminates the urgent problem of having your old bank account frozen. That may be enough of a solution for your friend, although obviously it’s not a full solution, as the debt still exists.

Your friend has a few other options:

First, she could simply stop paying them. If her income is only $1,200 per month, she doesn’t have the ability to pay them, so she doesn’t. This solution becomes a problem if the bank decides to take her to court and garnishee her wages.

Her second option is to offer a settlement, perhaps in the form of a consumer proposal. Unfortunately with only $1,200 in income this will be very difficult, since she doesn’t have the money to offer anything each month.

Her final option is personal bankruptcy. A student line of credit from eight years ago would be dischargeable in a bankruptcy. However, even declaring bankruptcy costs money. Most trustees in Ontario will require a minimum contribution of approximately $200 per month for a minimum of nine months, and she would also lose her tax refund for the year of bankruptcy. She needs to decide whether or not paying that money is worth it to officially discharge her debts.

She should consult an Ontario bankruptcy trustee to review her options in more detail before making a final decision.

Tags: debt, RBC, student line of credit
Posted in bankruptcy, bankruptcy alternatives, bankruptcy Ontario, bankruptcy trustee, consumer proposal | No Comments »

Stuck with ex-husband’s business debt

Thursday, October 14th, 2010

Question: I have been divorced for 5 years now and my ex-husband declared bankruptcy in June. He has a business and let the credit line go to $30,000.00. Since he declared bankruptcy they are now coming after me since I had signed a personal guarantee, he also did. I was taken off the business and bank account but not the personal guarantee. Is there anything that I can do other than declare bankruptcy? My divorce lawyer has done nothing other than suggest bankruptcy and another lawyer suggested we sue him.

Answer: Since your ex-husband is bankrupt, there is no point in suing him; any amounts he owes to the banks would be included in his bankruptcy. You have three options:

First, you could attempt to work out a settlement with the bank. If you tell them you are considering bankruptcy and they will get nothing, they may be willing to settle for less than the full amount owing.

Second, if you have income and assets and don’t want to go bankrupt, you could file a consumer proposal. A consumer proposal deals with all of your debts (not just the one you guaranteed for your ex husband), and if successful you end up with one monthly payment.

Third, if that’s not possible, then yes, bankruptcy is an option. You should arrange a no charge initial consultation with an Ontario bankruptcy trustee to determine which option is right for you.

Tags: ex husband business debt
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Writ of Execution: Will I have to surrender my home?

Monday, October 11th, 2010

Question: I’ve just received a writ of execution for the $7000 in credit card debt I’ve incurred. I’d like to know if filing for bankruptcy would stop the interest from accumulating, and whether they would take my home.

Answer: To fully answer your question, you will need to consult a lawyer. In general, in Ontario it is very unusual that a credit card company owed $7,000 would repossess your home. To repossess a home they would need to register on title, foreclose, sell the home, and then pay off any prior encumbrances (such as your mortgage, and any outstanding property taxes). Presumably if you had significant equity in your home you would have already paid the $7,000 you owe, so it’s likely that you have no equity, and therefore the credit card company would be incurring significant legal expenses for nothing.

However, the writ of execution does have the effect of putting a “freeze” on your property, so the advice of a lawyer and a bankruptcy trustee is recommended to determine your options going forward.

Tags: writ of execution
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Creditors meeting

Thursday, July 22nd, 2010

Question: I have $15,000 equity in my home and have asked my trustee to request a meeting of creditors to attempt to settle. I am a single mom with 3 children and i do not have the money to pay 15,000. I may be able to come up with $4,000.00 and can only afford approx. $100-$200/month. Do the creditors have to show up and agree to my proposal? Does this happen very often?

Answer: It is very unusual for creditors to attend a creditor’s meeting. Most creditors are big banks and credit card companies, and they don’t have the resources to be sending staff to creditor’s meetings. Even if they did show up, they would presumably request that you pay the $15,000, or surrender the house.

Your question is not clear: did you file bankruptcy, or did you file a consumer proposal? If you filed a consumer proposal, it is possible for the creditors to negotiate a settlement with you. If you have $15,000 in equity in your house it is unlikely that they would agree to $4,000. However, they may agree to an initial payment of $4,000, and then further payments of $200 per month for 60 months; that would be total payments of $16,000, which is more than they would get in a bankruptcy, so that may be acceptable to them.

We strongly recommend that you discuss this with your trustee, since it is your trustee’s job to fully inform you of all possible outcomes, so that you understand the different options.

Tags: home equity, house
Posted in bankruptcy alternatives, home equity, house | No Comments »

In a bankruptcy mess in Ontario . . .

Thursday, June 3rd, 2010

Question: In September 2008, I declared bankruptcy in Ontario. It was an emotional time in my life and didn’t know exactly what I was getting into.

My income is $95,000 per year and I owed $116,000 in unsecured debt.

I was supporting one of my common law’s two children, then half way through the nine month period, the other moved in with us.

Since then I’ve asked on several occasions for them to recalculate my surplus income. My original trustee left the business. They assigned me to another trustee from whom I’ve only heard once. That trustee has since left the business as well leaving one person to ‘wind up’ their business due to the death of the person who owned the company. The bottom line is that I’ve gotten no answers.

They sent me a letter last July stating that I missed a court date for a discharge hearing but I’d never been made aware of that required appearance. After contacting them, they advised that I had to finish my counselling and they would apply for another court date.

I asked them again to send me a revised amount owing based on the changes to my situation.

I’ve heard nothing from them since. I’ve called and left messages, but the message says they are no longer in the office as they’ve wound down the business and check messages occasionally.

I want to change trustees because clearly I’m not getting any level of service and want to deal with the amount owing so I can get on with my life.

As an aside, I am more than a bit annoyed because (although I didn’t know it at the time of filing) I could have done a consumer proposal at about 50 cents on the dollar and probably have avoided this whole mess.

My first thought is to see a bankruptcy lawyer, but I can’t afford that.

Any advice.

Answer: You are correct, you got very bad advice. A consumer proposal was probably the logical solution to your problems initially.

You have three choices.

First, you could contact the Office of the Superintendent of Bankruptcy and advise them that your trustee is not responding to your requests for information; perhaps they can help.

Your second option would be to contact a bankruptcy lawyer. I realize that you said that you can’t afford it, but if you are earning $95,000 per year, it may be wise to save $1,000 and get some good, independent advice from an expert. You are currently an undischarged bankrupt, which in the long run will cost you a significant amount of future hassle and money.

Your final option may be to file a consumer proposal. It’s unusual to file a proposal while bankrupt, but it is not impossible. If the proposal is accepted by your creditors, it serves to end your bankruptcy. An Ontario bankruptcy trustee can provide you with more information.

Tags: bankruptcy Ontario, consumer proposal
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Not given Options to Bankruptcy like a Consumer Proposal

Monday, April 19th, 2010

Question: I filed a Bankruptcy in Ontario last year, however would have liked a chance to do a consumer proposal. My trustee wasn’t very forwith and advised that I could afford to do a proposal. I thought otherwise. I felt cheated out that chance, and was treated very cavalier whenever I asked questions. I felt the trustee I dealt with was not knowledgeable. Anyways, my question is, now that I am Bankrupt..I feel even though it is public knowledge, my privacy is breached. The higher paying jobs I apply for want a credit check, and feel and know I have been turned down due to that fact. I am not a risk and would not steal and can be trusted. However, when they run a credit check this information is used against me. This is not RIGHT!!!! and feel my rights are infringed upon to make a better living without being judged as a RISK..check my criminal record…ITS CLEAN…

Answer: You are correct that some employers require a credit check, and will not hire someone who has a past bankruptcy or consumer proposal. That is very rare these days (there were more than 150,000 people who filed bankruptcy or a proposal in Canada last year, so employers generally understand that financial problems are common), but it does still happen.

In general, it is best to be open and up front with employers. If they tell you they will be conducting a credit check, tell then that you filed bankruptcy, and tell them why. If they are going to find out, it’s better if they also have an explanation up front.

We also strongly suggest that everyone research their options before deciding to file bankruptcy. A consumer proposal is a great option for many people, and if your trustee doesn’t want to explain a proposal to you, find another trustee.

As for your specific situation, even though you are bankrupt, it is possible to file a consumer proposal while you are bankrupt. Whether or not that makes sense will depend on your situation (your income, and how many months remain in your bankruptcy). You can discuss this with your trustee, or consult another trustee for a second opinion.

Tags: bankruptcy Ontario, consumer proposal
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