bankruptcy Ontario « 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
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Surplus income with only one person bankrupt

Monday, December 19th, 2011

Question: Does the surplus income in bankruptcy test apply at the household income level or the individual level when only one party is going bankrupt? In other words if the bankrupt party’s share of surplus household income is below $200 while the total surplus income is above $200, will the process take nine months or longer? If the second party makes an offer to creditors will this impact the answer?

Answer: Surplus income is conceptually simple: if your income, on average, is more than $200 over the limit set for your family size, your bankruptcy is extended for an additional year (from nine months to 21 months for a first time bankrupt).

If only one person in the family goes bankrupt, that person only pays their share of the penalty. So if the total family penalty is $600, but the bankrupt spouse’s income is only 10% of the total, they are only required to pay 10% of $600, which is $60. Since $60 is obviously less than $200, their bankruptcy would not be extended due to surplus income.

The surplus income calculation in a bankruptcy in Canada where only one person is bankrupt is a very complicated concept in practice, so we suggest that you arrange a no charge initial consultation with a licensed bankruptcy Ontario trustee to review the calculation in detail before you decide on bankruptcy.

Tags: surplus income
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Bankruptcy to a Proposal

Saturday, November 19th, 2011

Question: If you file for bankruptcy but your creditors vote it down can you come back and then file for a consumer proposal? And if so, does the original bankruptcy claim cost the $1800 or does that only click in after bankruptcy has been approved?

Thanks!

Answer: I think your question is backwards. Creditors do not “vote down” a bankruptcy. Once you file bankruptcy in Ontario you are bankrupt; there is no vote. Your creditors can object to your discharge from bankruptcy, but that happens at the end of the process, not the beginning. There is a vote in a consumer proposal, and if your creditors reject your proposal then yes, you can file bankruptcy.

It is possible to file a consumer proposal while bankrupt, which may happen if your situation changes.

Tags: consumer proposal
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how much do you live on? – surplus income in bankruptcy in Ontario

Wednesday, October 19th, 2011

Question: with respect to the formula for family of 1/2/3/4/5, there is a number for surplus money and then 50% taken. Do you pay only the 50% amount or do you also pay the amount for the number in the family…

Answer: You are referring to surplus income in a bankruptcy in Canada. Here’s a quick explanation:

Each month you are required to report your income to the trustee. You are required to make a payment into your estate for 50% of your surplus income. For example, in 2011 a family of four is permitted to have income of $3,579. If the bankrupt is the only person in the family with any income, and if the bankrupt’s income is $4,079 per month, they are $500 over the limit, so they would be required to make a surplus income payment of half of that, or $250. Because they have surplus income, they would be bankrupt for an extra year (so a first time bankruptcy would be extended from 9 months to 21 months), and they would be paying this $250 penalty each month for 21 months.

Of course that number could change each month, as your income goes up and down.

Here’s a surplus income chart with more details.

As for your question: the answer is that you only pay the percentage based on your income.

For example, if you, the bankrupt, has income of $3,059, and your non-bankrupt spouse has income of $1,020, and you have two children so you are a family of four, here’s the math:

Your income: $3,059, which is 75% of the family total

Your non-bankrupt spouse’s income: $1,020, which is 25% of the family total of $4,079

Threshold for a family of four is $3,579, so your family is $500 over the limit of $4,079, so the penalty if your entire family was bankrupt would be $250. However, since your spouse is not bankrupt, you are only required to pay your share of the penalty. Since your income is 75% of the family income, you are required to pay 75% of the penalty, or 75% of $250 = $187.50

The math is complicated, and your percentage of family income may change each month as your spouse’s and your income goes up and down each month, so we strongly recommend you meet with your Ontario bankruptcy trustee to do the math before you decide to file bankruptcy in Ontario.

Tags: surplus income
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House and bankruptcy in ontario

Monday, October 3rd, 2011

Question: When I filed Bankruptcy in Ontario I did not include my house thinking i can keep it It looks now that I am having problems making payments each month. I just started the bankruptcy 5 months ago .Is there any any way I can re-open my bankruptcy and in include my house in it.

If not then is it possible to put the house up for sale and what ever is the profit, if any can go to my bankruptcy . Since it was not included in the bankruptcy at all i am not sure if i will be allowed to sell.

Answer: I’ll start my answer by clarifying your question.

A mortgage is a secured debt, and bankruptcy includes unsecured debts, so at the start of your bankruptcy you chose to continue making payments on your mortgage, so you could keep your house. It’s not that your house wasn’t included in your bankruptcy; it’s simply that you chose to continue making your mortgage payments.

If you were to stop making your mortgage payments now, the bank would eventually foreclose on your house and sell it. In that case you would be responsible for the resulting shortfall, if any, since the shortfall is a debt that came into being after you filed for bankruptcy.

Alternatively, you could sell the house yourself. If you sell the house for more than is owing on the mortgage, including selling costs, the resulting equity would go to your trustee for distribution to your creditors. If there is a shortfall, you would be responsible for the shortfall.

Without knowing the exact numbers in your case, we would strongly recommend that you meet with your trustee to review the numbers, and to fully evaluate your options.

Tags: house
Posted in bankruptcy, bankruptcy Ontario, bankruptcy trustee, house | 1 Comment »

bankruptcy and incorporated business

Thursday, September 22nd, 2011

Question: if I was to declare personal bankruptcy is it possible to start up an incorperated small business while in bankruptcy?

Answer: Yes, you may start a business while bankrupt, but you are not permitted to serve as the director of a corporation while bankrupt, so if you were a shareholder someone else would need to serve as a director.

Another option would be to start the business as a sole prorprietor while bankrupt, and then incorporate once the bankruptcy process is completed.

Your bankruptcy trustee or lawyer can provide you with more detailed information.

Tags: corporation
Posted in bankruptcy, bankruptcy Ontario, bankruptcy trustee | 1 Comment »

if my husband has declared bancrupt and my credit is good

Wednesday, September 21st, 2011

Question: My husband recently declareed bancrupt,my credit is very good i would like to know if i apply for a joint line of credit ill be aproved?????

Answer: If you have good credit, and you apply for a loan, that fact that your husband declared bankruptcy should not have any impact on your loan application.

However, if you are applying for a joint loan, in both your name and your husband’s name, then yes, your husband will not be a very good co-signer, since he is bankrupt. The loan would only be granted based on your credit, not his.

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if they repo my car can they garnishee my wages

Tuesday, July 5th, 2011

Question: I am 2 payments behind and trying to make arrangements but they are threatening to repossess the vehicle and then garnishee my wages… What can i do and can they do this? I told them i will get caught up within 6 weeks but they don’t care.

Answer: If you are behind on your payments on a car loan or lease, the lender does have the legal ability to repossess the vehicle, and sell it to recover the amount owing. If there remains a balance owing after they have sold the vehicle, they can take you to court and sue you, and potentially garnishee your wages.

While legally they can repossess the car and garnishee your wages, practically that is generally a last resort. The car lender doesn’t want to go through all of the hassle of seizing your car, selling it, and then suing you. They just want their money. You have the following choices:

First, talk to the lender, and make payment arrangements. Obviously they want all of their money now, and they will use the threat of seizing your vehicle to make you pay, but they don’t really want to take your car. They are making threats because you haven’t paid, so offer to make a payment when you get your next paycheque, and propose a plan where you will get caught up over the next month or two. If you have the ability to make extra payments and get caught up, they will probably allow you to do so.

Second, if the lender refuses to take your money, or if you don’t have the ability to get caught up, you will probably lose your vehicle, so you could consider voluntarily surrendering it to them.

If they do take the vehicle and pursue you for the shortfall, you have a few choices:

Pay them, or work out payment arrangements
File a consumer proposal or
File bankruptcy in Ontario

Filing a proposal or bankruptcy immediately stops a garnishment, but obviously it’s better if you can work out a plan with them first to avoid having to file.

Tags: car, garnishee
Posted in bankruptcy Ontario, consumer proposal, wage garnishment | No Comments »

Bank Statements During Bankruptcy

Monday, July 4th, 2011

Question: Are you required to submit bank statements and receipts for all transactions during bankruptcy?

Answer: No, you are not required to submit bank statements and receipts for all transactions unless requested by your trustee. You are required to prove your income to your trustee each month, so that your trustee can calculate your surplus income.

The more you earn, the more you are required to pay, which is why your trustee will calculate your surplus income each month based on the paystubs and other proof of income you provide. If you don’t get a paystub (perhaps because your income comes from a pension) then the trustee will request a copy of your bank statement.

In most cases your expenses don’t matter when calculating surplus income, except for certain allowable deductions, such as payments for child or spousal support, or medical expenses. If you have those expenses the trustee will require proof of payment.

Tags: bank statements
Posted in bankruptcy, bankruptcy Ontario, bankruptcy trustee, surplus income | No Comments »

RRSPs and Bankruptcy in Ontario

Thursday, June 16th, 2011

Question: will they take your RRSPs if you claim bankruptcy in Ontario?

Answer: You will only lose the amount you have contributed to your RRSP in the 12 months prior to filing bankruptcy in Ontario. Any amounts you have contributed prior to one year ago are not seized.

For more information, contact an Ontario bankruptcy trustee.

Tags: RRSP
Posted in bankruptcy Ontario, what do I get to keep if I go bankrupt | No Comments »

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