Question: If I am being sued, and the plaintiff is awarded a judgement against me – if the plaintiff garnish’s my wages – does bankruptcy in Ontario remove such a claim. Also, does bankruptcy remove any court awarded judgments?
Thank You
Answer: Yes, bankruptcy stops garnishments and judgements, except for court order fines, restitution orders, and child and spousal support payments. Contact a trustee to review the judgment and then can advise you whether or not a bankruptcy would stop it.
Question: Is age taken into consideration when you make a consumer proposal. e.g. If you are 70 years old, stopping work due to downsizing and have very little in RRSPs and eventually just receiving OAS and CPP some part time work and minimum requirement from the RRSP’s
upon turning 71.
I would appreciate your comments bankruptcy over consumer proposal.
Answer: If you file bankruptcy in Ontario, you are required to pay a portion of your income above a certain limit. The amount of surplus income you are required to pay depends on the size of your family. If your income is primarily from OAS and CPP and some part time work, it is likely that your income will be below the limit, and therefore the cost of your bankruptcy will not be very high.
The most common reason for filing a consumer proposal is due to surplus income. If you have no surplus income, you may not be able to afford a consumer proposal, so bankruptcy may be a better option.
We suggest you contact a trustee for a free initial consultation to review your options in more detail; they can review your specific circumstances, and review your assets to help you decide whether a proposal, a bankruptcy or some other option is your best option.
Question: What happens when you have 3 mortgages on your property and your property value is of a lower amount then the combined mortgages and you file for bankruptcy in Ontario? What do you think the trustee’s stand point will be?
Answer: Part of the trustee’s job is to turn your assets into cash for the creditors. If your property has negative equity, the trustee will not seize the house, because they can not turn it into cash. Assuming the three mortgage lenders agree, you could keep the house if you go bankrupt.
Practically, it may make more sense to surrender the house to the mortgage holders before you go bankrupt. By doing so any shortfall when the house is sold will be included in your bankruptcy. In most cases it is not prudent to go bankrupt and still have a huge amount of mortgage debt that will be difficult to repay. Your trustee can provide you with more information.
Question: Hi There,
Due to my own error, I am currently in collections. I am being threatened with wage garnishee. They have not taken me to court as of yet; however, I am being harassed daily.
What action can the collections agency take when I am making consistent payments? I am paying what I can afford of $150/month. My outstanding debt is just over $5300.
I’ve been advised that they can’t do anything as long as I am making payments; however the harassment is making wonder.
Thank you for your help.
Answer: Legally, if you owe money, the collection agency can call you, even if you are making payments. Practically, if you are making payments, it is unlikely that they will take you to court, sue you, and attempt to garnishee your wages. They know that as soon as they take you to court you will stop paying them, and if they do get a wage garnishment you may then have no choice but to file bankruptcy in Ontario, and then they may get nothing.
If this is your only debt, and if you want to avoid bankruptcy, continuing to pay them is probably your best option. However, if you have other debts, or if you are tired of the harassment, it may be time to speak to an Ontario bankruptcy trustee about your other options.
Question: What is the criteria for extending surplus payments beyond the 9 months ? My trustee extended the payments with no real explanation . THANKS
Answer: You ask a very interesting question. First, some background. When you are bankrupt, you are required to report your income each month to your trustee. If your income exceeds a set amount, you are said to have surplus income.
Directive 11R issued by the Office of the Superintendent of Bankruptcy explains this calculation. The trustee is then required to determine if an extension to the bankruptcy is required.
Directive 12 states that if:
then the trustee is required to recommend a conditional discharge, which can last up to a further 12 months.
In practice in Ontario, if the bankrupt has a small amount of surplus income, the discharge from bankruptcy will not be opposed by the trustee. However, if the bankrupt has significant surplus, then the trustee may extend the bankruptcy for a period of up to 12 months, and require the bankrupt to make additional payments, on the basis that with that level of income the bankrupt should have filed a consumer proposal.
The problem, unfortunately, is that the application of these rules are left entirely to the discretion of the trustee. There are no set standards as to when a bankruptcy should be extended, or how long the extension will last.
In the last round of bankruptcy reform, the government proposed changes to the way the surplus income rules are applied. As of today the new rules are not yet in force. Under the new rules if you are a first time bankrupt and you have surplus income you are automatically bankrupt for a minimum 21 months.
So, what does this mean today? If you have surplus income, you should meet with your trustee and ask them to explain how they did the calculation, and how long they propose as an extension to your bankruptcy. If you don’t agree with your trustee’s decision, you may request mediation, or a discharge hearing in bankruptcy court, at which time the Bankruptcy Registrar (a type of judge) will decide on the terms of your discharge. Given the length of time required to arrange the court hearing, and the unpredictability of the judge’s decision, it is usually best to work out an arrangement directly with your trustee.
Question: What information do I need to divulge to go bankrupt? What if a small amount of my debt is recent debt? (Within the last 3 months). I’ve recently tried to spend money to make money to try get out of debt and it has not worked and I’m worried that to a trustee that will look like rampant spending.
Answer: When you declare bankruptcy all creditors are notified, and they are required to send the trustee a summary of all transactions for the past three months. If you bought a $10,000 big screen television the day before you filed for bankruptcy that will be a problem, since that’s considered fraud. However, if a month ago you put $50 worth of gas in your car, it will be much less of an issue.
One option is to simply make a payment to the creditor for the amount that you recently spent. If you bought $50 worth of gas with your credit card yesterday, make a payment today to them for $50. Since your balance then goes back to it’s previous level, it’s not an issue.
If the amounts are larger, you should consult a trustee before you file to determine what impact, if any, the transactions may have on your bankruptcy.
Question: We filed for bankruptcy in 2006, we have not been discharged due to the fact we have not been able to pay the surplus income owing. Our Trustee determined there was no equity in our home. We kept our mortgage payments up to date and now it is time to renew our mortgage. How can not being discharged effect us with renewing our mortgage? and what action can be taken against us for not being discharged?
Answer: If the mortgage company does a credit check prior to sending your renewal notice, they may discover that you are an undischarged bankrupt, and that may effect your ability to renew your mortgage. It is also possible that since your mortgage payments are up to date they may simply automatically renew your mortgage.
Either way, it is strongly recommended that you find a way to complete your bankruptcy, perhaps by beginning to make monthly payments against the amount that is owing, since eventually being an undischarged bankruptcy will have a very serious negative impact on your ability to borrow in the future.
Question: Here’s the deal….my husband has been out of work for a year and a half and debt is piling on top of debt. I make approx. $2200 a month but am now laid off for the summer months. We are barely managing our day to day bills (mortgage, car payments, insurance) and are hardly ever able to pay external bills such as phone, cable, hydro, etc. And that doesn’t even touch our credit card bills (between us we have about $25 000). What do I do?? I don’t know if bankruptcy is the right option. I want to keep our house and I need a car for work. Please help. I am at a loss.
Answer: Before worrying about whether or not to go bankrupt, the first step is to get your expenses as low as possible. With the recession it’s possible it will take a while longer for your husband to find a job, so expense reduction is critical.
You want to keep the house, but if you don’t have enough money coming in each month to pay the mortgage, that may not be possible. You may need to consider selling the house to reduce costs, and find a place to rent. You could also consider taking in a boarder to help with the costs.
The next item on the list is your car. You need a car for work, but not necessarily the car you have now. You could consider selling the car to pay off the loan, and replacing it with a less expensive used car.
These are just suggestions, since I don’t know what you are paying for your house and your car, and whether or not it’s possible to replace them with a less expensive alternative.
Once you have your expenses under control, then it will be necessary to consider options for dealing with your debts. The most common reason for filing bankruptcy in Ontario is to prevent your wages from being garnisheed. If you are both not working at the moment, it may not be necessary to file bankruptcy until you are back to work.
If your husband returns to work, a consumer proposal may be a better option.
For more specific advice, contact a licensed Ontario bankruptcy trustee who will help you evaluate your options and decide on the best course of action.
Question: My spouse and I are separating. If he goes bankrupt, will I lose the house? His name is still on the mortgage.
Answer: The answer depends on a number of factors.
First, in a bankruptcy, the bankrupt person will lose the house if it has equity. Equity is the difference between what the house is worth, and what’s owing on the mortgage. If there is minimal equity, he would not lose the house, which means you would not lose the house. If there is equity, he would be required to pay his share of the equity to keep the house.
The next issue is the mortgage. If your spouse goes bankrupt, the bank may remove his name from the mortgage. The bank may only allow you to keep the mortgage if your income is sufficient to qualify for a mortgage on your own. This may not be an issue immediately, but it may be an issue when the mortgage is up for renewal.
You should consult a family law lawyer to advise you more fully on your options for keeping the house.
Question: I currently have no form of income, I have creditors breathing down my neck for money that I cannot possibly give to them! How would bankruptcy work for someone with no income?
Thank you
Answer: The main reason most people file bankruptcy in Ontario is to prevent their creditors from garnisheeing their wages. If you have no income, then you have no wages for them to garnishee. If you have no assets, there is nothing for the creditors to seize, so could simply do nothing. The creditors may continue to harass you, but if there is nothing for them to get, legally there is nothing they can do until you return to work.
Alternatively, you could go bankrupt, but bankruptcy costs money. Trustees in Ontario charge a minimum contribution each month, plus you lose your tax refund and GST credits while bankrupt. If you have no income, it may make more sense to wait until you have an income to go bankrupt.
However, if you don’t want to deal with the phone calls from creditors, and you have a way to pay for the cost of the bankruptcy, that is also an option.