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.

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.

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.

Answer: Yes, you can do a consumer proposal on your own, however you must include all of your debts.  In your case you have $70,000 in debts solely in your name, and $80,000 in debts joint with your wife, so your proposal would be for your total debt of $150,000.  If you file on your own, your wife is still responsible for the joint debt, so she then may have no choice to file a proposal herself, unless she can continue to service the debts.  It probably doesn’t make sense for you to file a proposal on the joint debts, and for her to continue servicing them on her own.

When you file a proposal or a bankruptcy in Canada, you are required to disclose all asset sales or transfers within the last year.  The issue will be the amount of equity in the house at the time of the transfer.

For example, if the house was worth $250,000 and the mortgage was $240,000, there was minimal equity, so the creditors probably won’t care about the transfer.  However, if you owned a house worth $1 million with no mortgage, and you gave it to your wife 9 months ago, the creditors will be upset (since you could have sold the house and paid them off with the money).

You have a number of options, including filing a joint proposal, or filing two separate proposals.  In your case you should arrange a consultation with a licensed trustee to review the implications of all of the various options for dealing with your debts.

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.

Answer: Yes, there is a cost to file bankruptcy in Ontario.

You will be required to make a monthly contribution while bankrupt (for at least nine months), which depending on the trustee could be in the range of $200 to $250 per month.  This covers the trustee’s cost to administer your estate.

You will also be required to make surplus income payments if your income exceeds the limit set by the government.  Finally, you will also lose your tax refund and your HST credits while bankrupt.

You can read a detailed explanation in our article on How Much Does it Cost to File Bankruptcy in Ontario?

Answer: What you are saying is only partially correct.  During your bankruptcy you are required to report your income to your trustee, and if you have surplus income the bankruptcy is extended for an additional 12 months.

The trustee is required to average a minimum of the first six months of income (in the case of a first time bankrupt), and if there is surplus income, the bankruptcy is extended.  So, having one large income month would not necessarily increase the bankruptcy period.

In your example the bankrupt had no income for a few months, and then started earning income, so it’s likely that the initial months with no income would counter-balance the final higher months, so conceivably there is no surplus income owing.

As this is a complicated area of bankruptcy law, you should discuss your specific situation with your trustee.

Answer: Under the Ontario Wages Act only wages can be garnisheed.  The only exception would be if you owe money to the government, such as the Canada Revenue Agency, they can garnishee a CPP or OAS payment.

One option would be to simply open a new bank account at a new bank, and deposit your CPP and OAS payments there; since your other creditors do not know about that bank account, they cannot automatically take money out of it.

Another option would be to file a consumer proposal or bankruptcy to officially eliminate your debt.  However, you are then making payments towards your debt to protect yourself from creditors who may not have any legal recourse against you, so you should consult a licensed Ontario bankruptcy trustee to determine if that approach is in your best interests.

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.

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.