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Bankruptcy in Ontario and gambling

Friday, July 16th, 2010

Question: I met with an Ontario bankruptcy trustee and need to fill out the forms to file for bankruptcy in Ontario. His questionnaire says “in your own words, what circumstances have caused your financial problem?”. Do I need to disclose the fact that I have a gambling addiction or is it okay to be vague and just say that I over-extended myself over a long period of time? I have heard that there can be additional penalties if your bankruptcy is due to gambling.
thank you.

Answer: You are not eligible to be automatically discharged from bankruptcy if gambling was the cause of your financial problems; you would be required to attend a discharge hearing before the Bankruptcy Registrar, and they would determine whether or not your bankruptcy would be extended. Generally the Registrar would want you to confirm that you are no longer gambling (perhaps through a voluntary self-exclusion at the casino), and also providing proof that you have attended gambling counselling.

In most cases your creditors will be aware of your gambling. They will see cash advances being taken from your credit cards, bank loans and lines of credit, and they may also have records of cash advances taken on your debt or credit cards at the casino, or through on-line gambling. So, if you don’t disclose it, and they discover it later, you are in much more trouble than if you had simply disclosed it initially.

We therefore recommend that you be honest; that is generally the least risky alternative.

If you are concerned about a bankruptcy discharge hearing, another option is to file a consumer proposal. Once the creditors accept your proposal, you simply make the payments; there is no discharge hearing. Consult a consumer proposal administrator for more information, and to arrange a no charge initial consultation.

Tags: gambling
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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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Can I pay an Ontario bankruptcy off early?

Monday, April 26th, 2010

Question: My friend declared bankruptcy in Ontario 5 months ago, with the timeline being 21 months. His payment has been $1,000/month on average for surplus income. After 6 months of payments, it is my understanding that the trustee will take those payments and average them out to a regular monthly payment for the remaining 15 month term. Could I pay the balance “owing” off for him now? I would like to lend him the money to end this quicker, but will it be to his advantage? Will it allow him to move up the discharge? Thank you!

Answer: There is no simple answer to this question. Under current rules, if a bankrupt has surplus income of more than $200 over the limit each month, the bankruptcy is automatically extended for a further 12 months. Since your friend is paying $1,000 per month, they are obviously over the limit, which is why their trustee has advised that the bankruptcy will be extended from 9 months to 21 months. There are two possible methods for ending the bankruptcy early.

The first option would be for you to do as you suggest, and make the required payments to the trustee. The trustee, or your friend, could then apply to bankruptcy court for their discharge. It would be up to the court to decide whether or not they grant an early discharge. Section 169 [2] of the Bankruptcy & Insolvency Act provides that not earlier than three months and not later than one year after the start of the bankruptcy an application can be made for discharge. So, legally, it is possible to get an early discharge. However, it’s up to the court to decide whether or not to grant the discharge. The court may reason that the bankrupt is required to not only pay the money, but also to be bankrupt for a further 12 months, so they may not grant the discharge.

The other option would be for the bankrupt to file a consumer proposal. His proposal could be that he will immediately pay to the creditors the balance of the amount that would have otherwise been paid in the bankruptcy, with perhaps even a small amount more. The creditors may agree to that proposal so that they get their money quicker (without having to wait for the bankruptcy to end at the end of 21 months).

Your best option would be to discuss these different options with your trustee, since they will be best able to advise on the likely success of each potential approach.

Tags: bankruptcy Ontario, discharge
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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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consumer proposal paid

Wednesday, March 31st, 2010

Question: I filed a Consumer Proposal in 2005 and paid it off in 2006. As of 2010 it’s still on my credit report. How can I get it off?

Answer: The first thing would be to send a copy of your completion certificate to the credit bureau along with one of their correction forms that you should easily be able to down load from their website. Provide them with the relevant dates and they’ll notify you when the update has been made.

The note indicating that you filed a Consumer Proposal usually stays on your credit report for 3 years after it has been completed. It’s usually considered to be a good advantage to a filing a Consumer Proposal vs filing for Personal Bankruptcy. The incentive being, the sooner you pay it off, the quicker it comes off your report.

Send them the information and hopefully you’ll soon see the updated report.

Tags: credit report
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A lengthy question for you by a relative who is worried sick

Friday, March 26th, 2010

Question: I have a close family member who is spiraling out of control. I would like to help her but need to know the best way to go about it. I believe she is bipolar but has never been treated. She has had a good paying job and is married (no children). She has spent a few years in casinos and playing the lotteries and is heavily in debt. She is convinced it is only a matter of time before she “wins big”. Together with her husband, they own their house and vehicle outright. She has admitted using RRSP money to gamble and owes money on her credit cards. (She will not reveal the amount but it is very large.) Her husband does not know the extent of her debts but I believe he would be violent with her if he discovered all this. This is weighing heavily on her and she has been physically a wreck the last 3 weeks. She has gained a large amount of weight the last few years and it has done damage to her self esteem and in her marriage. Her work place has sent her a letter that states she is no longer welcome at their firm and will only be paid until the end of the month. She needs help with her mental health and her finances. Is bankruptcy her only option? She is not stable enough to get another job right now. What can I do to help her?

Answer: You should immediately refer her to a counsellor for her gambling problem, and to a doctor for her potential medical issues. Bankruptcy is one possible option for dealing with debts, but at this stage the debts are the symptom, not the problem. The problem is her medical issues, and her gambling; they must be treated first. Once treated, then the debts can be dealt with, perhaps through a bankruptcy or a consumer proposal.

Tags: gambling
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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.

Posted in Ontario bankruptcy trustee, bankruptcy Ontario, bankruptcy and mortgage, consumer proposal | No Comments »

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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