consumer proposal « Bankruptcy Ontario: Free Information about Bankruptcy in Ontario

consumer proposal and wife just left

Wednesday, February 16th, 2011

Question: My wife and i are half way through a consumer proposal. Came home and there was a note she has left to live with another man. The kids are here with me in the family home. She says she will pay half the bills including large mortgage for now. I cant imagine that would last too long. Can she be forced to keep paying our proposal and also joint car loan? Would bankruptcy be on option If she stops paying. Both my wife and I have good salaries and are professionally employed.

Answer: On the assumption that you have filed a joint consumer proposal (meaning one proposal covering both of your debts), the legal answer to your question is this: if the proposal payments fall three months in arrears, the proposal is annulled. Whether you each make the payment, or just you or just her make all of the payments, the result is the same.

Whether or not filing bankruptcy is an option will depend on your new circumstances. Presumably you filed a proposal, instead of going bankrupt, due to your high combined incomes, or due to equity in your house or other assets. Your family income is now lower, so bankruptcy may make sense.

Without know the facts of your situation it’s impossible to give a specific answer. You should book a meeting with your consumer proposal administrator and ask them to walk you through your options.

Tags: consumer proposal
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Garnashee: How to Stop if Car Repossessed

Tuesday, February 15th, 2011

Question: I went bankrupt in 2009 now I messed up again I bought a SUV and the financial interest is very high, my wife was working at the time but now she got injured and it is just a matter of time before WSIB kicks in. But it has been really hard to keep up with only one income. We got behind our bills, I know I make $3,000 but I pay $1,200 in rent, 250 in utilities, telephone and cable around 100 insurance 200 a SUV payment of almost $500 a month, which leaves us with about 700 a month now that my wife is unable to work due to an injury. So my question is this, we are behind in our vehicle payment and they are going to come and get it because we cannot get caught up at this time, this will leave us with no vehicle for me to go to work, and in time they will ganashee my wages, what can I do, we needed a vehicle and because of my bankruptcy i pay high in finance charges and my wife was working so it was not a problem. We have no other dept….now we need to try to find a really cheap car for me to go to work, but in time they will garnashee my wages what can I do I know I can’t go bankrupt again but I won’t be able to survive if they do that.

Please help us figure out what to do

thanks

Answer: You have four choices to stop a wage garnishment.

First, you could talk to the finance company and see if they will allow you to defer one or two payments, with the promise that you’ll get caught up once your income recovers. They may agree to defer one or two payments to the end of your term.

Second, if they don’t agree to that, you can attempt to delay them from repossessing your vehicle by making partial payments each month, in whatever amount you can afford. You may be able to delay long enough to get caught up, since the finance company doesn’t really want your vehicle.

Third, if they do repossess your vehicle, they will not immediately start garnisheeing your wages. They will first contact you to attempt to work out a payment plan. At that point you may be able to make payment arrangements with them.

If all else fails and they do start a garnishment of your wages, you could either let the garnishment continue until finished, or you could file a second bankruptcy, or a consumer proposal.

Tags: garnishee, garnishment
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Ontario Student Loan harassment even though Consumer Proposal was accepted

Thursday, February 3rd, 2011

Question: I have graduated from college April 2001, I’ve made a consumer proposal on Oct 25 2010 in which I’ve included the Ontario Student Loan as per my trustee, the proposal was approved but Ontario Student Loan are demanding payments from me stating that it does not matter that I’ve graduated over 7 years ago that I am responsible for repayment of the loan because Government Student Loans are guaranteed loans. Is that true, is my trustee wrong?

Answer: No, your trustee is not wrong. If the proposal is accepted, student loans are included in the proposal, provided you have “ceased to be a student” for more than 7 years prior to filing the proposal. Obviously it’s more than 7 years between 2001 and 2010, so your student loan is included in your proposal.

There are a number of student loan lenders that have very poor systems. There are numerous cases where, even though they voted to accept the proposal, they still send out collection letters, because “the left hand doesn’t know what the right hand is doing”.

Ask your consumer proposal administrator to send another letter to the lender, and that should be enough to put a stop to it.

Tags: student loan
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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
Posted in bankruptcy alternatives, bankruptcy Ontario, consumer proposal | No Comments »

on consumer proposal but loss job, is it okay to file for employment insurance?

Monday, January 31st, 2011

Question: if someone is on a consumer proposal, and suddenly loss his job, can he file for employment insurance? how is it going to affect his income tax return?

Answer: Yes, you can file for employment insurance while in a consumer proposal. A consumer proposal does not affect your income tax return.

The bigger issue may be whether or not you can continue to make the payments on your proposal if you aren’t working. That’s something you should discuss with your proposal administrator.

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Consumer Proposal in Ontario

Wednesday, January 12th, 2011

Question: I understand that a consumer proposal is a means of settling debt by paying at least 30% of the balance owing over a period of 5 years with no interest. Can creditors come back later after 5 years to claim the remaining 70%. Thank you

Answer: You are correct that a consumer proposal is a way to settle debt, and it is an alternative to bankruptcy in Ontario. The maximum period for the deal is five years, but there are no set payments; each situation is different. However, you are correct that in a typical consumer proposal you would end up making payments equal to about 30% of your outstanding debt (some proposals would be more than 30%, and some would be less).

To answer your question, no, the creditors cannot come back at the end of the proposal and claim the remaining balance owing.

The consumer proposal is a legally binding settlement. Once the creditors agree to the deal, the court approves the deal. Once you have completed the terms of your proposal, all remaining debt is discharged, so the creditors cannot claim anything further.

For further information, contact a consumer proposal administrator in Ontario to review your situation.

Tags: consumer proposal, creditor
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Post Consumer Proposal Tax Return

Monday, January 10th, 2011

Question: I had a consumer proposal accepted by CRA as of July 30/10. A tax return to that date was completed by the Trustee.

I want to know if my understanding is correct that I now file a post proposal return from July 31 – December 31/10 (exclusive of any of the prior 2010 income & expenses / deductions).

If so, is there any way to identify this specifically on the tax return to differentiate it from the prior return (ie. is there a section on the return that lets me indicate the from to dates of the return or any additional form that has to accompany my return)? How does a consumer proposal and income taxes work?

Answer:Let’s start with the simple part. Preparing your tax return for 2010 will be the same as it has been in prior years. You prepare a normal return for the full year with no special notes with respect to your consumer proposal.
That was clearly not your expectation, so here are the details:

The tax “return” to July 30, 2010 was not truly a tax return. It was an estimate of the taxes owing for the portion of 2010 before the date of the proposal. Though it was submitted to the Canada Revenue Agency (CRA) for their review, it was not actually assessed by the government.

The purpose of doing this estimate is so that the amount owing can be included in the consumer proposal. A consumer proposal automatically includes income tax debts only from all prior years; 2009 and early in this instance.

In the above example, you are still responsible for filing a normal return for the full year by the regular deadline of April 30. Once the CRA assesses that return, they will subtract the pre-proposal amount from the total amount owing. If the pre-proposal amount had not been estimated, you would be responsible for paying the full amount owing for all of 2010.

Your consumer proposal administrator can provide you with more details.

Tags: consumer proposal administrator, tax return
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Can CPP be garnisheed in Ontario?

Monday, November 22nd, 2010

Question: Can Canada Pension or Old Age Security payments be garnished?

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.

Tags: CPP, garnishee, OAS
Posted in bankruptcy Ontario, bankruptcy trustee, consumer proposal, Ontario bankruptcy trustee, options, wage garnishment | No Comments »

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
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Consumer proposal or bankruptcy?

Wednesday, November 3rd, 2010

Question: My friend is 60,000 in debt is now separated and his ex doesn’t work. He will have to pay child support, and earns 40,000 gross a yr. His debt is a mix of business and personal. He does not have any assets except a truck he uses for work and some tools – is a consumer proposal a good idea? Does it cost anything to file a consumer proposal?

Answer: A consumer proposal might be a good option; it depends on what he can afford to offer the creditors each month. In a consumer proposal you make payments each month, and the balance of your debt is eliminated.

Your friend should start by determining what they can afford to pay each month, and then consult a consumer proposal administrator for a no charge initial consultation to determine if a proposal is the correct option.

Tags: consumer proposal
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