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Considering bankruptcy or a consumer proposal brings up important questions about the effects on your financial and personal life. For that reason, the professionals of Beth Maynard & Associates presents some of client’s frequently asked questions, as well as some of the most common debt-causing issues. If you don’t see your question here or want more information, please book a free consultation with one of our three offices in Sudbury, Elliot Lake or Blind River. You can also search for answers on the Government of Canada site. You have the questions. Beth Maynard & Associates has the answers.
Creditors that are owed money may take legal action against you to collect on your debts, which includes obtaining a Garnishment Order from court. If your employer is notified of the Garnishment Order they are legally obligated to remit a portion of your income to the creditor until it is paid or you are able to make other arrangements. The good news is that when a bankruptcy or consumer proposal is filed Wage Garnishments are no longer valid and you will start to receive your full pay cheque again.
The only exceptions to the above are:
Income Tax Debt
If you owe income tax or other similar debt to Canada Revenue Agency (‘CRA’), it can be very difficult to deal with the CRA in making payment arrangements. They also do not negotiate with debtors and filing appeals or for relief under a hardship claim may be a lengthy and stressful process. The CRA has many options when it comes to collecting on this debt. These include garnishment of your wages, freeze your bank account and even seize your assets. They are not required to have a court order to do this. Income tax debt is a debt that can be included in your debts owing when you file bankruptcy or a consumer proposal. When you complete your bankruptcy or consumer proposal the debt is wiped out and you start fresh with CRA. If you have income tax debt that you cannot deal with, contact our office to speak with a Licensed Insolvency Trustee who can provide more details to you on this issue.
Under current Bankruptcy legislation, if you have been out of school for more than 7 years your student loan debt is dischargeable in a bankruptcy or consumer proposal. The date that determines the 7 years is based on your End of Study date. If you are looking at filing a bankruptcy or consumer proposal, then contact the student loan agency to obtain your End of Study date before meeting with a licensed insolvency trustee. If you have not been out of school for 7 years, the debt is still included and collection of the student loan will not happen until after the bankruptcy or consumer proposal is completed. However, interest will still be applied. If after 7 years has elapsed and you are still experiencing financial hardship, then it may still be possible to have the student loan included in the bankruptcy. Please contact our office at 705-524-3034 if you would like to get further information on this subject.
Credit Card Debt
If you are using your credit cards to pay your monthly expenses, such as groceries or gas, to make up the difference between your income and your debts, then the interest may add up very quickly. In addition, it is not unusual for credit card companies to increase your limits without your knowledge, leading to even higher debt. It is very common to suddenly find that you are unable to keep up with even the minimum monthly payments which may lead to collection calls, court judgements and wage garnishments. We can help you reduce or eliminate your credit card debt. We will meet with you and provide you with options that will help relieve this financial burden. You will get the information necessary to make a decision based on what is best for you. Contact our office at 705-524-3034 for a free consultation.
Payday loan companies advertise an easy alternative for cash shortages. It is very easy to qualify for a loan or cash advance but these loans come with a high cost. The interest that is charged can be overwhelming and this usually leads to repaying the loan and taking another loan right away because you have no cash left to live on. This can be a cycle that leads to cash advance loans at three or four different locations and can add undue stress. If you do not make your payment the companies will keep trying to withdraw the funds from your bank account, which can lead to high bank charges and possibly NSF charges. A bankruptcy or consumer proposal are both options that will include payday loans/cash advances, and can eliminated the debts owing.
Stop Collection Calls
If you are falling behind in your monthly payments, you will start to receive collection calls from creditors. You may be able to arrange a monthly payment with them that you can afford. If you are able to do this make sure that you have a paper trail for all your payments and that you are clear who is being paid. If the creditor is asking for too much money and you cannot work out a settlement, they will keep calling and can obtain a court order which will allow them to garnish your wages. If this is happening to you, please feel free to contact us so we may speak with you about how to stop these calls. Whether you are looking at a consumer proposal to consolidate your date into one lower monthly payment or interested in finding out if bankruptcy is an option for you, we can help you with this decision. If you do file a bankruptcy or proposal, we will notify your creditors and collection agencies and they are no longer able to call you or take your wages.
What options do I have to deal with my debts?
You may be able to negotiate new payment terms with your creditors. This may not be an option for you if some or all of your creditors are unwilling to negotiate with you.
You may attempt to get a debt consolidation loan to pay off your creditors and then make only one monthly payment on the loan. This may not be an option for you if the payment on the debt consolidation loan is too high or if you are turned down for the loan.
You may be able to file a consumer proposal. A consumer proposal is an arrangement made with the help of a licenced insolvency trustee to repay all or part of your debts. A licenced insolvency trustee can help determine if this option is right for you based on your debts and income.
As a last resort, you may consider filing an assignment in bankruptcy. Bankruptcy is a legal process which provides debtors with a chance to make a fresh financial start. A licenced insolvency trustee can give you more information based on your personal situation.
Will filing a bankruptcy or consumer proposal stop harassment from creditors?
Yes. Creditors are no longer permitted to make contact with you after you file a bankruptcy or proposal. Your licensed insolvency trustee will deal with your creditors on your behalf.
Can a wage garnishment be stopped?
Yes. Filing a bankruptcy or consumer proposal will stop a creditor from garnisheeing your wages.
Will I lose all of my assets if I file a bankruptcy or consumer proposal?
In general, you will not lose your assets if you file a consumer proposal unless you choose to liquidate your assets and use that money to fund the proposal.
If you file an assignment in bankruptcy, some assets are exempt under provincial law. For example, in Ontario, one vehicle with a value up to $6,650 is exempt. There are also exemptions allowed for home, RRSP’s, Registered Pension Plans, furniture, personal effects and Tools of the Trade. The licensed insolvency trustee may sell other assets for the benefit of creditors, or you may be able to make arrangements to keep certain assets. The licenced insolvency trustee will give you more information based on your specific circumstances before you make the decision to file a bankruptcy or consumer proposal.
What happens to my credit rating if I file a bankruptcy or consumer proposal?
If you file an assignment in bankruptcy, your credit rating will be recorded as an R9. An R9 is the credit rating for bankruptcy, debts placed for collection, or long-term unpaid debt. This rating will remain on your credit report for seven years for a first bankruptcy, or fourteen years for a second or third bankruptcy.
If you file a consumer proposal, your credit rating will be recorded as an R7. An R7 is the credit rating for debts under any kind of consolidation order. This rating will remain on your credit report for the length of the proposal and for three years following the proposal.
How will my bankruptcy or consumer proposal affect my spouse?
Your bankruptcy or consumer proposal will not directly affect your spouse. However, if you and your spouse have many joint debts, your spouse may wish to consider filing a bankruptcy or consumer proposal as well.
Will my personal information be kept confidential if I file a bankruptcy or consumer proposal?
We only provide your information to third parties as required by law, to meet regulatory requirements and as necessary to administer your estate. We are required to notify the Office of the Superintendent of Bankruptcy, Canada Revenue Agency, and all your creditors.
How much does a bankruptcy or consumer proposal cost?
In a bankruptcy, there is a fee payable to the licensed insolvency trustee for services, which are normally paid monthly. In addition, there may be additional amounts owed if you have net income above the amount allowed. The licensed insolvency trustee will advise you on the cost when your financial situation is reviewed. In a consumer proposal, there is a deposit required to file the proposal. The balance of the licensed insolvency trustee’s fees is paid out of the payments you make towards your proposal.
The fees and disbursements of the licensed insolvency trustee are restricted by the tariffs described in the Bankruptcy and Insolvency Act.
Do I lose all my property in a bankruptcy?
No. In Ontario, a bankrupt is able to retain the following property:
Will bankruptcy eliminate all my debts?
The following debts survive a bankruptcy meaning you will still have to pay the creditor after your discharge:
When should I seek credit counselling?
If you need help reducing or eliminating debt or managing your money, credit counselling could be right for you. Here are some signs that you may need credit counselling:
What are the impacts of a poor credit score?
Having a poor credit score can make important life purchases very difficult, including car loans, insurance, mortgages and more. And if you are approved for loans, you will likely receive higher rates.