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Bankruptcy FAQ

What is bankruptcy?

Bankruptcy is a legal process that allows an individual to be relieved of most or all of their debts.

Who can declare bankruptcy?

Bankruptcy can be filed by an insolvent person who owes more than $1,000 and is unable to pay their debts in the normal course.

Can I declare bankruptcy without using a Trustee?

The Bankruptcy and Insolvency Act requires that all bankruptcies be filed with a licensed Trustee.

How long will I be bankrupt for?

The Bankruptcy and Insolvency Act will dictate the length of your bankruptcy or when you will be entitled to your discharge. In most cases, a first time bankrupt will be discharged in 9 or 21 months and a second time bankrupt in 24 or 36 months. The Trustee will review the discharge process with you directly.

What does it cost to file a bankruptcy?

Depending on your income and your family situation you may be required to make surplus income payments to the estate based on standards set by the federal government. The Trustee is entitled to charge a fee with respect to your bankruptcy. Trustee fees are prescribed under the Bankruptcy and Insolvency Act and are the same regardless of the trustee you see. These payments will be discussed in more detail in your free initial consultation with us and we are happy to answer any questions you may have.

Will a bankruptcy stop collection action?

Upon filing a bankruptcy, unsecured creditors will not be able to initiate or continue legal or collection activities.

Will I lose all my assets if I declare bankruptcy?

The following assets are exempt from seizure by the Trustee (pursuant to The Ontario Execution Act):

  • Household furnishings to a value of $11,300
  • Personal effects to a value of $5,650
  • Tools of trade to a value of $11,300
  • A motor vehicle to a value of $5,650
  • Most pension plans, life insurance policies, and certain RRSPs
  • Farmer’s business assets to a value of $25,000

These exemptions do not prevent a secured creditor from realizing on assets which have been pledged as security.

Do I have to disclose all my debts?

All debts, including those owing to relatives and friends must be disclosed.

Will bankruptcy release me from all debts?

Not all debts are released by bankruptcy. The most common debts which survive bankruptcy are:

  • Student loans where the bankrupt last attended school less than 7 years from the date of bankruptcy
  • Fines or penalties imposed by a Court; restitution orders
  • Alimony and support
What are my responsibilities once I declare bankruptcy?

Once you have declared bankruptcy you will be required to perform duties, which include:

  • Disclose all assets and debts to the Trustee;
  • Assist the Trustee in dealing with your property;
  • Attend a meeting of creditors, if required;
  • Keep the Trustee advised of any changes in address, phone number, employment and income;
  • Provide information for tax return preparation;
  • Surrender all credit cards;
  • Attend two (2) financial counselling sessions
What if I have co-signed debts or have debts guaranteed by someone else?

A guarantor, or co-signer, will be responsible for the entire debt as they are jointly and severally responsible. It is recommended that you disclose the possible bankruptcy to this individual so they can make appropriate arrangements.

Can I have a bank account?

Yes, however if you owe money to your current bank, it is recommended that you open an account at a new financial institution.

What effect will bankruptcy have on my credit rating?

The truth is that most clients’ credit ratings are in trouble before they even meet with a trustee. Most credit bureaus keep information about bankruptcy on their records for about seven (7) years for first time bankruptcy clients. We can provide you with resource material on understanding your credit report, your credit score and how to rebuild your credit.

Consumer Proposal FAQ

What is a Consumer Proposal?

A consumer proposal is a formal arrangement to pay creditors under the Bankruptcy and Insolvency Act without going bankrupt. Most consumer proposals require an interest free partial repayment of the debt over a period of time, not exceeding 5 years.

Who is Eligible to file a Consumer Proposal?

A consumer proposal may be filed by an insolvent individual who is unable to pay their debts in full and who owes less than $250,000, excluding any mortgages on their primary residence.

Can a Consumer Proposal be filed without a Trustee?

The Bankruptcy and Insolvency Act requires that all consumer proposals be filed with a licensed Administrator (Trustee).

What happens to assets under a Consumer Proposal?

Assets remain the property of the individual and do not become the property of, or vest to, the Trustee.

Will a Consumer Proposal stop collection action?

Upon filing a consumer proposal, unsecured creditors will not be able to initiate or continue legal or collection activities.

What if the creditors do not accept the Consumer Proposal?

Although the majority of proposals are accepted as filed or subsequently amended, if the proposal is not accepted by the majority of creditors we will advise alternative options based on your particular situation and circumstances.

What if the Consumer Proposal is not completed?

If the payments under an accepted consumer proposal become 3 months in arrears, the consumer proposal will be automatically annulled and creditors are able to resume collection action for the amount due to them.  A second consumer proposal may not be filed with respect to the same debts if the first consumer proposal is annulled.

What effect will making a Consumer Proposal have on credit rating?

Most credit bureaus keep information on record for 3 years following the last successful completion of a proposal.

Will there be a meeting of creditors or a requirement to appear in Court?

For most proposals no meeting of creditors occurs and there is no requirement to go to Court.  However, if creditors request a meeting the client must attend.

How are co-signers and guarantors affected?

Co-signers and guarantors will be responsible for the unpaid balance and may be asked to make full payment upon the filing of the proposal.  It is our recommendation that the co-signer(s) contact the lending facility to make payment arrangements as they would be jointly and severally responsible for the debt.

Resources

Office of the Superintendent of Bankruptcy

Dealing with Debt – A Consumers Guide [PDF]

Counselling Directive [PDF]

Surplus Income Directive 2014 [PDF]

Request for Mediation (Regarding Surplus Income) [PDF]

Monthly Income and Expense Statement [PDF]

2015 Tax Preparation Information and Questionnaire [PDF]