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Frequently Asked Questions

For many, carrying debt can feel incredibly heavy.

Our team is here to help you make informed decisions about how to best manage your debt.

Below are 20 Frequently Asked Questions for your information.

A consumer proposal means assets are not involved unless you choose to make it a part of the solution. In a bankruptcy, the trustee is obligated to collect the money, which could come from the house. If there’s not a lot of equity in the house, a payment arrangement could be made, but you can protect $9,000 of equity in your home.

There is a $5,000 exemption in a motor vehicle. In a bankruptcy, it depends what the equity is. You could repurchase the equity through the trustee in a bankruptcy. If you financed the vehicle, you can keep it through both a bankruptcy and a consumer proposal as long as you continue to make payments.

In a consumer proposal it is negotiated based on your income, your cost of living and how much the creditors will demand. In a bankruptcy the payment is determined by a formula, depending on a person’s household size and how much each of the household members earns.

If your partner has also signed the credit card or loan application, the short answer is the protection that a person gets doesn’t protect anyone else. The lender can collect from anybody. They don’t have to collect 50% from both. They’ll go whoever is easiest—either the one with the deepest pockets or perhaps the one who can’t defend themselves.

Yes. If it’s in the best interest of everybody, it can be done through one process as opposed to two.

That used to be a big issue. In very, very few cases does anybody’s name actually get published. In a bankruptcy, if a person has more than $15,000 of realizable assets, then it has to be published in the paper. It doesn’t happen very often.

A person who knows how to find the information could probably find it, but most people don’t care.

The answer to that is up to you. Depending on how organized you are and how committed you are, the process can be started in just days. If things are more complicated, it could take a little longer. You can put a temporary protection in effect to give the person time—approximately 30 days—to sort things out.

In a bankruptcy, the first time is nine (modest income) or 21 months (higher income). The second time it’s 24 months (modest income) or 36 months (higher income). If it’s a third bankruptcy, you will have to appear in court, and generally the discharge will be three-plus years after you start. In a consumer proposal, five years is the maximum time.

A secured debt means you have to keep paying that, and you have to do support payments, too.

At the end of a consumer proposal, it is reported on your credit as a 7 rating on a scale of 1 to 9 for three years after you complete it. If it’s a bankruptcy, it is reported as a 9 rating on a scale of 1 to 9 for six years. If it’s your second bankruptcy or more, it’s reported as a 9 for 14 years.

Generally with a consumer proposal we see improvement within a couple months. At the end of a consumer proposal, you are debt-free. We think that is the second most heavily weighted factor in determining a credit score. Borrowing could be an issue, though, and interest rates could be high. There is an urban myth that if you go bankrupt you cannot borrow for seven years. It may make it a little harder to get credit, and it may cost more, but if a person meets the other criteria, or has collateral or a co-signer, borrowing is certainly possible.

In a consumer proposal, a card that doesn’t have an amount owing on it may be kept. If the issuer finds out you have done a consumer proposal, there is a risk it may cancel it. In a bankruptcy, you are generally not allowed to have a credit card in your possession.

No, as long as you didn’t sign the paperwork or borrow the money together.

Yes. Two financial planning sessions are provided, and you are required to attend.

Not always, but we generally recommend it if you do their day-to-day banking somewhere where you have debt. They can’t legally do this, but if your paycheque shows up in your account a few days after you started a debt solution process and the bank takes it because you owe the credit card company, we can fight to get it back, but it makes it tough to pay the rent in the meantime.

It means the debts are revived, as are the creditors’ right to use enforcement mechanisms. That could include wage garnishment, bank account and asset seizures, harassment and phone calls.

Yes, as long as you fulfil your obligations.

We are paid out of the amount that is being contributed from your income or assets. We are paid by the process. There is no direct bill.

Creditors can’t lay in the weeds and wait forever to try to collect. If they do, they lose the legal right to do so. If you don’t incur any new debt, if you don’t make a payment or acknowledge it in writing within two years, then the creditor has to start a court action within two years (NEEDS CLARIFICATION). Otherwise the debt becomes statute barred, and the creditor loses the legal right to use the court system to try to enforce payment.

What's Protected

  • Most retirement savings are protected.
  • Some life insurance has a cash value. Some life insurance is term life that only pays when you die. If the beneficiary of the plan is the spouse, child, parent or grandparent of the policy owner, then it is protected
  • RRSPs are typically safe as well. Some of them are governed by insurance rules, where the beneficiary of the plan is the spouse, child, parent or grandparent of the policy owner, then it is protected
  • all RRSPs have protection for money that’s been in the plan for more than a year
  • RDSPs (Registered disability savings plans) are fully protected

What's Not

  • RESPs have no protection (we generally do a payment plan to repurchase the value. it may say there’s $10,000 in there, but if it gets cashed out the government takes back the money it has contributed through learning bonds and grants; the interest is lost.)
  • Tax-free savings accounts are not protected
  • Most recreational assets—dirt bikes, campers, trailers, quads, jet skis, boats — are not protected

Definitions

debt — something, typically money, that is owed or due
debtor — a person or institution that owes a sum of money
creditor — a person or institution to whom money is owed
consumer proposal — a formal, legally binding process that is administered by a licensed insolvency trustee (LIT). In this process, the LIT will work with you to develop a proposal, which is an offer to pay creditors a percentage of what is owed to them or to extend the time you have to pay off the debts—or both
bankruptcy — a legal proceeding involving a person or business that is unable to repay their outstanding debts. All of the debtor’s assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt
licensed insolvency trustee (LIT) — federally regulated professionals who provide advice and services to individuals and businesses with debt problems. LITs help people make informed choices to deal with their financial difficulties
unsecured creditors — a person or organization that has lent money and has no right to the property or other assets of the borrower if the money is not paid back
secured creditors — an organization that has lent money under an agreement that they can take particular assets from the borrower if the money is not paid back