Ontario Personal Bankruptcy Blog

Ex husband declared bankruptcy 6 months after separation

2008-07-23T14:53:00.003-04:00

Question: i am in a legal pickle re: my ex husband-he signed over our house to me in a legal, bank exchange during the week after we separated in Aug 2006. The deal, or so I thought, was that i take over a 58K joint credit debt (refinance the house) he incurred mainly via gambling during our marriage.

i was not aware he would go on to declare bankruptcy for 87K 6 months later. he did not/refused to declare where any of the money he spent went when we split. So, having no choice, and him refusing to get a separation agreement in place, we exchanged the house free and clear, so i thought, 58K debt I would take on for the equity (about 100K in total). I had creditors looming and i had to refinance immediately.

Of course his trustee is looking to get the money out of me now, and we are going to trial in the fall on this issue. he hasn't been added as a party and i don't think he will motion to be. i want to keep it in family court because there are several variables involved.

Ex was not making a claim for equalization at the time he declared bankruptcy - he refused to get a separation agreement regardless of written inquiries from my lawyer for months. We separated in Aug 2006, he "declared" bankruptcy in May 2007.
I am wondering if you have knowledge about family court rulings and bankruptcy.

Also, 45K of the 87 he is claiming is money he took from his mentally ill brother while he was supposed to be managing it after his mother died (300 a month or so). Can someone deemed incapable of managing this own funds be placed on a list as a creditor?

Why would the trustee not make my ex propose a repayment plan to his brother (Small monthly payment, as he was to do via his managing role to begin with because the brother had gov't benefits and a lump sum from their dead mother would have negated his benefits) and then a repayment plan to the other creditors? It seems logically that he added this amount (45K) he could have paid back in order to exceed the 70K threshold for consumer proposals?

Also, are my RRSPs (in my name) exempt from this -- they are gone anyway on legal fees now?

I am looking to retain my asset for my daughter. Any advise is appreciated. its a real mess...

Answer: We have one simple bit of advice for you: get a lawyer.

The issues you raise deal with very complicated areas of both bankruptcy law and family law.

In most cases, if a spouse receives a house pursuant to a separation agreement, the spouse can keep the house, even if the other spouse goes bankrupt (subject to certain conditions). In your case it does not appear that there was a legal separation agreement, so this will probably be an issue that the courts must decide (hence your need for a good lawyer).

As for his brother, yes, if he is a creditor, he can be included in the bankruptcy as a creditor. It is not possible to make repayment arrangements with only one creditor; all creditors must be treated similarly. The only exception would be in the case of fraud; fraud is not discharged in a bankruptcy, and therefore the money can be repaid. Again, legal advice is required, since it is the job of the court to determine whether or not fraud has occurred.

Family Income during Bankruptcy

2008-07-22T21:36:00.002-04:00

Question: My take home income is $2960. I receive Child Tax Credit of $273 and Child Universal Support of $100. So total of $3300. Can I put the $373 as income to my spouse and my income is only $2960; or they will consider the entire income of $3300. Please help Thanks.

Answer: The calculation of surplus income payments in bankruptcy are somewhat complicated. The calculation is based on your family income, even if your spouse is not bankrupt. However, you only pay your percentage of the payment.

For example, if your family would be required to pay $100 if both of you were bankrupt, and your income is 75% of the family total, you would be required to pay $75 if only you were bankrupt.

As to whether or not the Child Tax Credit and Universal payment are your income or not, that is a question you should ask your trustee, since each trustee may handle that differently. In most cases the difference in payment is relatively small, so it may not be an issue.

individual rights with regard to collection agencies

2008-07-17T14:14:00.002-04:00

Question: Can collection agencies legally continue to harass an individual with threats and lawyers letters even after bankruptcy discharge 15 years ago.

Is there any legal recourse that can be taken when this happens.

Answer: You have numerous rights when dealing with collection agencies in Ontario. You can refer to the government of Ontario web site for more information.

If the debts were included in your personal bankruptcy 15 years ago, you could contact your bankruptcy trustee, if they are still in business, and request that they send a letter to the creditor. You should also provide a copy of your certificate of discharge to the creditor and their lawyer; once they have proof of your discharge they will probably leave you alone.

If none of those ideas work, you should consult a lawyer.

Court awarded damages and bankruptcy

2008-07-17T12:01:00.003-04:00

Question: I sued a person for property damage and won, at the time the person was not working so I waited to make a claim for the amount owing. As soon as he got back to work he filed personal bankruptcy. Does the bankruptcy eliminate the court awarded damages that are owing to me? (the award was in small claims court - Ontario and had no restrictions on the claim and even included current and future interest).

Answer: In most cases the answer is yes, the debtor's bankruptcy will discharge the debt to you, even though you have a court order. There are a few rare exceptions to that rule, so you should consult your lawyer, or the bankruptcy trustee handling the case.

House sale and gambling before bankruptcy

2008-07-15T19:19:00.001-04:00

Question: If I sold a house 3 years ago because of a divorce, split the proceeds in a settlement, and now find my financial situation has forced me to file for bankruptcy, will I be obligated to repay that amount? Financial difficulty was brought on by first child support, then by gambling.

Answer: It depends on when you got into financial trouble. If all of your debts were incurred in the last three years after your divorce, you were not insolvent at the time of the sale of the house, so you would not be required to repay the house proceeds. However, if you were in debt at that time, it is possible that some extra payments may be required in your bankruptcy.

A bankruptcy trustee can provide more details. It is also likely that if a significant portion of your debts are as a result of gambling, your bankruptcy may be extended, so a consumer proposal is another option your trustee will advise you to consider.

Bankrupcty discharge getting divorced

2008-07-15T09:32:00.002-04:00

Question: I received my bankruptcy discharge over 3 years ago. I'm in the process of getting a divorce. If I receive a monetary settlement after my divorce from the sale of our house, will I have to return this money to the creditors? Can I use this monetary settlement to purchase a home without retribution from the creditors?

Answer: Provided you did not lie to your trustee or hide any assets, once you are discharged from bankruptcy in Ontario you are free to do as you wish with your money.

Old debt but new shared assests

2008-07-11T12:57:00.002-04:00

Question: What happens if you are living together and have purchased a home with both signing the mortgage? The debt is only one of the persons from prior days. What happens to the other party that signed for the house?

Answer: Will I lose my house if I go bankrupt? is a very common question. You can read an article about Will I lose my house because of money problems for more information.

If you own part of the house and you go bankrupt for your debts, you must pay the trustee the value of your half of the house (less the amount owing on the mortgage). If you just bought the house there is probably limited equity, so it may not be a problem.

To find out how bankruptcy in Ontario will effect your spouse, contact an Ontario bankruptcy trustee for a free initial consultation to review your situation in detail.

We Are In a Real Mess - is bankruptcy an option?

2008-07-07T11:51:00.005-04:00

Question: My wife and I are in debt of about $200,000 due to a number of circumstances. My wife is now disabled, cannot work and is on Social Assistance. I am also filing with Social Assistance as I have been diagnosed with extreme anxiety and depression. I am currently not working. Here are my circumstances:

My vehicle was recently reposessed.

I have a pre-loaded debit card with $1700

I have money in the bank $5000 + but my rent each month is $1320.00

I have about $3,000 liquid cash.

I am trying to establish an OnLine business and last month I earned $60 + as I cannot work in a normal environment due to medical condition.

I have made an Online investment (which if it continues to do well) will provide me with some financial relief and over the next 6 months I could start to make as much as $20,000 a month but there are no guarantees that this will last.

If it does last I will stop accepting Social Assistance.

For this to work I cannot touch the small investment I made and I need the CASH that I have to Live on until such time the $amount accumulates sufficiently for me to draw a monthly income.

If I declare bankruptcy will I lose all my Online Income?

My wife and I are so afraid right now that the stress level is killing us day by day and we have both been a participant in the Mental Outpatient Dept for Mental anguish and depression.

We want to do the right thing but having a little money behind us is the ONLY STABILITY WE HAVE and if we lose that security then our mental anguish will probably worsen.

We just don't know what to do

Thanks

Answer: You are in a very difficult situation, but there is hope. First, you have asked the question about what will happen to your income if you file for personal bankruptcy. When you are bankrupt you are required to report your income each month to your trustee. If you have surplus income while bankrupt, you must pay a portion of your surplus income to your trustee. These surplus income payments are calculated based on your family size and monthly income. If you earned $20,000 in one month, you would definetely have surplus income. Therefore, if you think the business will be successful, personal bankruptcy is probably not a good option for you.

A proposal to creditors is an option, but given your level of debt and limited income at this time it may not be possible to create a viable proposal.

Your final option would be to open a new bank account at a new bank and use it for all of your day to day living expenses, and do nothing further with your creditors until you have more income. Since you have no wages to garnishee, there is very little your creditors can do legally. If you believe your on-line business will be successful, that may be your best option.

Bankruptcy Discharge

2008-07-03T09:44:00.003-04:00

Question: I thought bankruptcy was something other people did, until I had to file three years ago after a marriage cleaned me out.
I have to date paid about Eleven thousand dollars to a trustee based in North York. They keep threatening to oppose my discharge if I don't send them more payments, However, a few days ago I finally reviewed the court documents, and found the court judgment was for Eight Thousand three Hundred Seventy six dollars ( $8376.00)only. The Trustee has also cashed my cheque for June 2008, and it is not included in the statement they sent me. I cant file my income tax because I need the documents they filed on my behalf three years ago.
Finally my Question, Do I Have to keep paying forever? despite the court decision ?
How do I get out of this mess ?
Thank you sincerely.

Answer: If you believe that you have paid more than required in your bankruptcy, you have three options.

First, you should request a meeting with the trustee responsible for your file. Ask to meet directly with the trustee, not a clerk or administrator. Ask the trustee to explain the court discharge order that states how much you are required to pay to get your discharge, and ask for an accounting of how much remains owing. If in fact you have paid the full amount, request that the trustee proceed to obtain your discharge, and to provide you with all outstanding paperwork.

Second, if you are not satisfied with the trustee's explanation, you can apply to bankruptcy court in Toronto for directions. The trustee will be required to attend. You can provide proof to the court that you have paid the amount required in full, and you can ask the court to grant your discharge. You can hire an insolvency lawyer to assist you in this process.

Finally, you can contact the Office of the Superintendent of Bankruptcy and request that they investigate the matter.

Selling my house before declaring bankruptcy in Ontario

2008-06-29T14:05:00.003-04:00

Question: Hi. If I sell my house and move my money to an offshore account and then file for bankruptcy (all my debts are unsecured) will there be any repercussions?

also

Would I be able to sell my house to my brother and rent it from him. Then file for bankruptcy?

Answer: When you file for bankruptcy in Ontario, the trustee will ask you a number of questions, including "in the last five years did you sell any property?" If you sold your house and moved the money to an offshore account, you would be required to repay the money to the trustee before you would be discharged. Since all real estate transactions are easily traceable, lying about this is a criminal offense, and the maximum penalty is a jail sentence. So the answer to your question is yes, there would be serious repercussions.

You are able to sell your house to your brother and rent from him, but again, you must sell the house at fair market value, and the proceeds of the sale must be turned over to your trustee for the benefit of your creditors.

Student Loans and Bankruptcy in Ontario

2008-06-21T10:22:00.003-04:00

Question: I have now been paying back my student loans (through a B.C. debtors assistance program) for almost ten years. (I live in Ontario now and have a canada loan and a BC loan.) Despite paying almost $30,000 I owe more now than I did when I started. I of course am considering bankruptcy at the ten year mark but am devastated that I will then have to wait another 7 years before I am clean (I am in my mid forties now) I wonder if there are other options. Am I able to offer my creditors a certain amount on the dollar to clean this up. A family member has offered to help me financially. Any advice that you may have would be greatly appreciated.

Answer: You have three options.

First, keep paying until the loans are paid off; this will have the best impact on your credit, but with the interest is obviously very costly.

Your second option is to declare bankruptcy. If you have been out of school for more than 10 years your student loans will be automatically discharged in the bankruptcy. The rules are somewhat complex; more information is available on the student loan bankruptcy canada web site. Once the bankruptcy is finished you can begin to re-build your credit. You are correct that the bankruptcy remains on your credit report for seven years, but if you have a good job and can save money you can generally re-build your credit in a much shorter period of time.

Your final option would be to file a consumer proposal, where you offer a settlement to your creditors. If you have family that can help, it may be possible to offer a lump sum to the creditors of an amount less than the full amount owing, and they may be willing to write off the remaining balance. Whether or not they will accept the consumer proposal depends on your level of debt, your family income, and your other assets.

You have options, so we suggest you contact a licensed trustee in Ontario for a no-charge initial consultation to review your options.

Kicked in the head again, what about the house?

2008-06-20T22:31:00.003-04:00

Question: Hi. Just bought a house with 100% mortgage 6 months ago, so essentially there is no equity in the house. I may be looking at bankruptcy as the only option at this point. Never missed a payment; all associated bills up to date. Will I have to sell/lose the house?

Answer: If you go bankrupt in Ontario, if you want to keep your house, you are required to pay to the trustee the equity in your house. In your case, if there is no equity, you would be able to keep your house.

Of course the other question to ask is whether or not it makes sense to keep the house. If there is no equity, and if the housing market in Ontario is declining, it may be better to surrender the house, find a place to rent, and then file bankruptcy.

Each person's situation is unique, so to fully explore your options contact an Ontario bankruptcy trustee for a free initial consultation.

Can creditors/Trustee oppose my discharge after the fact

2008-06-08T14:07:00.002-04:00

Question: Hi, i got discharged 2 weeks ago from my first time bankruptcy. I'm planning to buy a house immediately from a private financeire and borrow the down payment from a relative.

1. Can any of my creditors/trustee void my bankruptcy based on the fact that i will own a house not long after my discharge.

2. Does the loan have to be registered anywhere or is an agreement on paper good enough

3. If yes, how long can i wait before i can own something and guarantee that no one will come after me.

Thanks alot

Answer: Once you are discharged, your bankruptcy cannot be re-opened, so you are free to buy a house or do whatever you wish. The only exception to that rule would be where the trustee or a creditor can prove that you lied or did not fully disclose your assets while bankrupt.

In your case, you have a relative that is willing to loan you the down payment on a home, so you are free to do as you wish.

Our only caution would be to be very careful getting back into debt at this time. The real estate market in Ontario is declining, so borrowing from a relative and borrowing for a mortgage puts you back in debt, which may prove difficult to service if the value of your new house declines over the next two years. In most cases it is better to save for a significant down payment, and then buy a house in the future with a minimum amount of mortgage debt.

Bankruptcy in Ontario

2008-06-07T15:04:00.002-04:00

Question: I am separated from my spouse and he is not paying his share of debt which is forcing me into personal bankruptcy. I have tried to sell my home to cover these debts but have not until now and find myself sinking deeper and deeper. My husband has been gone since Nov 07 and has contributed nothing to any debt. Is there some recourse I can take as I would not be declaring bankruptcy if he would pay the debt he owes me. We were married for 30 years and it is before the courts now but I may not be able to last until the court date.
I have tried to save my credit and at this point it is ok but I can no longer keep up. Please advise what I can do.

Answer: Unfortunately there is no way to speed up the court process. Your options are as follows:

First, you can talk to your lawyer about strategies to speed up the court process.

Second, if you are able, you could sell your house and use the funds to deal with your debt. If you are faced with a multi-year legal fight, it may be best to sell the house now and get out of debt now, rather than waiting until your credit gets worse.

Please note that this is a very generic answer, since we don't know the value of your house, or what you owe. It may therefore be wise for you to discuss your situation with an Ontario bankruptcy trustee to determine your possible options.

407 ETR and Bankruptcy in Ontario

2008-06-04T04:45:00.003-04:00

Question: The 407 has been charging an insane amount of money as "interest" to me...Will that bill be erased on a claim of bankruptcy in Ontario?

Answer: The rules are subject to change, but as it stands now debts owed to 407 ETR are discharged in a bankruptcy in Ontario. However, it is possible that at some point in the future debts to 407 ETR will be added to your license plate or driver's license renewal cost, in which case you will need to pay them in order to renew your license.

Monthly Payments and Income Tax Question

2008-06-03T10:59:00.001-04:00

Questions: I have two questions. The first is:

I have a certain amount that I pay monthly to my trustee and would like to know if my mortgage payment increases (or have other increases), will this affect the amount that I pay to them (decrease it)?

If I get money back from filing my income tax, I understand that my trustee takes that amount and distributes it to whomever, does this money get included into the amount that I am required to pay back and does it decrease my monthly payments?

I hope these questions make sense.

Thanks

Answers: When you go bankrupt in Ontario, you are required to report your income each month to your trustee. If you have what is called surplus income, you are required to make extra payments while bankrupt. These payments are based entirely on your income, not your expenses, so if your mortgage payments increase, your surplus income payments remain the same.

Also, you are correct, your tax refund is an asset of your bankruptcy estate; it is distributed to your creditors, but it does not reduce your monthly payments, because again your monthly payments are based on your monthly family income.

Your trustee can provide you with more detailed answers based on your specific situation.

UPON RECEIVING A LETTER OF DISCHARGE

2008-05-30T00:09:00.003-04:00

Question: After receiiving my letter of discharge, I was told to request a credit report, and then amend the file with a letter including my letter of discharge. What happens if I don't?

Answer: Once you have completed the duties in your bankruptcy, you will receive a certificate of discharge from your trustee. Your trustee also sends the certificate of discharge to the Office of the Superintendent of Bankruptcy, who in turn forward that information to the credit bureaus. Therefore your credit report will be automatically updated, so it is not necessary for you to send your certificate of discharge to the credit bureau.

We recommend that everyone check their credit report once a year, whether or not you were ever bankrupt. About three months after your discharge you should request a copy of your credit report, and if your discharge is not properly reflected on your credit report than at that time you could send in your certificate of discharge to correct your credit report.

Owing Canada Revenue Agency and Bankruptcy in Ontario

2008-05-27T20:09:00.004-04:00

Question: If I owe Canada revenue and I go bankrupt in Ontario will the bankruptcy erase the debt?

Answer: Yes, debts to Canada Revenue Agency (CRA), formerly known as Revenue Canada, are discharged in a bankruptcy in Ontario. More information can be found in this article on Revenue Canada and bankruptcy.

Impact on corporate bankruptcy

2008-05-27T13:39:00.004-04:00

Question: We keep our boat at a marina which rumour has it my file for bankruptcy. Could we or our boat be in any jeopardy? We owe the marina no money.

Answer: If you own the boat, it does not form part of the assets of the marina, so if the marina goes bankrupt you should still be able to retrieve your boat. However, if the marina goes bankrupt and the trustee takes over the operations, there may be a period of time where access to the marina becomes difficult, so to be safe you could consider removing your boat now and storing it somewhere else.

mortgage and bankrutcy

2008-05-24T10:31:00.002-04:00

Question: Here is my situation i bought a house a year ago this year i found out my septic needs to be replaced and my water well is under the garage.
I can barely pay the bills now, i cant afford a new septic and well, and i soon won't be able to live here much longer.
I cant sell the house for even half of what i owe on it.I also have about 35000 in visa and unsecured loans.

my questions

1)does the bankruptcy take care of my mortgage

2)should i go bankrupt before or after foreclosure does it make a difference?

thank you

Answer: If you know for sure that you cannot afford to continue living in the house, the best answer may be to find a place to rent now, surrender the house to the bank, and then consider a consumer proposal or personal bankruptcy. In either case the shortfall on the mortgage would be included in the proposal or bankruptcy.

If you go bankrupt and continue making payments on the mortgage, and then some months after the bankruptcy starts decide to surrender the house, you would be liable for the shortfall; the shortfall would not be included in the bankruptcy.

As the real estate market gets worse in Ontario, mortgage foreclosures are increasing. This is a complicated area, and it is important that you get good advice before making a decision, so we strongly recommend that you arrange for a no-charge initial consultation with a licensed bankruptcy trustee.

Consumer Proposal and OSAP

2008-05-22T22:01:00.002-04:00

Question: If my parents are locked in a consumer proposal for four years, can I apply for OSAP funding for university?

Answer: Yes. In most cases even if you yourself were in a consumer proposal or a bankruptcy, you could still apply for OSAP, and subject to your family income in most cases you would be approved.

Pay Increases while Bankrupt

2008-05-21T21:58:00.002-04:00

Question: Am I obligated to tell my trustee about pay increase as a result of a performance review?

Answer: Yes, you are required to report to your trustee each month your income, regardless of why it increased or decreased. Failure to disclose your income could result in your bankruptcy discharge being opposed, meaning that your bankruptcy period could be extended.

Child Tax Credit and Bankruptcy in Ontario

2008-05-21T13:47:00.003-04:00

Question: If I go bankrupt will I lose my child tax credit for my kids?

Answer: If you go bankrupt in Ontario, the trustee will NOT take your child tax credit. However, each month that you are bankrupt you are required to report your income to the trustee, and if your income goes above a certain limit (based on the size of your family), you will be required to pay a portion of that surplus income into your bankruptcy estate. Please contact an Ontario bankruptcy trustee to do a calculation for you of the cost of bankruptcy based on your income and family size.

Divorce settlement and bankruptcy in Ontario

2008-05-20T12:53:00.003-04:00

Question: I have been left no alternative after being seperated and receiving no interim settlement then to declare bankruptsy. I have one question. When we finally do settle our financial matters from the divorce, will the money I get from the settlement I receive, will it be seized as part of the bankruptsy? I might have a sum of approx $75,000.00.

Thanks

Answer: In most cases, yes, if you receive a large sum of money while you are bankrupt, the money will be seized and distributed to your creditors. If you owe less than $75,000, you probably don't want to go bankrupt, because when you receive the money you can pay your creditors directly. If you owe more than $75,000, bankruptcy may be the correct option. A trustee can explain the implications and help you decide whether or not bankruptcy is the correct option in your situation.

time frame to transfer house before bankruptcy in Ontario

2008-05-09T23:23:00.004-04:00

Question: i have a house paid fully if i sell the house or transfer it to another name then file bankruptcy after 3 or 4 months is it ok? is my house safe? can i do it?

Answer: No, if you own a house that is fully paid for with no mortgage, and you go bankrupt in Ontario, you will lose your house.

When you go bankrupt you must answer the following question: "Within the last 5 years, while you new you were insolvent (ie. in financial trouble), did you sell or transfer any assets?" If you were to sell your house, or transfer it, and then go bankrupt 3 or 4 months later, that fact would be disclosed to the trustee. (Even if you lied to the trustee and didn't disclose the sale you would probably still get caught, since all house sales are recorded by computer and are easily searchable). If you did sell the house, your bankruptcy would probably not end until either you got the house back, or paid to the trustee the equivalent value of the house.

More information can be found in this article on Will I Lose My House If I Go Bankrupt?