Ontario Personal Bankruptcy Blog

Should we go bankrupt??

2009-07-02T11:56:00.000-04:00

Question: Here's the deal....my husband has been out of work for a year and a half and debt is piling on top of debt. I make approx. $2200 a month but am now laid off for the summer months. We are barely managing our day to day bills (mortgage, car payments, insurance) and are hardly ever able to pay external bills such as phone, cable, hydro, etc. And that doesn't even touch our credit card bills (between us we have about $25 000). What do I do?? I don't know if bankruptcy is the right option. I want to keep our house and I need a car for work. Please help. I am at a loss.

Answer: Before worrying about whether or not to go bankrupt, the first step is to get your expenses as low as possible. With the recession it's possible it will take a while longer for your husband to find a job, so expense reduction is critical.

You want to keep the house, but if you don't have enough money coming in each month to pay the mortgage, that may not be possible. You may need to consider selling the house to reduce costs, and find a place to rent. You could also consider taking in a boarder to help with the costs.

The next item on the list is your car. You need a car for work, but not necessarily the car you have now. You could consider selling the car to pay off the loan, and replacing it with a less expensive used car.

These are just suggestions, since I don't know what you are paying for your house and your car, and whether or not it's possible to replace them with a less expensive alternative.

Once you have your expenses under control, then it will be necessary to consider options for dealing with your debts. The most common reason for filing bankruptcy in Ontario is to prevent your wages from being garnisheed. If you are both not working at the moment, it may not be necessary to file bankruptcy until you are back to work.

If your husband returns to work, a consumer proposal may be a better option.

For more specific advice, contact a licensed Ontario bankruptcy trustee who will help you evaluate your options and decide on the best course of action.

Separating and Bankruptcy

2009-06-30T08:20:00.000-04:00

Question: My spouse and I are separating. If he goes bankrupt, will I lose the house? His name is still on the mortgage.

Answer: The answer depends on a number of factors.

First, in a bankruptcy, the bankrupt person will lose the house if it has equity. Equity is the difference between what the house is worth, and what's owing on the mortgage. If there is minimal equity, he would not lose the house, which means you would not lose the house. If there is equity, he would be required to pay his share of the equity to keep the house.

The next issue is the mortgage. If your spouse goes bankrupt, the bank may remove his name from the mortgage. The bank may only allow you to keep the mortgage if your income is sufficient to qualify for a mortgage on your own. This may not be an issue immediately, but it may be an issue when the mortgage is up for renewal.

You should consult a family law lawyer to advise you more fully on your options for keeping the house.

How does Bankrupcy work when you have no Income

2009-06-29T11:51:00.000-04:00

Question: I currently have no form of income, I have creditors breathing down my neck for money that I cannot possibly give to them! How would bankruptcy work for someone with no income?
Thank you

Answer: The main reason most people file bankruptcy in Ontario is to prevent their creditors from garnisheeing their wages. If you have no income, then you have no wages for them to garnishee. If you have no assets, there is nothing for the creditors to seize, so could simply do nothing. The creditors may continue to harass you, but if there is nothing for them to get, legally there is nothing they can do until you return to work.

Alternatively, you could go bankrupt, but bankruptcy costs money. Trustees in Ontario charge a minimum contribution each month, plus you lose your tax refund and GST credits while bankrupt. If you have no income, it may make more sense to wait until you have an income to go bankrupt.

However, if you don't want to deal with the phone calls from creditors, and you have a way to pay for the cost of the bankruptcy, that is also an option.

bankrupt recently now someone wasnts to sue me

2009-06-26T14:27:00.002-04:00

Question: I bought something in a little shop and was making payments on it . the shop keeper refused to give me reciepts as he said . just pay what you can when you can. Personallty he did not want it to go through his records
he showed up at my house threatening to take back what i bought ( a bird ) ..
is this a secured debt ?
Can he take my bird ?
He threatened a wage garnishment
what do i do ...

Answer: First, if someone shows up at your house threatening you, you should call the police.

Second, if you have filed bankruptcy, your unsecured debts are included in the bankruptcy. The shopkeeper should have been listed on your statement of affairs, so the trustee should have notified him of the bankruptcy. If this was not done, you should contact your trustee immediately.

It is doubtful that he registered a lien on your bird; that's the only way it could be a secured debt. He should file a claim with the trustee, who can then investigate whether or not it is a secured debt.

A creditor cannot garnishee your wages while you are bankrupt, unless they get the prior permission of the bankruptcy court, which is highly unlikely in your case. Your trustee can provide you with further information.

Bankruptcy Vs. Proposal

2009-06-18T16:50:00.000-04:00

Question: Hi, I have already gone through bankruptcy before approximately 15 years ago. Now I'm in a terrible situation with my finances where I can't make ends meet.

Here is my situation: In the past 6 years, I have been married, had a child, divorced, and now have shared custody of my child. I have been living with a woman for over a year now and she is expecting.

I owe approximately 50K in debt on credit cards and 2 seperate lines of credit.

I make 60K a year.

The woman I am living with has been separated from her ex for over one year. He is claiming bankruptcy, which will force her into bankruptcy as well as she is currently not working and is co-owner of their home and vehicles (her ex and the house is in a western province)

with the arrival of a newborn just before Christmas we are very scared about our finances and our future.

Please help! any advice would be greatly appreciated.

Answer: You have severe financial problems and your situation is urgent, but it is not hopeless. You have a number of options.

One option would be to file bankruptcy in Ontario again. However, a second bankruptcy is more costly and cumbersome than a first bankruptcy. It will last for at least one year (instead of the minimum of nine months in a first bankruptcy), and you are required to appear in bankruptcy Court to receive your discharge.

A better option would probably be to file a consumer proposal, where you make a deal with your creditors and avoid a second bankruptcy.

Whether a bankruptcy or a proposal is the correct option will depend on a number of factors. You earn $60,000 per year, so you have good income, which is generally the most important factor in filing a consumer proposal.

Our debt options calculator can help you assess your different options. Then, contact a licensed trustee in Ontario to arrange for a detailed, no obligation, no cost review of all of your options, and then you can make an informed decision.

bankruptcy & co-signer (?) on bank account

2009-06-15T12:41:00.003-04:00

Question: My son filed for personal bankruptcy a few month ago & this bankruptcy included his overdraft amount on his bank account, roughly 1000.00. A few years ago, he moved to the U.S., so we went to the bank, so I could get a bank card on his account, to be able to deposit & withdraw money so I could make monthly payment's on his student loan & other debts he had here in Ontario. Now the bank is coming after me, for this overdraft amount, saying when I signed for the bank card, I became a co-signer on his bank account. This was never told to me when I signed for this. When I called about this, the bank manager said this was true & said the statement would be addressed in both of our names but the statement is only addressed to my son. Another thing my son questioned was, if I am co-signer, why didn't I have to sign when he went for the overdraft protection? Can the bank come after me for this money & will this ruin my credit if it is not paid. I never heard of being a co-signer on a bank account, a loan yes, but a bank account no!

Answer: Since the bank account had overdraft protection, it is both a bank account and a bank loan. The first step will be to ask the bank to show you a copy of the paperwork you signed agreeing to be liable for the overdraft. If they can't prove that you are liable, they should stop threatening you.

If you did sign for it, then you are liable for the overdraft. In that case it may be simplest to pay them if the amount is reasonable. Alternatively, you can let them pursue you, but if they do it will have a damaging impact on your credit.

Is it Possible to discharge student loans without going bankrupt?

2009-06-11T09:40:00.000-04:00

Question: Is it possible to have a student loan discharged (older then 7 years) with out claiming bankruptcy. I do have other debts that have gone to 3rd party collection agencies but I'm working with almost all of them to repay the relatively small debts.

My student loan is the biggest obstacle and I haven't been able to make payments on it for sometime. Bankruptcy is the last resort for me and I think I'd be okay if I could just get rid of this student loan.

Answer: A student loan can only be discharged by paying it in full, making a settlement with the lender, by filing a consumer proposal, or by declaring bankruptcy. You could contact the lender and see if you can work out payment arrangements. If not, it may be necessary to consider one of the other options.

If you haven't been able to make payments on it for some time, it is likely that your income isn't sufficient to continue servicing it even if they did reduce the interest, so a proposal or a bankruptcy may be the only logical option.

how much can one make and still declare bankruptcy?

2009-06-10T14:39:00.000-04:00

Question: I just found out that my fiancee has around $35,000 in debt, including credit card, unpaid personal bill, line a credit (paying interest only) as well as being overdrawn. We live together in my home and share utility bills, food, line of credit (in my name with joint items). He has been paying for about 1/3 of our bills but because he's so strapped (with personal debt) he can't pay his. He makes $60,000 a year, has a vehicle valued at $1,800 - does he make too much to declare bankruptcy and if he can - can he get out of his debt but still help with our joint bills ???

Answer: If you file bankruptcy in Ontario, the amount you are required to pay while bankrupt is based on your net family income. Assuming your fiancee is currently a single person with no children, he is allowed to earn $1,870 per month (take home pay). He then would pay half of the first thousand he is over that amount, and three quarters of the rest. This is called surplus income. For example, $60,000 per year may be around a net after taxes of $3,750 per month, so the surplus owing would be $3,750 - $1,870 = $1,880, so 50% of $1,000 and 75% of $880 = $1,160 per month. (Here's a surplus income spreadsheet you can use to do the math).

If he is paying $1,160 per month in a bankruptcy, it is likely the bankruptcy would last for up to 21 months (instead of the usual 9), so for him a consumer proposal is probably a better option.

Either way, yes, if he files a bankruptcy or a proposal he will then be able to devote the rest of his income to helping with your living expenses.

Obviously the math is somewhat complicated, and it's a difficult decision, so we recommend that you meet with a licensed Ontario bankruptcy and proposal professional to review all of your options before making a decision.

What happens in Bankruptcy Court in Ontario?

2009-06-07T16:50:00.003-04:00

Question: I filed bankruptcy 8 months ago was everthing ok till now and my trustee told me I have to go court soon . What s waiting for me now in the court?

Answer: In most cases in a first bankruptcy you are eligible to be automatically discharged after nine months. If you were bankrupt before, or if you have not completed all of your duties, or if any of your creditors have objected to your discharge, you are required to attend a discharge hearing in bankruptcy court.

At the hearing the Bankruptcy Registrar will review your case, and determine what further duties you will be required to perform to get your discharge (such as making additional payments).

For more information, you should consult your trustee and ask them to explain in detail what will happen at court, what questions you will be asked, and what you need to do to prepare.

Here's an article on the effects of a bankruptcy discharge for more information.

keeping our house if we go bankrupt in Ontario

2009-06-06T21:30:00.000-04:00

Question: I was recently married,we bought a house together about a year ago before we got married ,she bought a truck for me about 2 years ago,i recently found out that she owed a lot of money on it and the payments are way behind,along with a few other debts,...what id like to know is with her name on the title of the house ,is it possible for her to claim bankrupcy and for me to beable to keep the house,...i can handle all the debts of the house and bills,but with this all added on theres no way i could afford it,...they are also threatining to reposses the vehicle,...all we care about is our home,...thanks

Answer: Whether or not you can keep your house if you go bankrupt depends on the value of the house, and the amount owing on the mortgage. Here is an article that answers the question: What Happens To My House If I File Bankruptcy?

Consumer proposal

2009-06-06T12:18:00.003-04:00

Question: I recently undertook to do a consumer proposal, but was unable to find the funds within the time frame allowed. My financial circumstances have now changed and feel I could re-do the proposal.

Having failed to meet the deadline, how long do i have to wait in order to re-write the proposal?

Answer: Under current rules a consumer proposal is a one-shot deal. If the proposal is rejected by the creditors, or if you fail to meet the terms of the proposal and it fails, you cannot file another consumer proposal for the same debts.

The only way to file a second consumer proposal would be to go to court and get permission from the Bankruptcy Registrar to file another proposal. You would be required to provide an explanation of why the original proposal failed, and why you believe this proposal will be successful. Your proposal administrator can provide you with more information.

Is it possible for us to file bankrupcy and how would it work

2009-05-29T01:57:00.000-04:00

Question: My husband and I have a lot of debt and live in an apartment. My father is disabled and needs financial help so I always help him. Right now i'm unemployed and suffering from anxiety and depression. our debts include a consolidation loan of 20,000(his) which 14,000 of it was from a vehicle, we owe 15,000(ours) on a line of credit and have an additional 9,000(4 mine 5 his) in credit card debt as well as a student loan for 2,500 from the year 2002(mine). my husband works 40 hours a week making 20$ an hour and I have no income. Would bankruptcy be an option for us and how will it affect us???

Answer: Yes, bankruptcy would be an option. You can read more here about the affects of bankruptcy in Ontario. Bankruptcy would discharge your debts, but there is also a cost to bankruptcy based on your income, so you will need to decide whether or not filing bankruptcy makes sense for you at this time.

Before making the decision to file for personal bankruptcy in Ontario, you should contact a licensed Ontario bankruptcy trustee for a no charge

Bankruptcy or consumer proposal?

2009-05-28T15:58:00.003-04:00

Question: The house and mortgage is registered under my spouse's name but my name is in a ownership title as well.
Both of us are running our own businesses. Since recession started in 2008 our businesses are very slow and we barely break even.
To increase sales we were convinced to advertise with Yellow Pages, so we did. That kind of advertising brought in no business whatsoever. At this moment both of our businesses owe Yellow Pages $100,000.
I was the one who signed contracts with them.
Do you suggest to file my personal bankruptcy or just write them a consumer proposal ? if it's a proposal what kind of monthly payment would make my life easier ?
Thanks, Mark

Answer: Under current rules you can only file a consumer proposal if your debts are less than $75,000, so if you owe $100,000 to the yellow pages, you can't file a consumer proposal. It may be possible to file a Division 1 proposal, which is more complicated. The monthly payment would depend on what you can afford.

It may also make sense to simply file bankruptcy, depending on your income and the value of the house.

We suggest you contact a licensed bankruptcy trustee to review your situation and help you crunch the numbers to determine which option will work best for you.

what happens if you do not show up for bankruptcy court?

2009-05-21T01:30:00.000-04:00

Question: what happens if you don't show up for bankruptcy court?
and if the trustee has been discharged, then how long will it take for an automatic discharge for the person who filed? And if the trustee is discharged and the debtor did not comply with all the provisions, what happens to the debtor, an automatic discharge?

Answer: In a normal first bankruptcy if you have completed all of your duties and no-one objects, you are eligible to receive an automatic discharge at the end of nine months.

If you don't complete your duties, the trustee is required to object to your discharge, and a discharge hearing is scheduled in bankruptcy court. At the discharge hearing the trustee will explain which duties have not been completed, and the Bankruptcy Registrar or Judge will determine the conditions of discharge.

For example, if you had surplus income during the bankruptcy and you did not make the required payments, the court will issue an order requiring you to make the payments.

If you do not appear in bankruptcy court, the court may simply issue a "No Order", which means the trustee can now apply for their discharge, but you remain bankrupt. Because you were not discharged, your debts are not discharged (that's the effect of a bankruptcy discharge).

If you were not discharged, you should contact your trustee and determine what duties remain to be completed, and then ask them to make an application to court to obtain your discharge.

how to calculate surplus income, and will bankruptcy be extended

2009-05-19T13:10:00.000-04:00

Question: I filed for bankruptcy in feb 2009. I might be offered a job in the near future for 10 months. The job will be full time and i would be making 25 dollars an hour. I am supposed to be discharged in the Nov 2009. How is the job going to affect me. Will the bankruptcy period be extended even though the duration for the job is only 10 months or maybe even less than that. Also what surplus income would i be owing the creditors ( i have declared a 2 person family when filing).....thanks in advance;)

Answer: Here's an article that explains in detail how to calculate surplus income. In simple terms, each month you send the trustee proof of your income (paystubs) and allowable deductions (child care receipts, medical expenses, etc.) and the trustee compares your next income to the allowable limit for your family size. If you are over the limit, you pay half of first $1,000 you are over, and 75% of the remainder.

If you have significant surplus income, it is possible that a bankruptcy will be extended longer than the minimum nine month period. Your trustee will determine whether or not an extension is warranted. In your case you have already been bankrupt for four months, and your new job perhaps won't start until month five or six of your bankruptcy, so given the short period of time you are earning the extra income, and the temporary nature of the job, it is possible that your bankruptcy will not be extended.

However, we suggest you discuss this with your trustee immediately, so that you are prepared for whatever will happen.

Wage garnishment in Ontario

2009-05-12T19:47:00.003-04:00

Question: I've been negotiating with my collectors with some success except one. I have a small unsecured debt with a retail chain. I tried to negotiate with them and make payments but they refused and said they had to go ahead and garnish my wages.
In anger, I stupidly made the comment go ahead, I can't do anything else.

Will they go ahead with this wage garnishment? The last thing I want is my employer to know I'm in trouble.

Answer: Probably not, but they might. It costs money for a creditor to go to court, sue you, and obtain a wage garnishment. In most cases if the amount is small they won't bother.

However, if you don't pay, a creditor can take you to court and attempt to garnishee your wages. If they do, you are left with three choices:

1. let the garnishment continue until they have been repaid in full (including legal costs)

2. file a consumer proposal; or

3. file bankruptcy in Ontario.

It's up to you to decide which option is best for you. For more information, read this article on How to Stop a Wage Garnishment?

Joint Car loan and bankruptcy

2009-05-05T11:03:00.000-04:00

Question: I have a joint car loan (with a bank) with my ex-husband. He has taken over paying the monthly payment until he can take over the loan, but if i claim bankruptcy what will happen to the car loan? Will he be able to continue to make the monthly payment or will this loan become defaulted?

Thank you.

Answer: In most cases he will be allowed to continue making the payments on the car loan. One option would be for him to contact the bank now, before you go bankrupt, and ask to have your name taken off the loan. If the loan is entirely in his name, there should be no issues.

If the bank won't remove your name, your husband should discuss it with the bank first, and ask them to confirm that he won't lose the vehicle if you go bankrupt.

How is my Pension affected in a bankruptcy in Ontario?

2009-05-04T13:05:00.000-04:00

Question: I have a government job and over 25 years service and would be eligible for a pension in a few short years. In a bankruptcy is a pension an asset that is taken even before you qualify to get the pension?

thanks for your guidance

Answer: No, if you file bankruptcy in Ontario you do not lose your pension. You are not eligible to receive your pension until you retire, and even then you are only able to receive a fixed payment each month, not the entire amount, which is why it is not seized in a bankruptcy.

There are other factors to consider, so feel free to contact an Ontario bankruptcy trustee to arrange for a free initial consultation.

Bankruptcy and EI in Onario

2009-05-02T20:55:00.002-04:00

Question: I am in my late 20's and recently lost my job. I have significant OSAP and federal student loans and a credit card debt. I am currently receiving employment insurance, but I cannot afford living expenses let alone making payments on these debts. How would filing bankruptcy affect my EI? Also, will my student loans (most recently from 2004) be discharged? Thanks

Answer: Filing bankruptcy in Ontario does not affect your eligibility for employment insurance.

Student loans in bankruptcy in Canada are only automatically discharged if they are more than seven years old (ie. you have been out of school for more than seven years). Your student loans would therefore not be automatically discharged. If you file bankruptcy when your student loans are more than five years old it is possible, at the end of the bankruptcy, to apply to court to have the loans discharged, but there are no guarantees.

Since you are currently not working, you have no wages to garnishee, so in the short term your best course of action may simply be to use your EI cheque to pay your rent and other living expenses, and then deal with the rest of your debt when you return to work. You can get more information from a credit counsellor or a bankruptcy trustee.

consumer proposal and house

2009-05-01T17:24:00.004-04:00

Question: Do I lose my house with a consumer proposal?
Dan

Answer: No, the administrator of the consumer proposal will not take your house. One of the main benefits of a consumer proposal is that you keep your house. However, if there is a mortgage on the house, you must continue to make the mortgage payments, or else the bank will take your house if your mortgage falls into arrears.

Retaining a newly financed vehicle in bankruptcy

2009-04-29T19:18:00.000-04:00

Question: Am I able to keep my new vehicle which I recently purchased ( financed thru the Car dealership ) if I declare Bankruptcy, since I need it to get to work and to pick up and drop off my daughter to her daycare centre?

Answer: Bankruptcy rules do not allow you to keep a vehicle simply because you require it to get to work, or to transport your children.

However, if the vehicle is financed through a car company, the vehicle probably has no "equity", meaning the vehicle is worth about the same as the amount owing on the car. In that case your bankruptcy trustee will not seize your vehicle if you go bankrupt. However, you should confirm in advance with the lender that they will allow you to keep the vehicle, provided you continue to make the monthly loan payments. Car finance companies generally don't have a problem with bankruptcy, but some banks do, so you should also discuss this with your trustee.

If there is no loan against your car, you are allowed to keep a car worth up to $5,650 in Ontario if you go bankrupt. An Ontario bankruptcy trustee can provide you with further information.

FRO - Child Support and Bankruptcy

2009-04-28T14:22:00.003-04:00

Question: I am behind in my child support payments due to lack of work. I love my kids dearly, but I am simply unable to make the payments and could face jail time. If I file bankruptcy or even a consumer proposal, does the outstanding amount disappear or can you negotiate with FRO to accept a smaller amount?

Answer: No, child support does not disappear in a bankruptcy or a consumer proposal, and you cannot negotiate with FRO (Family Responsibility Office) to accept a smaller amount. If your income is reduced, in most cases it is necessary to go to court and have the court reduce the amount you are required to pay. With a revised court order FRO will reduce your payments.

In some cases a bankruptcy may still make sense, if it reduces your other debts and therefore frees up enough cash to allow you to get caught up on your support payments.

Disclosing of Information about bankruptcy

2009-04-26T11:39:00.002-04:00

Question: I had to claim bankruptcy in September of 2001. It is no longer showing on my credit report and I have a student loan that I have been paying every month for almost five years (no missed payments). My question is "if I go to borrow money or buy a house or whatever with a bank, do I have to tell them that I had a bankruptcy in my past?" The reason I ask is because I was honest last week and got screwed on the interest rate for a loan because of this bankruptcy 8 years ago!!
Thanks

Answer: It's your decision what you disclose. Most lenders will run a credit report on you before giving you a loan, and in most cases your bankruptcy will not appear on your credit report after seven years, so if your bankruptcy was eight years ago it's not likely they will know.

More importantly, most lenders don't care what you did eight years ago. They care about today: what is your income today, what assets do you own today, how much of a down payment do you have today, etc., so a bankruptcy from eight years ago should not be an issue for most lenders.

anxious about discharge and surplus income

2009-04-24T20:01:00.003-04:00

Question: My calculations are that over the 9 month period my surplus would be 870 dollars. To clarify, that is 870 beyond the 1620 (9months X 180), a total of 2490 paid. Do you think they would keep me in bankruptcy for another 12 months based on that small amount? If so I'm tempted to work a little less, but that seems a little shady almost.

Answer: As a general rule, if your surplus income payments average less than $100 per month, as yours do, it is doubtful that your bankruptcy would be extended beyond the normal first-time bankruptcy minimum period of nine months. It is your decision whether or not you work less while bankrupt. Your trustee can provide you with further information.

Forgotten Liabilities in bankruptcy

2009-04-24T19:47:00.003-04:00

Question: I was just discharged from a firstime personal bankruptcy. I have a debt that was forgotten and the creditor was not listed on the liabilities list for my bankruptcy. I just got served a notice from small claims court in regards to this bill, do I have to attend or do I give a copy of my discharge from bankruptcy?
Thank you for any information.

Answer: Even though you are discharged, you should contact your trustee and ask them to send the bankruptcy paperwork to the small claims court and the creditor so that they can stop the lawsuit.