by admin | Bankruptcy, Consumer Proposal, Credit Counseling, Debt Management, Uncategorized
So you’ve had enough of the continuous phone calls and repeated emails from collection agencies and decided to file a consumer proposal or for bankruptcy in order to settle your debts. And yet the calls keep coming. What’s that all about?
Well, it all comes down to communication, or lack thereof. And communication is not always easy or fast.
Once you file a consumer proposal or for bankruptcy, your trustee sends out notices to all your creditors advising them of the filing and the consequent actions. That should make the calls stop. But the action isn’t always immediate — it may take a while. In this day of electronic correspondence, things can be a lot quicker, but it’s still not immediate.
First of all, your trustee has five business days to notify your creditors in the event of a bankruptcy filing. The period in the event of consumer proposal is 10 business days — there’s two weeks right there.
If your trustee doesn’t correspond with your creditors electronically, you have to take mail times into account, and Canada Post offers delivery within four business days. There’s another week gone.
The creditor then has to enter the information into its system, which could take another couple days. So when all is said and done, there could be a period of three weeks from the time you sign off on your file until all your creditors are up to speed on the action. Then the calls should stop.
But they might not if your creditor has turned your file over to a collection agency. Collection agencies are agents (either in-house or third-party) of the company to which money is owed. They collect money for a fee or a percentage of the debt owed. Debt buyers are a type of agency that basically buys your debt from the company you owe it to and then takes on collecting the full amount owed (sometimes tacking on interest). Collection agencies in Ontario have to be registered and have to follow certain guidelines, including how many times they can contact you (no more than three times in a seven-day period) and when (never on holidays, for example).
So, once the company you owe money to has entered the filing information into its system, it could take another couple days to pass on the information to the collection agency. Or the company you owe money too could have sold your debt to an agency after you filed, and neglected to tell the agency.
Usually, an explanation of what has transpired and a transfer of information between the agency and your trustee should immediately put a stop to the agency’s contacting you.
However, some debt collectors may not be satisfied with the action taken and may continue to call you or a guarantor in an attempt to collect the total amount outstanding. If that happens despite repeated requests that it stop in light of your consumer proposal or bankruptcy, you can file a complaint with Consumer Protection Ontario.
Most of the time, the contacts are a result of missed communication and most agencies will stop once they have all the satisfactory information that the debt has been settled.
by admin | Bankruptcy, Consumer Proposal, Debt Management, Uncategorized
The break-up of a marriage or common-law relationship has certain financial ramifications for both parties, including the splitting of assets and the creation of equalization payments (support).
However, both can be financially draining on one partner (and sometimes both) and could lead to bankruptcy.
So, what happens if one of the “exes” does file for bankruptcy as a result of financial hardship following the breakdown of the relationship?
Bankruptcy basically results in the liquidation of property (houses, cars, RRSPs, etc.) in order to pay off a portion of the outstanding debt (mortgages, loans, credit cards, taxes owing, etc.).
In the event of a bankruptcy following a divorce, the equalization payment also becomes an outstanding debt and the spouse being “supported” will have to settle for a reduced payment according to the bankruptcy payment agreement. However, spousal support does get preferred status in the bankruptcy’s payment distribution schedule, meaning it takes priority over other creditors such as credit cards and the amount outstanding is still payable after the claimant is discharged from bankruptcy.
So, in a nutshell, say John is supposed to pay Jane $1,000 a month for support and owes her $15,000 in back support. The trustee rules that over the course of his bankruptcy, John will pay back the $12,000 owed in the year prior to bankruptcy in addition to a percentage on the outstanding $3,000, and when he is discharged from bankruptcy, John still has to pay Jane the outstanding balance on the $15,000. Say John pays Jane $13,500 over the course of his bankruptcy; he still owes her $1,500 after he is discharged from bankruptcy. These are just examples for easy calculations and not indicative of actual payment schedules.
Now, the family home throws a wrench into the bankruptcy works. Under Canada’s Bankruptcy and Insolvency Act (“BIA”), the trustee liquidates the claimant’s assets to settle debts, but he can’t very well do that if the spouse with custody over the children is still living in the family home.
There are two solutions: force the sale of the family home in order for the bankruptcy claimant to realize his/her share of the asset’s value, or facilitate the sale of the claimant’s share in the home to the spouse receiving equalization payments. There are difficulties with either solution.
In the case of the former, provincial law may prevent the sale of the home due to the resultant financial hardship created for the child(ren)’s guardian, disruption of the child’s life, the availability of suitable alternative housing in the area of residence, the employability of the supported spouse (especially if he/she is required to stay at home to care for dependents), and even because of the history of the spouse and children in the family home.
Although preferable and perhaps an easier avenue toward asset liquidation, attempting to facilitate a sale between ex-spouses is dependent on the spouse taking possession of the house being able to secure suitable financing to purchase it. Again, that depends on the employability and financial stability of the spouse.
Either way, bankruptcy does make a difficult time more difficult for both parties in the separation but in the end, the bankrupt individual has a fresh start financially, and the supported spouse receives regular support payments (as opposed to the deadbeat’s “not at all”).
by admin | Bankruptcy, Uncategorized
Many people are aware that in a declaration of bankruptcy, the individual’s assets are seized by a bankruptcy trustee and sold off to satisfy as much of the person’s debts as possible, and then the individual is required to make payments, based on his income, in accordance with a repayment schedule.
There are some assets (referred to as “property” in bankruptcy lingo) that aren’t relinquished, though. Although filing for bankruptcy is done at the federal level, the rules of exemptions are set by the individual provinces and territories in order to take into account the needs of the individual, which (naturally) may vary from region to region.
RRSPs older than those acquired in the final year before bankruptcy, for example, as well as insurance policies, property held in trust for another person (such as a house bequeathed to a child of the bankrupt individual), and furniture, food, fuel and clothing for the bankrupt individual and his/her family (up to a set amount). A vehicle is also exempt (usually to a set amount, though not in all provinces), presumably to accommodate the individual who has to get to work in order to continue to fulfil his financial obligations.
And then there are “tools of the trade.” Those are items (vehicles, equipment and other things) the individual requires in order to perform his/her job and, again, allows that person to continue earning an income in order to help meet the remaining financial expectations.
There is a dollar limit set on that property, with the excess valued against the amount of debt being written off. The value varies according to province or territory, usually in the $10,000 range, with the amount in Ontario set at $11,300.
Farmers, however, get preferential treatment. In the prairie provinces, for example, the farmer is allowed to keep up to 160 acres around the principal residence, and the equipment and supplies required to maintain operations for one year. In Ontario, a farmer gets to keep livestock, fowl, bees, books, tools, implements and other items (including seed for up to 100 acres, and feed and bedding for the coming winter) up to a value of $28,300.
The theory behind allowing you to keep some assets under bankruptcy is to allow the individual to be allowed a fresh start, while still fulfilling as much of his/her financial obligations as the law and creditors deem acceptable. Bankruptcy is not meant to be a punishment for not being able to pay off debt.
And, because payments are tied to the amount of income the bankrupt individual can generate over the course of the repayment schedule, it’s in everybody’s best interest to allow that person to keep what he needs in order to continue to work.
