GENERAL QUESTIONS & ANSWERS
Take a look at the resources below and then please give us a call. We will go over the specifics of your financial situation with you and help you determine what debt solution is best for you.
Many people are concerned about who will know about the financial trouble that they are experiencing. Some people are embarrassed, while others simply aren’t comfortable sharing such information because, let’s face it, it’s really no one’s business but your own.
At Bromwich & Smith we make a point of trying to normalize the conversation of debt within the community and that is why you will hear us as regular guests on radio programs and as speakers throughout the community. But notwithstanding our commitment and vision of creating a safe and inclusive community where we are all able to speak about our finances with the same candor as we do with our health, we understand we as a society are not there yet.
If you are afraid that your friends will find out, don’t be. The people we let know are your creditors, the government (for record keeping purposes),and your account receivables (people or businesses that owe you money). If you are being garnisheed, we will have to let the Court know to stop the garnishee, as well as your employer or bank (whomever has been served with the garnishee summons).
If you are concerned about who will find out about your bankruptcy or consumer proposal with Bromwich & Smith, ask yourself this, “Do I know anyone that has filed a bankruptcy or a proposal?” Almost 10,000 people a month file for protection under the Bankruptcy & Insolvency Act, we are certain you know at least one person that has – they just didn’t talk about it.
When someone cosigns for a debt for you they agree to make the payments on the loan if you aren’t able to. So if you have had a friend or a loved one cosign on one of your loans you should know that the creditor will turn to that person and demand that they continue to make the payments as agreed or pay off the balance owed.
We would recommend that you talk to your friend or loved one about your situation and what is likely going to happen. We know that it is not an easy conversation, but our counsellors can help prepare you for it, and even help assist them if they need help!
If you file into a bankruptcy you cannot keep any of your cash savings. This will have to be turned over to the trustee for the creditors.
Many people are very concerned about this because they have saved the money for a rainy day or an emergency, and having to give it up is very frightening. We certainly understand the concern, but the fact of the matter is that when you are unable to pay your debts and you have to look at filing bankruptcy it is an emergency, it is a rainy day (in fact, it’s a flood day!).
Turning over your savings might be difficult, but the good news is that you can save as much money as you want after you file for bankruptcy and your creditors are not allowed to touch it! Talk to one of our counsellors today for more information.
A credit rating is a tool that is used by lenders to assess how much money they can lend you, the risk associated with that lending and how much interest they can likely charge you before you think the cost of borrowing is too high.
The fact of the matter is that when you file for a bankruptcy or a proposal you are changing the original terms of the loans. In a bankruptcy you are simply cancelling the terms of the loan, while with a consumer proposal through Bromwich & Smith you are re-writing the terms of the loans (typically for less than what is owed – with no interest payable) and forcing the creditors into a settlement. As you can imagine, when you change the terms of the agreement the creditors are going to want to report that as a negative on your credit rating.
In a bankruptcy it will be an R9 and be reported for 6 years after you complete your bankruptcy (14 years if you have been bankruptcy before).
In a consumer proposal it will be an R7 and be reported for 3 years after you complete your proposal.
Don’t worry though; our counsellors can assist you in rebuilding your credit even while you are currently enrolled in one of our programs.
You are a separate legal entity from your spouse and your children. What you chose to do has absolutely no impact on anyone else’s credit rating.
You should know that just because you restructure your financial situation, your spouse doesn’t have to do anything – they can keep their relationship with the creditors the same. Also, you don’t need to have your spouse’s (or your co-signer’s) permission to file a bankruptcy or a proposal (although we do support discussing the situation and options with them).
Our counsellors will want to know what the income is for all of the people in the family unit because there is a calculation that we need to do in order to apply a government guideline (the “Superintendent Standard”). If a family member (including your spouse) refuse or neglect to divulge their income, that is no issue at all, we simply have to do the calculation a different way.
If you have student loans, they will be included in your bankruptcy or proposal (so you don’t have to pay them while you are in the program). However, if you have been a full or part time student in the 7 years prior to filing your bankruptcy or the proposal you will have to continue paying the debts after you completed the terms of the bankruptcy or the proposal.
If you were not a student in the 7 years prior to filing your bankruptcy or proposal the debt owed for student loans will go away automatically with your discharge like all of your other debts.
If you have been out of school for at least 5 years and you file a bankruptcy the Court can grant an order to have the debt discharged under section 178(1.1). If you have student loans and have been out of school for 5 years but less than 7 years talk to one of our counsellors today to discuss your options.
In a bankruptcy you are entitled to keep a vehicle with up to:
$5,000 in equity - Alberta & British Columbia. (Note: The vehicle exemption drops to $2,000 in BC if the debtor is behind on child care payments (to facilitate the enforcement of Maintenance Orders);
$6,600 in equity - Ontario
If you owe money on your car, provided that you are up to date with the payments to the creditor you can continue to pay them even after you file a bankruptcy or a proposal – they cannot cancel the contract.
Alberta: You are allowed to keep $40,000 equity in your home.
British Columbia: You are allowed to keep $12,000 equity in your home in Greater Vancouver/Victoria. In all other regions the allowance is $9,000.
Ontario: You are allowed to keep $10,000 equity in your home.
The above allowances are adjusted to your interest in the home. (For example: if you own your home with your spouse you are each entitled to a $20,000 exemption because you each have a 50% interest in the home).
Your mortgage is not affected by a bankruptcy or a proposal. Provided that you are up to date with your mortgage and you continue to make your mortgage payments, when it comes time to renew your mortgage the creditor will typically not require that you re-qualify for your mortgage (it will just be a regular mortgage renewal letter that they will send out).
Certain debts will not go away if you file a bankruptcy or a proposal. These debts are outlined in Section 178 of the Bankruptcy & Insolvency Act. They are as follows:
Debts owing for child or spousal support
Fines, penalties or restitution orders
An award for damages relating to willfully inflicted bodily harm
Debt arising from fraud, misrepresentation or breach of fiduciary duty
Student loans (if you have been out of school for less than 7 years)
If a creditor has obtained a court order or judgment against you this doesn’t mean you have to pay the debt back. Many Court Orders that creditors get are just judgments, and these types of debts and court orders don’t have to be paid.
If you are concerned if your debt will survive, call and speak with one of our counsellors today.
A long time ago if a person was unable to pay their debts they would be apprehended and thrown into debtor’s prison. We, as a society, have moved away from that type of draconian behavior and approach insolvency situations (when a person can’t pay their debts back) in a much more civilized light. You do not go to jail if you can’t pay your bills.
If you can’t pay your bills the creditors can telephone you, they can sue you and get Court Orders to seize your bank accounts and to take your wages, but they don’t put you in jail. Of course, if they have take all of your money by seizing your bank account or garnishing your wages and you can’t pay your rent you may wish that you were put into jail (at least you would have a roof over your head!)
If you can’t pay your debts don’t be afraid of jail, because it simply can’t happen. But do talk with one of our counsellors because if you just ignore your debt things will get worse and worse.
You cannot simply assume someone else’s debt by signing an agreement with them to take on the debt and have that agreement bind the creditor that is owed the money.
If you are going through a divorce or a relationship breakdown and you are trying to separate the assets and the debts equally, understand that just because you have made an agreement between the two of you, it doesn’t mean the creditor that you owe jointly is bound by that agreement.
If the payment is not being made the creditor will have the right to pursue both parties that owe the money, notwithstanding the agreement that has been made between the two.
If you are not feeling well and you go see your doctor, the best thing that you can do is to be completely honest. The same goes for when you are speaking with someone about your financial health; leaving out information or providing incomplete or misleading information isn’t going to help you, because your situation will be misdiagnosed and likely the wrong remedy applied.
What you need to make sure of is that you are, in fact, dealing with a “doctor,” so to speak. Just as you would not disclose your personal medical history to a clerk at a grocery store if you were looking to purchase more healthy foods and live a more healthy lifestyle, you should be conscious of how much information the person is asking for and how much you really need to disclose in order to get advice (and more importantly, to get the service that you need – you will need a trustee like Bromwich & Smith in order to file a consumer proposal or a bankruptcy).
If you are speaking with one of our counselors they will be asking you for information on the following:
1. Who you owe money to and how much you owe;
2. What types of assets you own and how much they are worth;
3. What your income is, how many dependents you have and how much they earn;
4. All property that you have sold, had seized or given away in the past 12 months;
5. If you have ever been bankrupt before;
6. What your monthly budget is (your rent/mortgage, groceries, gas, entertainment, etc.);
7. What bank you are dealing with.
With this information our counselors will be able to start the process to determine what a bankruptcy might look like for you, and with this information how to avoid a bankruptcy by filing a consumer proposal (a consumer proposal is an offer of settlement that gives more money to the creditors than what they would get in a bankruptcy).
When we consider our relationship with a bank with think of having numerous and separate accounts with them. For example, we may have a chequing account, a savings account, a line of credit and a Visa or MasterCard with our bank. Although it may appear that these are separate accounts, the fact of the matter is that they are all sub-accounts under a singular account (you).
It is important to understand this aspect of your relationship with your bank because it gives the bank certain abilities that we are largely unaware of. Specifically the ability that the bank has that will cause you some very big problems when you are run into financial difficulty is the ability to exercise the right of Set-Off.
Set-Off is the ability to move money from one account that has a positive balance to another account that has a negative balance (ie. moving money from your savings or chequing account to your Visa, Mastercard or line of credit). The bank can do this without a Court Order and without your consent. If you have ever had this happen to you, you can certainly attest to how frustrating and frightening this can be – it absolutely turns your budget upside-down.
If you owe your bank money for an unsecured debt (credit card, line of credit, overdraft, etc.) we recommend that you move to a new bank that you don’t owe any money to (or a bank that you have a secured debt with that you are planning on continuing to pay – car loan, mortgage, etc.). Speak with your employer about having your wage directly deposited into your new bank account.
Every Canadian citizen is entitled to a personal bank account. This is a basic right that cannot be denied even if you don’t have a job, you don’t have any money to deposit at the time of opening the account or you have been or are facing bankruptcy.
To open an account you need to make an appointment ta the bank to open the account and bring 2 pieces of identification.
If the bank refuses to open a bank account for you they are required to provide you with a letter stating that they refuse to open an account, and also to provide you with the contact information for the Financial Consumer Agency of Canada (FCAC). You can call the FACA toll free at 1-866-461-3222
Yes. One of the fundamental principles of Canadian Insolvency legislation is that all creditors will be treated equitably under the legislation. If you were able to pick and choose those creditors that you wanted to pay back in full and those that you wanted to settle with, the system would break down.
What makes Bromwich & Smith the right choice for you and the creditors is that we are on no one party’s specific side. We stand in the middle and ensure that all creditors are treated fairly and in accordance with the Canadian bankruptcy and insolvency legislation, and also that you as the consumer have all of your rights respected too!
No. One of the most important principles of bankruptcy & insolvency legislation is your rehabilitation (having creditors able to call you for payment or get court orders against you will prevent and damage the goal of rehabilitation). Your rehabilitation starts upon the engagement of Bromwich & Smith, and with that engagement there is a legal Stay of Proceedings (granted under section 69 of the BIA) which stops all creditor actions immediately. The creditors have no ability to start or continue any action against you for a claim that is provable in the bankruptcy or the proposal (all garnishees will stop too!)
Just remember, if you owe your bank money they will be able to exercise the right of Set-Off, so you should look at changing to a new bank that you don’t owe money to. (Read the section above on 'Why should I get a bank account at a bank I don’t owe money to?')
The reason that a creditor will sue you is because they are an unsecured creditor and they are looking to get a judgment from the Court confirming that the money is owed. Once they have a judgment they can look to get a garnishee order (an order that requires your employer to pay a portion of your wage to the creditor) and/or seize bank accounts, etc.
Because the nature of the debt is unsecured we are able to stop any and all action. If you are in this situation you need to speak with one of our counselors immediately to stop the creditor’s action – time is of the essence in these situations.
Even if a creditor has a judgment against you we can still help. The nature of the debt is unsecured so we can stop any action that the creditor can take with the authority of that order, and we can bind them with all of the other unsecured creditors.
A writ registered on your home is still, by it’s nature, an unsecured debt and would be included in either a bankruptcy or a proposal (unless the writ is registered by Canada Revenue Agency – speak with one of our counselors about these types of writs and how we can help).
The creditor would not be required to remove the writ on your home until you completed all of your duties (if you went bankrupt) or until you paid off the balance owed on your proposal (if you filed a proposal).
Once you choose and file the documents with a trustee it is virtually impossible to change trustees. The only way you can do this is through a Court Order – and this does not happen very often.
We are always saddened to share a conversation with someone that tells us that they are unhappy with the service and information that they are receiving from their trustee. The reality is that sometimes people are not happy with the level of service that they receive from the company that they are in a relationship with. We always recommend that if you are not happy about a situation or a relationship, talk with the people involved and see if there can be a greater understanding created and perhaps even a compromise.
Just like all things in life, you can’t undo the past, so before you sign any documents really ask yourself if you are ready to start the particular process and relationship with the trustee you are speaking to; review their website and print materials (if they have any); see if you can find any reviews about them on the internet (Google+ reviews, Yellow Pages reviews, their website, etc.), but make sure that the reviews are from actual people that used their service (not colleagues in the community reviewing them); take a look at their Facebook page to get an idea of what the company is about; ask if they have a Purpose & Value statement that they can share with you; and last but not least, trust your instincts: you are a good and capable person that happens to be overburdened by debt right now, but that doesn’t mean you can’t and don’t make good decisions, so listen to what your gut tells you too!
The good news is that these types of debts are a special type of unsecured creditor called preferred creditors. This means that they are preferred under section 136, and get money before any of the other ordinary unsecured creditors get paid.
Although these types of debts will survive a bankruptcy or a proposal process, they are still included in the bankruptcy or proposal and have to respect the stay of proceedings. This means that if you are being garnisheed by for one of these creditors we can stop the garnishee (or reduce it so that you are only being garnisheed for the current monthly amount payable and not the arrears).
For more details speak with one of our counselors today.
The trouble with a situation like this is that the government that you owe this money to is also the party that is responsible for issuing and renewing your driver’s license. So although the debt won’t survive the bankruptcy or proposal process, the government has for a long time taken the position that they will not grant or renew your license unless you continue to make payments to them on this debt.
The action of the government with respect to this collection of a debt that is included in a bankruptcy or a proposal was challenged and a Court application was made to have the government stop this behavior. The Court agreed with the debtor and found that the government’s position was wrong and ordered that the government stop this activity and renew the license unequivocally. The government appealed this decision, but the Court of Appeal agreed with the lower Court and directed the government to stop this behavior too. The government has since appealed this decision to the Supreme Court of Canada.
If you owe money for a motor vehicle accident the government will not be able to require that you continue to pay this amount to keep your license if your file a bankruptcy or a proposal with Bromwich & Smith. If you are in this situation speak with one of our counselors today.
It is completely natural that you would want to protect yourself and your family from the claims of your creditors. The desire to give away or sell your property to family at less than the fair market value of the property is a powerful desire. You may even want to do this in order to pay back a debt that you owed them from when they lent you money when you were in a real bind. And while you can certainly do these things before you file bankruptcy or a proposal, what will happen will be of no benefit to either you or your family.
One of the most important principles of bankruptcy and insolvency legislation is the control and distribution of your assets for the equitable treatment of your creditors. This means that the law is very much interested in what assets you own when you file, but it is also very interested in what you owned the 5 years prior and what you did with those assets if you no longer have them.
If you have given away your assets or sold them for less than the fair market value the creditors, through the engagement of a Trustee, can get those assets back from the person through a Court Order. Also, your actions and behavior will result in a fact being provable under section 173 of the BIA, which will impact your ability to file a proposal and/or receive an automatic discharge form bankruptcy.
If you are considering giving away property or selling it for less than the fair market value we encourage you to no do this. Speak with one of our counselors today and see how we can help protect your property through the filing of a consumer proposal.
When you cosign a debt for someone you are guaranteeing that you will pay the debt if the person does not make the payments according to the original agreed upon terms.
If the person you cosigned for files a bankruptcy or a proposal the creditor will turn to you for payment of the debt (even if the creditor has accepted a proposal that the person offered).
If you cosigned a debt for someone and they are telling you that they are not going to be able to make the payments you can (and perhaps should) consider filing a restructuring proposal as a preemptive move before the creditor(s) start collection activity against you.
Speak to one of our counselors today.
If you can’t make the payments you have committed to that is certainly understandable. If this is your situation you should call and speak with one of our counsellors that will help you formulate a proposal that fits your budget and keeps the creditors happy.
What our counselors are interested in is helping you create a budget that allows for you and your family to have a reasonable standard of living (including entertainment and sports for you and your children), with enough money being paid into the proposal on a monthly basis to make your creditors happy. We are looking to create a win-win situation for you and your creditors.
Of course every situation is unique and is based upon the individual and their personal family situation, so call and speak with one of our counselors today to discuss the entertainment budget that would likely be set in your consumer proposal or bankruptcy.
Many people are very afraid of the financial mess that will be left behind for their loved ones to deal with if they pass on. Because of this concern some people elect to file bankruptcy (or settle their debts with a proposal) while they are still alive. (If a person dies and their estate is insolvent the executor/executrix can have the death estate put into bankruptcy, but this can cause even more work and stress in a very stressful and trying time.)
If a person dies while they are in bankruptcy the Trustee just continues on with the administration, but the executor of the death estate will need to notify the trustee of the death and provide some documents. The bankruptcy estate may have an interest in some of the deceased assets too, so it is very important that the executor keep in contact with the bankruptcy trustee.
If a person dies while the are in a proposal, the remaining balance owed on the proposal terms can be paid in full and the proposal completed. The executor/executrix should be contacting the Proposal Administrator/Trustee and letting them know of the death. If there is insufficient money in the death estate to pay out the proposal the executor/executrix will want to consider putting the death estate into bankruptcy.
You can still apply for and receive credit while you are in a consumer proposal, and this new credit will report favorably on your credit score.
The good news is that when you file a consumer proposal with Bromwich and Smith we always ensure that the creditors agree to a term that allows you to pay out the proposal early if you have extra funds. This means that if you increase the monthly payments and/or make online lump sum payments, you will be done your proposal sooner (and there is never any prepayment penalties).
The tariff allows Bromwich & Smith to be paid $750 to file the proposal, but this is never paid by you.
A consumer proposal is a forced settlement on the creditors that only Bromwich and Smith, as a trustee, can offer. Proposals have to be offered through a trustee because the trustee has to determine the percentage of the debt that would be recovered in a bankruptcy scenario first, and then help you arrange a proposal that offers the creditors a bigger percentage return.
Since there is no way to know how much of a percentage of repayment the creditors will get in a bankruptcy until certain facts are known (we need to review income, assets, family responsibilities, etc.), it is misleading and dishonest to advertise and make claims of being able to get a proposal settlement at a certain percentage without knowing those facts.
We understand that when looking for a fresh financial start most people want to pay as little as possible (within reason) and be done with a program as soon as possible. We also understand that creditors want people to pay as much as possible for as long as possible. It is because of our dual understanding of both perspectives that we are able to negotiate successful proposals that everyone is happy with.
Successful negotiation and mediation knows what both parties want and how to reach a compromise that everyone is happy with. Bromwich & Smith is home to not only top tier credit/debt counselors and Licensed Insolvency Trustees, but also excellent mediators and proposal administrators. We have helped thousands of Canadians successfully reduce millions of dollars in debt and we can help you too!
You may have read some nightmare stories on the internet about how people have engaged debt settlement companies for help and even though they thought they were being protected by the company they ended up getting their bank accounts seized and their wages garnished. This is because the company they were dealing with were no a Federally Licensed Trustee like Bromwich & Smith.
If you are thinking of dealing with a company other than Bromwich & Smith for assistance in your debt restructuring, before you pay them any money or go any further, ask the representative you are dealing with if they will be stopping your creditors actions under section 69.2 of the Bankruptcy & Insolvency Act, or if they will be just negotiating with their good will.
There a two sessions during the proposal. One sessions will happen within the first 60 days. It is completed one-on-one with one of our counsellors and the focus is to discuss 4 different topics (Money Management; Spending and Shopping Habits; Warning Signs of Financial Difficulty; and Obtaining and Using Credit).
The second counselling session will happen usually in or around the sixth month. This session is also one-on-one, and in it the counsellor will review the ideas discussed in the first session, as well as discuss the budgetary or non-budgetary issues that may have played a factor in the onset of the financial difficulties.
Once you have paid the agreed upon sum your proposal is finished. Best of all…there is no prepayment penalty for doing so.
If you think that this is something that you need to do our friendly counsellors are only a phone call or email away to outline how this is done.
You need to be careful when you are looking at amending the terms of your proposal though, because if the creditors reject the amendment that you want to make your whole proposal gets rejected (not just the amendment).
You must immediately stop all actions against the person; you cannot call them or email or have any contact with them. You will need to deal directly with their Trustee/Administrator. If you don’t respect this Stay of Proceedings you can end up in a lot of trouble.
You will need to submit your Proof of Claim and indicate whether or not you want to vote in favour or against the terms of their proposal, and whether or not you would like to have a meeting to have your vote counted.. Remember, the terms of the consumer proposal likely offer greater money than what you would recover in a bankruptcy situation.
After 45 days the Trustee/Administrator will check to see if there is a requirement to call a meeting of creditors. If a meeting is required you will be notified of the meeting. You don’t have to attend, but it would be helpful if you did send in a voting letter indicating whether you want to vote in favour or against the proposal.
If the proposal is accepted by the majority of the creditors all creditors you be bound by the terms of the proposal – even if you voted against it.
If you have any questions please contact one of our counselors.
A DMP or OPD program requires that you pay back all of the debt at a reduced interest rate over an agreed upon period of time (usually no more than 4 years). This means that the monthly amount that you will have to pay is based upon how much owe, divided by how many months they can get the creditors to agree to wait for payments (of course there is usually also a monthly administration fee that you would have to pay that varies from company to company). Sometimes that monthly amount is just too high, and what started out as manageable becomes unmanageable.
The monthly payment in a Consumer Proposal is based upon how much money is left over in your budget after you have covered your basic living expenses. You are not required to pay all of the debt back either; you only have to offer more to the creditors than what they would get in a bankruptcy scenario (this is why you need a Trustee like Bromwich & Smith to file a consumer proposal).
If you have filed for DMP or an OPD program and were kicked off for nonpayment we can stil help you with a Consumer Proposal.
If you are currently in a DMP or OPD program and are struggling with the monthly payment you should call and speak to one of our counsellors to discuss what your monthly payment in a Consumer Propsoal might look like if you engaged Bromwich & Smith.
When you are ready, give us a call. The credit counselling professionals at Bromwich & Smith will examine your specific financial situation and help you determine which debt solution is best for you. We are here to help you find the best solution to eliminate your debt problems today.
If you have been bankrupt once before and your earnings are less than Superintendent’s Standards, you will be eligible to be automatically discharged from bankruptcy in 24 months; if you earn more than the Superintendent’s Standards you will be eligible to be automatically discharged from bankruptcy in 36 months.
If you have been bankrupt on 2 or more previous occasions you are not eligible for an automatic discharge from bankruptcy; your discharge application will have to be made before the Court.
If you do all of your duties as a bankrupt you will be eligible to receive a discharge from the debt. The discharge is what makes the debt be forgiven and uncollectable from you.
A long time ago when you went into bankruptcy the only way that you would get out of bankruptcy and be discharged from your debts was by applying to the Court and seeking your discharge through a formal Court application before a Judge. Nowadays, however, we are able to discharge your debts automatically through the offices of Bromwich & Smith, without the need of a formal Court application.
This called issuing an Automatic Discharge.
We are able to issue you an Automatic Discharge so long as neither the government nor a creditor objects, there were no conduct issues before you filed bankruptcy, and so long as you complete all of the Duties of a Bankrupt.
Arguably the most important and obvious duty is to tell the truth, but here is a list of what will be expected of you if you filed bankruptcy:
1. Create a Statement of Affairs (our counsellors will help with this);
2. Assist the Trustee with the administration;
3. Deliver the non-exempt property to the Trustee;
4. Make an inventory of all property that you have gotten rid of in the past 5 years;
5. Disclose any significant gifts or settlements made in the last 5 years;
6. Give the Trustee your credit cards for cancelation;
7. Attend an interview with the government if they request one;
8. Attend the First Meeting of Creditors (if required);
9. Attend any other meetings, interviews or examinations as requested or required;
10. Keep the Trustee advised of your current address, telephone number and email;
11. Submit income and expense statements for each month of bankruptcy;
12. Make payments to your bankruptcy in connection with Surplus Income obligations;
13. Attend two financial counselling sessions;
14. If addiction played a part in your financial difficulty, provide evidence from an Addictions
Counsellor that you have satisfactorily attended counselling with respect to your addiction;
15. File your tax return for the year prior to filing bankruptcy;
16. Provide the trustee with your pre-bankruptcy income tax information;
17. Disclose to the trustee any inheritances or windfalls that you have received or are entitled
18. Attend Discharge application at Court (if a Court application is required).
If a person earns more than the Superintendent Standard they are required to pay 50% of anything earned above the Standard. This amount that they have to pay is called the person’s Surplus Income Obligation; sometimes it is referred to as Surplus Income; still other times it is referred to as a Section 68 obligation or a Section 68 payment (because it is Section 68 of the Bankruptcy & Insolvency Act that sets out the payment requirement).
If a person has a Surplus Income Obligation and they have not been bankrupt before, they will be required to make these payments each month for a period of 21 months; if they have been bankrupt before they will be required to make these payments for a period of 36 months.
The idea behind the Superintendent Standard is so that everyone is treated equally. If you earn over a certain amount of money it is believed that it is fair that you should be required to pay more money.
If you earn more than the Superintendent’s Standard you will probably want to look at filing a Consumer Proposal because the monthly payment being made in a proposal is based upon your budget, it’s not based a formula produced by the government.
When a bankruptcy is filed it is like a line drawn in the sand, and all debts that are owed are caught by the bankruptcy and cannot cross that line. Income tax is owed and payable on all earnings as they are actually earned, but of course the Taxman doesn’t reconcile how much is owed until the end of the year (December 31st). When a bankruptcy occurs though it is so powerful that it actually stops the tax year right at that moment, and the Taxman calculates the debt owed at that very date (at that line in the sand).
For example, let’s say you file bankruptcy in July. The Trustee will do a calculation to determine if you have paid enough taxes from January until July (this is called the pre-bankruptcy tax period). If there is a debt owing for this pre-bankruptcy tax period you don’t have to pay it – it is included in your bankruptcy.
Your GST refunds work a little differently than your income tax refunds. CRA will send these refunds to the Trustee but the Trustee is not allowed to distribute these funds to your creditors and you may be entitled to receive some or all of the GST refunds back at the end of the administration when the Trustee is discharged.
Bankruptcy is designed to allow the honest but unfortunate debtor to be freed from their overwhelming debt so that they can start again. Using credit and borrowing money when you know that you are not able to (and are not planning to) pay it back is not an honest thing to. If you do this you can end up putting yourself in a very bad position.
When you continue to use your credit when you specifically know that you aren’t going to pay it back, you are creating a fact provable against you under Section 173(c) of the Bankruptcy & Insolvency Act.
This is a conduct issue and it means that you will not be entitled to an Automatic Discharge.
It’s important to know that the creditors review your credit usage history to see if there is any out of the ordinary activity in the year before bankruptcy. If in doubt speak to a Counsellor at Bromwich & Smith.
In Alberta it is Part 10, Section 88 of the Civil Enforcement Act that defines what assets are exempt from seizure (the things that you are allowed to keep and not have to give up to your creditors). They are as follows:
- Motor Vehicle up to a liquidation value of $5,000
- Household furniture & effects up to a liquidation value of $4,000
- Clothing & personal effects up to a liquidation value of $4,000
- Equity in principal residence up to $40,000 (adjusted to pro-rata share)
- Tools required for your work (tools of trade) up to a liquidation value of $10,000
- All RRSP,. RESP, RDSPs
- Certain life insurance policies
- Other special exemptions if you are a farmer.
The exemptions only apply to bankruptcy situations, so if you are concerned that you may have to give up some of your assets make sure you speak to one of our counsellors about a Consumer Proposal, and read this article about the topic, Can I Retain My Assets With A Consumer Proposal?
When you file bankruptcy your legal status is changed to “bankrupt,” but this has no impact on your ability to travel. The status of being a bankrupt effects your ability to sit on certain boards, it prevents you from being a director of a limited company, and it can impact your ability for certain professions (speak to the professional body you belong to if you are concerned).
Remember, it is only when you file bankruptcy that your legal status changes to “bankrupt,” if you file a proposal your legal status doesn’t change at all so it has no bearing on associations or roles you are a part of.
Of course, whether you chose a bankruptcy or a proposal you will need to always let Bromwich & Smith know where you are living and your contact information while you are involved in one of our programs, as we will need to send you correspondence and updates from time to time.
Bankruptcy can have a negative affect on you sponsoring people to immigrate to Canada. While you are in bankruptcy you are unable to sponsor someone. The good news is that once you have finished your bankruptcy you are able to sponsor them.
If you avoid bankruptcy and file a consumer proposal this will not have a negative impact on your sponsorship application at all.
Many people that are hoping to sponsor loved loves to immigrate to Canada elect to file a Consumer Proposal with Bromwich & Smith rather than bankruptcy. Speak to one of our counsellors today about how we can assist you.
Bankruptcy has absolutely no impact on your citizenship application.
Yes you may, but before you file a second bankruptcy you will need to be discharged from your first bankruptcy. Our counsellors can help you determine if you finished your first bankruptcy by looking up your name and birthdate in a government database that is available to us.
If you are filing for bankruptcy a second time you will be in bankruptcy for a minimum period of 24 months (36 months if you make more than the Superintendent’s Standards).
If you have been bankrupt more than once before than you have to go before the Court before you are eligible to be finished your bankruptcy (and you should be prepared to be in bankruptcy at least 24 months).
When people have been bankrupt before, they often choose to file a consumer proposal with Bromwich & Smith to avoid their second bankruptcy. Talk with one of our counsellors today to see what your consumer proposal might look like for you.
Many, many people are under the mistaken understanding that the debts that are owed to Canada Revenue Agency (CRA) will never go away, even if they file bankruptcy. There can be nothing further from the truth.
Bankruptcy is for the honest but unfortunate debtor to be given the opportunity to be freed from the overwhelming burden of his or her debts. Debts owing to CRA are often some of the most crushing and overburdening debts that someone can have, that’s why the law says that these debts are dischargeable (you don’t have to pay them back) when you go bankrupt.
Now if it is the case that you owe over $200,000 to Canada Revenue Agency for personal taxes and this amount represents at least 75% of the debt that you owe to creditors, there are some things about your bankruptcy that will be different. First off, you won’t be automatically discharged from bankruptcy – there will have to be a Court application, and the court will consider the following before granting you a discharge:
1. The circumstances you had when the debt was created;
2. The efforts you made to pay the debt;
3. Whether you were paying other debts while not paying your tax debt;
4. Your financial prospects for the future.
When a bankruptcy occurs you will be required to do certain duties and fulfill certain obligations in order to receive your discharge from bankruptcy and release from your debts (see Duties of Bankrupt section above for a list of these duties). If these duties are not completed your discharge application will be adjourned Sine Die (or Adjourned Indefinitely), which means that you are not released from your debts. The big issue with this type of discharge order is that once the order is granted the Trustee will seek his or her discharge and the rights of your creditors will be reinstated (which means they will be able to come after you again, but you will still be bankrupt). You do not want this to happen.
If this has happened to you, you should know that there are only 2 ways in which to end your bankruptcy: 1) Get a discharge from the Court (you will need to either re-engage the trustee for assistance , or do it yourself or with the help of legal counsel; or 2) File a Consumer Proposal to annul your bankruptcy.
Call to speak with one of our counselors for more details.
The requirement of filing a Pre Bankruptcy Tax Return is not a function of the Bankruptcy & Insolvency Act, it is actually a requirement of the Income Tax Act. This needs to be done because when you file bankruptcy all debt that you owe will be included (even tax debt owing to Canada Revenue Agency that has not yet been assessed or even due to be filed).
If there is a refund that is generated from the Pre Bankruptcy Tax Refund it will come into the Trustee (unless there is money owed to Canada Revenue Agency, in which case they will keep it).
A Provisional Tax Return is a return that is prepared from January 1st of the year you file your proposal to the date you file your proposal. The return will indicate the amount of money that is owing for the taxes for that period, and your proposal will indicate a provision stating that this this amount will be included as a provable debt in your proposal.
Talk with one of our counselors for more details and how this may apply to your situation.
Of course it still can happen that you can petition someone into bankruptcy. If you are owed money and you want to put the person that you owes money into bankruptcy, you will need to hire a lawyer who will bring an application before the Court to petition a bankruptcy order; you will also need to find a Trustee that would be willing to consent to being appointed as the Trustee.
If you are worried that you will be petitioned into bankruptcy, you should speak with a counselor at Bromwich & Smith today about how we can help you. Remember, if you voluntarily assign yourself into bankruptcy you get to pick your trustee (like Bromwich & Smith), whereas, if your creditors petition you into bankruptcy they will pick the trustee.
If you are a creditor to someone that has filed bankruptcy you should be listed as a creditor on their Statement of Affairs and you will be sent notice of the bankruptcy. You must immediately stop all actions against the person; you cannot call them or email or have any contact with them. You will need to deal directly with their trustee. If you don’t respect this Stay of Proceedings you can end up in a lot of trouble.
You will need to complete and submit a Proof of Claim outlining how much money you are owed and submit it to the Trustee in order to participate in the bankruptcy process and share in any dividends that might be payable.
If you are unsure of what to do, contact the Trustee that has been appointed for details and/or speak with a lawyer.
When a bankruptcy is filed you will be given a Superintendent Standard Guideline that requires that you pay into the bankruptcy estate half of the money that you make over and above that Guideline amount (for more information, refer above to 'What is Surplus Income Obligation'). This is the only attachment to your income that the creditors can make. If you save money after you file bankruptcy the creditors can’t demand that you pay it to the bankruptcy estate.
We encourage everyone to save money while they are in bankruptcy, and this is something that we discuss and assist with during your two counseling sessions.
People have expressed concern that they are afraid that the creditors, the government or the Court would not be happy that they were getting that financial help, and that they would have to give some (or all) of the money that they were receiving to the bankruptcy. This is simply not the case.
If your friends or family are helping you to cover your living expenses while you are in bankruptcy this is completely alright and completely normal and common. No one can make your family give money to your creditors.