Archive for Category 'Bankruptcy', page 2

Question: My gross income annually is $70,000 and my wife’s is $42,000. We own a home valued at $490,000 with an outstanding mortgage of $460,000. We have $110,000 of unsecured credit, a secured car loan for $15,000, and a second leased vehicle. In addition to this we are behind $7,000 in property taxes.  Is personal bankruptcy in Canada our only option?

Answer: No, bankruptcy is not your only option.  In fact, it is probably not the correct option.  Before considering bankruptcy, you should consider two other alternatives.

First, you could consider selling your house and renting.  By selling your house you might generate a small amount of cash, but you would probably also significantly lower your monthly living expenses.  Paying rent is probably much less expensive than paying a mortgage and property taxes and repairs and maintenance on a $460,000 mortgage.

A house is not an investment, so reducing your living expenses may be a good start.

Second, whether or not you decide to keep your house, bankruptcy would be very expensive, because the cost of bankruptcy is based on your surplus income each month.  Given your income, a bankruptcy would be very expensive.

A better option would be a consumer proposal.  With a consumer proposal you can work out a payment plan that is affordable, without the significant monthly costs of a bankruptcy.  A trustee can explain both options in more detail, and show you the costs based on your situation.

Question: I have not been a student for more than 4 years. The last time I went to college it was for one year and I flunked out but I didn’t use OSAP.
From that time I have gone bankrupt. I got discharged this year from my bankruptcy. I can’t apply for any loans at any banks because of my situation. I’m starting university this is my second year and I need some sort of financial help or else I’m going to have to drop out. I did really well in my grades last year so OSAP doesn’t have a problem with that. They rejected me last year and I just want to know what I can do if they do reject me and what my other options might be. I am completely desperate.

Answer: Your best option is to talk to OSAP.  It is quite common for someone to go bankrupt and still qualify for a student loan again in the future.  Your other option is to discuss your situation with the admissions department at your school.  They will be fully familiar with all forms of student aid, and can advise you fully on your options.

Question: Hello! Can you please tell me if you fall behind in credit card payments or just pay small payments to credit card companies….can they sue you or place a lien on a mortgaged home? We are a one income home(pension), car is on a loan and our home is mortgaged. Can they take our home, force us to sell or move out? I am very worried! I do not want a consumer proposal or go bankrupt. I thank you in advance. M

Answer:  In theory, yes, if you default on your payments the credit card company could take you to court, sue you, obtain a judgment against you, and then enforce that judgment by placing a lien on your home.

However, that is very unlikely.  Since your home already has a mortgage on it, there is probably not a huge amount of equity.  Also, the credit card company, in order to get their money, would have to sell the home and pay off the first mortgage holder.  It is unlikely they will want to spend that much money to collect what you owe them on your credit card.

You should attempt to make payment arrangements with the credit card company.  If that’s not possible, it may be time to consider your other debt management options.

Question: My case is a bit particular. I’ve started my studies in 1992 at a college, got OSAP (Ontario and Canada Portions) loans, everything was fine until 2 yrs after in 1994 that I had to leave my studies due to a family emergency. I was away for college, after 1 year the collection letters started to come asking for $ 500/month pymts that I could not really have afforded at that time, I did not pay.

My credit history suffered a lot, but I still wanted to finish my degree some day. I was working all these years at bad paying jobs and really struggling. By late 1999, I decided to take some part time courses at my college, so they could count towards my diploma and degree (I had the option to get both). I kept studying part time throughout 2000, 2001, 2002 and finally in 2003 I received my College Diploma. Please note, that it was in 1994 where I received the last dollar from OSAP loans. All courses after that, I paid from my pocket either by using my little savings and using my credit cards.

Since I wanted to get a Bachelors Degree, I kept studying part time and took some courses at Seneca, Humber, Centennial College so I can get transfer credits for DeVry (which no longer exists in ON). In 2006, I went to Calgary, Alberta and Finally finished my Bachelor’s Degree in Business which is recognized by the Govt of Alberta.

Since OSAP stopped helping me in 1994, could I ask the courts to discharge my debts ??
- Or will they take 2006 as my final study date ??
- The Canada Student Loan portion $ 15,799.10 is being handled by Human Resources Dev. Canada,,,will they settle for less ?

-The Ont portion $ 12,663.51 Balance is handled by a collection agency working on the Gov’ts behalf, tehy say they can accept 90% of that in full and close the account. – Can they accept less ?

I owe $ 28,000 b/w Canada and Ontario Student Loans, about 10,000 or more is interest accumulated. My Tax refunds are being seized by C.R.A.

Please advice.
Thanks.

C.J.

Answer: If you go bankrupt in Canada, government guaranteed student loans are automatically discharged if you file bankruptcy more than seven years after you ceased to be a student.  The date you received the loans is not relevant.  Since you graduated in 2006, that’s the date the “seven year clock” starts, so your student loans would not be automatically discharged in a bankruptcy unless you wait until 2013 to go bankrupt.

It is possible to go bankrupt and then apply to court after 5 years in cases of extreme hardship if you are unable to repay your student loans.

In your case, you should contact OSAP and confirm your end of study date, and then your best option may be to simply work with them to make a reasonable repayment plan.  Since the federal government is already taking your tax refunds it is unlikely that they will take any further action.  You could also consult a credit counsellor, trustee or lawyer for further advice on your specific information.  The Canada Student Loans in Bankruptcy web site also contains more information.

Question: How does a consumer proposal affect a debtor’s future when accepted? Does it affect your future like someone who’s gone bankrupt?

Answer: Once a consumer proposal is accepted by the creditors, the creditors cannot take you to court, sue you, or garnishee your wages.  Once you have completed all of the payments and the proposal is completed, your debts are legally eliminated.

Unlike in a bankruptcy, once the consumer proposal is accepted, the payments you are required to make in the consumer proposal are fixed; they don’t change.  That’s good, because you know exactly what you are required to do to eliminate your debts.  In a debt consolidation loan with a line of credit, the interest rate may change, so your payments may change.  In a bankruptcy, the payment you make each month is based on your surplus income, so if your income increases, your payment increases.  A fixed payment is a big advantage of a consumer proposal.

Another advantage of a consumer proposal is that you don’t lose your assets, such as a house, car or RRSP.  In a bankruptcy if there is equity you may lose some of your assets.

According to Equifax, Canada’s largest credit reporting agency, a consumer proposal is reported as an R7 (perfect credit is R1), and remains on your credit report for 3 years after the payments are completed.  A bankruptcy is coded as an R9, and remains on your credit report for six years from the date of discharge.  Since a normal first bankruptcy lasts for 9 months, that means it’s on your credit report for about 7 years.  If the proposal payments last for 4 years, the proposal is also showing on your credit report for 7 years, so in that respect a proposal and a bankruptcy are similar.

To decide whether you should file a proposal, a bankruptcy, or some other option, you need to consider all of the costs and implications.   A licensed trustee can provide you with a free consulation to review all of your options.

Question: I own a house that is worth 144k but owe 130 on it. I have gone in debt 91k on credit cards and my personnel line of credit. I have never missed a min payment but have used my overdraft on my checking account. I have a full time job that earns 88 thousand per year but know I am in serious trouble. Currently I pay over 1400 in fees and interest and am only heading backwards with nothing on the principle. I have gone to the bank for a debt consolidation loan but have been declined as a result of my overdraft. I know I need help but am unsure of my alternatives.

Answer: Great question.  With the decline in the real estate market, and with the recession, many people find themselves with houses with minimal equity, and with a lot of debt.  You have a few choices for dealing with your debt:

1. Attempt to pay it off on your own.  That means you will need to prepare a detailed budget,  and determine what you can afford to pay.
2. Decide whether or not it makes sense to keep your house.  If you can’t afford the payments, it may be prudent to sell the house and lower your living costs by renting.
3. Consider a debt consolidation loan to reduce your monthly interest costs.
4. If you can’t afford a debt consolidation loan, consider credit counselling.
5. If that’s not affordable, consider a proposal.
6. If none of those options work, the final option is personal bankruptcy.

To evaluate these options, use our debt options calculator, and then contact an expert for more information.

Question: I do not want to claim bankruptcy. I have about $25,000 debt, credit cards, loans etc. still good credit. been doing all my min payments. Don’t have a job. min payments are about all I can do. Am not getting anywhere with my debt. Will remain in debt forever if i don’t get help. Can anything be done?

Answer:  You have a few options.

First, you could continue doing exactly what you are doing until you find a job.  You make your minimum payments to keep your rating positive, and then when you are back to work you can work on paying down your debt.

Second, you could file a debt management plan with  a not for profit credit counsellor who will work out a repayment plan where you repay your debts in full, but at a low or zero rate of interest.

Third, you could file a consumer proposal where you repay a portion of your debts.

Both a debt management plan and a consumer proposal require you to have enough money each month to make payments on your debts.  If you are not working that may not be possible, so you will need to review your budget to see exactly how much you can afford each month.

Finally, as a last resort bankruptcy is an option.  If you are not working you have no wages, so your wages cannot be garnisheed, so bankruptcy is not necessary to prevent a wage garnishment.  However, you may decide that it is better to deal with your debts now, so that when you return to work you do not have the stress of the debts.

We suggest you consult a licensed bankruptcy trustee to review your options in detail, and help you decide which option is best for your.

Question: my husband and I are considering going bankrupt due to over whelming debt. We have a mortgage and are terrified of loosing our house. Our mortgage is with the bank and we think the property value is going to be close to the mortgage that is on it now. Would they foreclose if there was say $5000-$10,000 equity?

Answer:  It is doubtful that the bank would foreclose if your mortgage payments are up to date; you should contact the bank prior to declaring bankruptcy to get confirmation directly from them.

The other issue is that if you have equity in your home, the trustee in bankruptcy is required to collect that equity from you.  In simple terms, if you have $10,000 in equity, you would be required to pay the trustee $10,000 in order to keep your home.

The amount of equity you are permitted to keep varies in each province, so before making a decision you should contact a bankruptcy trustee.

Question: Question is do I have to wait until actual discharge to be able to apply for a mortgage?

We will be released in May 2009 but not discharged until Apirl 2010, can we apply for a mortgage now? To purchase a home prior to discharge? Like soon????

Answer:  In today’s economy it is almost impossible to qualify for a mortgage while you are an undischarged bankrupt.  It may only be possible if you have a co-signer.  You should consult your bank or a mortgage broker for more information, and to determine what you need to do to qualify for a mortgage after bankruptcy.

Question: i haven’t been able to file my taxes for the last two years. i recently went to do my taxes and i owe about $500 which i can’t afford to pay. can i include this if and when i file for bankruptcy?

Answer: Yes, if you file for bankruptcy in Canada, your tax debts are included in the bankruptcy.