Archive for Category 'personal bankruptcy Canada'

Question: I have been told that even when one files for bankruptcy, up to 20% of my wages could be garnisheed (by the bankruptcy trustee?) during the 21-month period before discharge. Is this correct?

Answer: When you file bankruptcy in Canada you are required to make a payment to the trustee for the benefit of your creditors based on your surplus income.  In a first bankruptcy if you have excessive surplus income you will be bankrupt for 21 months.

However, that doesn’t mean the trustee will be garnisheeing your wages.  When you file bankruptcy the trustee will arrange a payment plan with you, and you will simply make the required payments each month, so no wage garnishment should be required.  If you don’t make the required payments the trustee does have the power to go to court to get a garnishment order, but that would be a very unusual circumstance.  Obviously you filed bankruptcy to deal with your debts, so it would not make sense to not fulfill your obligations while bankrupt so that you can receive your discharge.

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: 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.

Question: My wife and i are close to facing bankruptcy in Canada. My wife’s parents have her name listed on a property title as well as theirs strictly as a right of survivor scenario.Would this property come into play as an asset of my wife’s? If it does would there be any repercussions if her parents had her name removed before she declares bankruptcy? Thank you

Answer: The answer depends on what province she lives in, and what the property is worth.  If the property is fully mortgaged, and therefore has no equity, it should not be an issue in her bankruptcy.

However, if the property does have equity, and if immediately prior to bankruptcy you transfer your share of an asset to someone else, there will be issues, since creditors don’t like it when you give up an asset just before bankruptcy.

We suggest that you assemble all of the numbers (including getting an appraisal of the property, and a print out of the current mortgage balance), and then meet with a lawyer or a bankruptcy trustee to review your options.

Question: Hello, I live and work in Canada on work visa for the past 7 years. I am self employed and I lost my contracts recently. I have a substantial debt, personal, and business related. Can I file a bankruptcy in Canada if I am not a permanent resident in Canada?

Answer: Yes, since you are a resident of Canada (even though not a permanent resident) and since you have debts in Canada, you can file a bankruptcy in Canada.

Question: I would like to know what happens when a person goes through the filing of a bankruptcy but then doesn’t follow through with the rules?

What would happen in the case of non-compliance and dis-charge?

My boyfriend went through a bankruptcy six years ago and then had no further contact with his trustee. When we inquired with them six years later as to what was required for dis-charge they sent a nasty letter saying he needed to pay $1600. just to get them to pull his file from storage, review it, and advise him?

Would he be at risk of having to file all over again lengthening the term to 13 years under a bankruptcy umbrella? Would he risk assets gained in the six years since filing?

Answer:  If a bankrupt person does not complete their duties during the bankruptcy period, the trustee goes to court, and is then required to close the file.  The person remains an undischarged bankrupt.  In order to obtain their discharge, they must return to court and have the bankruptcy judge grant their discharge.

If, for example, the bankrupt person was supposed to pay $1,600 to complete their bankruptcy but didn’t, the court may require them to pay the $1,600 in order to get their discharge.  That may be what the trustee was referring to in the letter they sent your boyfriend.

We suggest you discuss this further with the trustee to fully understand what is required to obtain the discharge.  If you disagree with the trustee’s approach, you can hire a bankruptcy lawyer to represent you at a bankruptcy discharge hearing.

Question: is bankrupcy right for everyone ?

Answer:  No.

If you have more debt than you can handle, bankruptcy may be an option, but it is the last option you should consider.  There are many bankruptcy alternatives, and you should consider all of them before deciding to file bankruptcy.

Start by making a personal budget to see if you can cut expenses and use the extra cash to repay your debts.   On this site we offer a free trial of budgeting software to make the job very easy.

Your next option is to consider a debt consolidation loan, where you borrow at a lower interest rate to repay your high interest rate debts (like credit cards and payday loans).

If you don’t qualify for a debt consolidation loan, a credit counsellor may be able to help you file a debt management plan where you get extended time, and lower interest, to repay your debts.

If that’s too expensive, a consumer proposal is a way for many Canadians to make a legal settlement on their debts for less than the full amount owing.  (In the United States, you can consider a Chapter 13 Wage Earner Plan).

Only after you have tried all of these options should you consider personal bankruptcy.

Question: Dear Sir, I have a question about Canada student loan forgiveness rules.

According to the proposed changes to the Bankruptcy & Insolvency Act, a bankrupt person who has been out of school for five or more years may apply to a court to be discharged from their student loans.

I am a Canadian citizen and an Ontario resident, and have attended university in 3 different periods, with intervals of one or two years in between. I completed the first 2 programs over 5 years ago. Then was out of school for a year, and then attended another university from 2003 to 2005.

When the proposed changes come into effect, will I be eligible for loan forgiveness for the portion of my student loans that I received over five years ago, or would my application be rejected, because I have been out of school for less than 5 years?

Thanks in advance for your attention.

Answer: First, the changes you describe came into effect on July 7, 2008.   Full details can be found on the student loan bankruptcy Canada web site.

The period for the discharging of student loans in a bankruptcy starts when you cease to be a student.  In your case, you ceased to be a student in 2005, so if you were to go bankrupt now, in 2008, your student loans would not be automatically discharged.  After bankruptcy, you could apply to court in 2010 and ask for forgiveness of the student loans; the court may or may not grant your request, depending on your financial circumstances.  If you waited seven years (ie. until 2012) and filed bankruptcy, your student loans would be automatically discharged in the bankruptcy.

These rules are complicated, so for more details, contact a licensed bankruptcy trustee.

Question: When the decision has been made to file bankruptcy, and I am only in the first stage of filling out the paperwork, and payments are coming due. Do I call the creditors and tell them I am filing bankruptcy? My concern is creditors attempting to access my bank account for their payment and it is not there. Both myself and the creditors will suffer the nsf charges, me twice. What should I do?

Thank you.

Answer:  Once you decide to file bankruptcy in Canada, you should open a new bank account at a new bank (a bank where you don’t owe any money).  Have your payroll and other income transferred to your new account, and notify your on-going bills that you will continue to pay, such as your rent and utilities, about the new account.  Do not tell any of your creditors about the new account.  Once everything is switched over, you can simply close your old account.  If the account is closed, no-one can take money from it, and there will be no NSF charges.

Your creditors may add an NSF fee to the balance you owe them, but that will be included in your bankruptcy.

In most cases a new bank account and the bankruptcy paperwork can be prepared in a week or less; your bankruptcy trustee can provide you with more information.

Question: I acquired my student loan in Ontario but have been living in British Columbia for 12 years now. What province would I claim personal bankruptcy in Canada?

Answer: If you decide to declare personal bankruptcy in Canada you would declare bankruptcy in the province where you are currently living.  It does not matter where you incurred the debts.