Most people aren’t aware of how Consumer Proposals or personal bankruptcy work – so it’s no surprise that as Licensed Insolvency Trustees we get asked a lot of questions each and every day. We’ve asked some of our knowledgeable staff to answer the top 10 questions we hear – read on!
Can I avoid bankruptcy but still deal with my debts?
Yes! A Consumer Proposal is another option to deal with your debt. A Consumer Proposal is simply a deal between you and your creditors to offer less than 100 cents on the dollar, in full settlement of the debt. The creditors vote on the proposal and the proposal is legally binding on all your unsecured creditors, so they can’t pursue you for payment.
Tracey Lowe, Licensed Insolvency Trustee (Sands & Associates Burnaby office)
Is a Consumer Proposal the same as debt settlement?
A Consumer Proposal is definitely not the same as a debt settlement agreement. With debt settlement you would need to come up with a lump sum all at once, which can be very difficult; whereas in a Consumer Proposal you can make monthly payments and the payments are pre-determined, making budgeting easier. Also with a debt settlement the creditors do not have to agree to this and they can sue you, obtain a judgement against you and either garnish your wages or put a lien on your assets.
A stay of proceedings goes into effect when you start a Consumer Proposal and creditors cannot sue you anymore. I always say a Consumer Proposal is the best product available because not only is the debt itself reduced, but payments can be made monthly, the interest and penalties are stopped and on top of that the creditors cannot contact you.
Marlene Byrne, Estate Manager (Sands & Associates Maple Ridge office)
Can I keep my house and car if I file for personal Bankruptcy?
Provincial legislation states that you are allowed to keep a number of assets, including equity in a vehicle up to $5,000, as well as a portion of the equity in your home. Any amount over and above that exempt value the trustee has a responsibility to collect or realize for the creditors. If the equity amount is low a person can generally pay the equity amount throughout the bankruptcy process.
It’s important to note that even if a person has equity in their car or home that is more than the exemption amounts allowed, it doesn’t mean they won’t get to keep the asset. There are a few ways to deal with the assets in that case.
If you have a loan on your vehicle or a mortgage for your home, we establish through documentation you and your creditors provide if there is any equity (of course the exemptions mentioned above are also factored in).
If the trustee establishes that there is no equity in the vehicle, you can decide whether or not you want to keep making payments on the financing, or to let the car go back to the creditor. If you wish to return the vehicle it will be covered under the bankruptcy or Consumer Proposal. The same basic options apply with a mortgage.
Sandra Myers, Estate Manager (Sands & Associates Chilliwack office)
How does a Bankruptcy or Consumer Proposal impact my spouse?
If you spouse isn’t attached to any of your loans by co-signing or guaranteeing them, it won’t affect your spouse at all. Your spouse will be able to maintain his/her credit rating throughout your Bankruptcy or Consumer Proposal.
Cindy Wallas, Estate Manager (Sands & Associates White Rock office)
What are your fees as Licensed Insolvency Trustees?
In most cases our fees are legislated by the government of Canada.
All fees taken by licensed insolvency trustees are subject to the approval of creditors, our regulator (The Office of the Superintendent of Bankruptcy) and the court. This ensures complete transparency and promotes the integrity of the insolvency system.
Individuals that are not regulated by the government or the Office of the Superintendent of Bankruptcy may charge as they wish.
Raj Hara, Licensed Insolvency Trustee (Sands & Associates New Westminster office)