FAQ | Debt, Bankruptcy, & Consumer Proposals | Sands & Associates

Frequently Asked Questions about Personal Bankruptcy, Consumer Proposals and Debt Help in BC

We understand that you may have a lot of questions about legal debt solutions and how they work, which is why we’ve put together a basic overview covering topics people frequently ask us about when they’re considering their options to deal with debt.

Read through some commonly asked questions below to learn more about Personal Bankruptcy, Consumer Proposals and Debt Help in BC.

If you don’t find the answer to your specific question, please call our office toll-free at 1-800-661-3030, one of our qualified debt management specialists would be happy to help you.

To meet in person at one of our 16 BC office locations, book your free debt consultation.

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What is bankruptcy?

Bankruptcy is a legal process that results in debt forgiveness for consumers and businesses.

Declaring bankruptcy in British Columbia is done with the help of a debt professional called a Licensed Insolvency Trustee – formerly known as a Bankruptcy Trustee.

Read More: What is bankruptcy?

How do I file for bankruptcy in British Columbia?

There are two ways for a person or business to become bankrupt.

The most common way is to file for bankruptcy voluntarily.

If you are considering declaring bankruptcy, the first step in the bankruptcy process is to meet with a Licensed Insolvency Trustee for an assessment of your situation.

Read More: How do I file for bankruptcy in British Columbia?

What are the alternatives to bankruptcy?

Many people feel that filing for bankruptcy is the only solution if they need help getting out of debt.  This is simply untrue!

In BC, several debt options exist to help you become debt free.

A Consumer Proposal is the number one alternative to filing a personal bankruptcy.

Read More: What are the alternatives to bankruptcy?

What debt can be included in a bankruptcy?

Nearly all types of debt can be included in a bankruptcy filing in BC.

Consumer and business debts, including government debt to Canada Revenue Agency (Revenue Canada) and student loans can all be dealt with in a bankruptcy.

Read More: What debt can be included in a bankruptcy?

Will my creditors stop harassing me if I file for bankruptcy?

Yes, they will! By law, all collection actions against you must cease once official bankruptcy documents are filed.

Read More: Will my creditors stop harassing me if I file for bankruptcy?

Who will know if I file for bankruptcy?

For most bankruptcies only the creditors, the Licensed Insolvency Trustee (Bankruptcy Trustee), the Office of the Superintendent of Bankruptcy and the person filing the bankruptcy will be aware of the proceedings.

Read More: Who will know if I file for bankruptcy?

What am I allowed to keep if I file for personal bankruptcy?

Most people who file for personal bankruptcy keep all their assets.

Provincial laws set out property that you are automatically entitled to keep in the event you file for personal bankruptcy.

Read More: What am I allowed to keep if I file for personal bankruptcy?

What is a Consumer Proposal?

A Consumer Proposal is a legal agreement that allows a person to consolidate all of their debts into a single amount, stop all future interest charges and collection activities, and repay a portion of the debt (often 20-40%) in full satisfaction of amounts owing.

A Consumer Proposal is the number one alternative to filing for bankruptcy in Canada.

Read More: What is a Consumer Proposal?

Can I keep making payments on my car or mortgage if I file for bankruptcy?

If you have a vehicle financing agreement (lease or loan), or a mortgage, you can choose to continue with those agreements while you are in bankruptcy.

Conversely, you may decide not to continue those agreements and ultimately include any balances owing in the bankruptcy.

Read More: Can I keep making payments on my car or mortgage if I file for bankruptcy?

Who can file a Consumer Proposal?

A Consumer Proposal can be filed in BC by a person who owes between $1,000 and $250,000 (not including mortgages on their personal residence).

If a person owes more than $250,000 they may still be able to file a Proposal, but some different rules will apply.

Read More: Who can file a Consumer Proposal?

Can I keep my RRSPs if I file for personal bankruptcy in BC?

You are entitled to keep your RRSPs if you file a personal bankruptcy in BC, except for amounts contributed in the 12 months prior to your date of bankruptcy.

Read More: Can I keep my RRSPs if I file for personal bankruptcy in BC?

How can I find out who I owe money to?

If you’re unsure who you may owe money to, a good place to start is by requesting copies of your credit history reports from both Equifax Canada and TransUnion. These can be obtained online, for a fee; or by mail, at no cost.

Read More: How can I find out who I owe money to?

What are the benefits of filing a Consumer Proposal?

Some general benefits of filing a Consumer Proposal include being able to:

• Consolidate debt;
• Reduce amount of debt that needs to be repaid (in full settlement);
• Stop interest and collections;
• Have a definite date of being “debt-free”;
• Deal with virtually all types of debts;
• Protect assets from creditors;
• Avoid filing bankruptcy.

Read More: What are the benefits of filing a Consumer Proposal?

How much does it cost to file for bankruptcy in British Columbia?

In a basic bankruptcy the cost is approximately $1,800 in total. Sands & Associates offers payment plans that allow a person to make monthly payments over time.

Read More: How much does it cost to file for bankruptcy in British Columbia?

How can I get my credit report?

There are two main credit bureaus in Canada - Equifax and TransUnion.

You can make a request to receive a free copy of your credit history report by mail.

Read More: How can I get my credit report?

What are the main steps in a Consumer Proposal?

There are four main steps to filing a Consumer Proposal in BC.

1. The first step is to book a free, confidential debt consultation.
Request a consultation with Sands & Associates here! Or call us toll-free: 1-800-661-3030.
2. If you decide to file a Consumer Proposal, the next step will be to sign the official documents, which will then be officially registered and sent to your creditors.
3. Complete the terms of your Consumer Proposal. (These are usually monthly payments, along with two financial counselling sessions).
4. After your last payment, your Consumer Proposal will be finished! You are now debt-free and have achieved a financial fresh start!

Read More: What are the main steps in a Consumer Proposal?

Can tax debt be included in a bankruptcy in Canada?

Yes, debt to Canada Revenue Agency can be eliminated by filing a bankruptcy in BC.

Filing a bankruptcy or a Consumer Proposal are the ONLY options for eliminating or negotiating debt to Canada Revenue Agency (Revenue Canada).

Read More: Can tax debt be included in a bankruptcy in Canada?

Can Canada Revenue Agency put a lien on my house?

If you are behind in your tax filings or payment obligations, CRA may resort to collection actions including placing a lien on your residence, or other real property.

Filing a personal bankruptcy, or a Consumer Proposal can halt escalating collection actions.

Read More: Can Canada Revenue Agency put a lien on my house?

Can I go bankrupt on student loans?

Yes - private, provincial and federal student loans can be eliminated by filing a bankruptcy in BC.

Filing a bankruptcy, or a Consumer Proposal are the ONLY options for eliminating or negotiating government student loan debts.

Read More: Can I go bankrupt on student loans?

Can Canada Revenue Agency seize my wages or freeze my bank account?

If you are behind in your tax filings or payment obligations, CRA may resort to freezing your bank accounts, or even garnishing your wages or self-employment income.

Filing a personal bankruptcy, or a Consumer Proposal can halt escalating collection actions. Wage seizures or bank account freezes imposed by CRA will be lifted upon filing a bankruptcy or Consumer Proposal.

Read More: Can Canada Revenue Agency seize my wages or freeze my bank account?

What debts can I include in a Consumer Proposal?

Virtually all types of debt can be included and settled using a Consumer Proposal.

Consumer and business debts, including government debt to Canada Revenue Agency (Revenue Canada) and student loans can all be included in a Consumer Proposal.

Read More: What debts can I include in a Consumer Proposal?

Will my creditors stop contacting me if I file a Consumer Proposal?

Yes, they will! By law, collection action against you must cease once your Consumer Proposal has been filed.

Read More: Will my creditors stop contacting me if I file a Consumer Proposal?

What debts survive bankruptcy?

Certain kinds of debts are not released by filing a personal bankruptcy.

They are:
• Child and/or spousal support payments;
• Fines imposed by a court;
• Money owing for things stolen;
• Property or services obtained through false pretences or fraudulent misrepresentation;
• Award of damages by a court for intentionally inflicting bodily harm or sexual assault;
• Student loans if bankruptcy is filed within seven years after the end of studies.

Read More: What debts survive bankruptcy?

Is there a statute of limitation on debt in BC?

In British Columbia, the Limitation Act sets various limitation periods, including capping the length of time people have to sue for a debt owing. This does not prevent creditors from calling you, sending you correspondence, or negatively impacting your credit score.

With regards to basic consumer debt, BC has a two-year basic liability limitation period.

Read More: Is there a statute of limitation on debt in BC?

What do I have to do during the bankruptcy process?

The main duties that need to be completed to obtain a discharge (release) from personal bankruptcy are:

• Attending two financial counselling sessions
• Submitting a monthly budget form
• Providing information required to file your tax returns for the year you file for bankruptcy
• Making payments based on your income and family situation

Read More: What do I have to do during the bankruptcy process?

Who will know if I file a Consumer Proposal?

Consumer Proposals are generally quite private. In a Consumer Proposal your Licensed Insolvency Trustee will normally only notify your creditors and the Superintendent of Bankruptcy (the government body that oversees all Consumer Proposals) that you have made a Consumer Proposal.

Read More: Who will know if I file a Consumer Proposal?

What is a Licensed Insolvency Trustee ("LIT")?

In Canada, Licensed Insolvency Trustees (“LITs”) are the sole professionals legally authorized to file a bankruptcy or Consumer Proposal for consumers and businesses.

Read More: What is a Licensed Insolvency Trustee ("LIT")?

What is the Office of the Superintendent of Bankruptcy?

The Office of the Superintendent of Bankruptcy (OSB) is the government body which oversees all matters and filings that the Bankruptcy and Insolvency Act applies to, including bankruptcies and Consumer Proposals.

Read More: What is the Office of the Superintendent of Bankruptcy?

How do I get discharged from bankruptcy?

Being discharged from bankruptcy means that you exit bankruptcy, free of debt. In most bankruptcy cases, you will be granted an automatic discharge from bankruptcy nine months after the date your bankruptcy starts, provided that the duties required have been successfully completed.

In the event you have filed a bankruptcy before, this nine-month term is extended to 24 months before you are eligible to receive an automatic discharge (release) from bankruptcy.

Read More: How do I get discharged from bankruptcy?

Can I keep making my payments on my car or mortgage if I make a Consumer Proposal?

Most people will use a Consumer Proposal to deal only with debts other than those involving an ongoing car or mortgage agreement.

If you have a vehicle financing agreement (lease or loan), or a mortgage, you can choose to continue with those arrangements outside of your Consumer Proposal.

Alternatively, you may decide not to continue those arrangements (ie. return a financed car to the lender) and ultimately include any shortfall or balance owing in your Consumer Proposal.

Read More: Can I keep making my payments on my car or mortgage if I make a Consumer Proposal?

Where can I get debt help if I have bad credit?

Licensed Insolvency Trustees offer debt help regardless of a person’s credit score and history.

Some people we assist have “ideal” credit ratings, while others are struggling to find help with bad credit.

Read More: Where can I get debt help if I have bad credit?

What can I keep if I file a Consumer Proposal?

Under a Consumer Proposal, you retain possession of all of your assets – there is no “vesting” of your assets in the Trustee.

Most Consumer Proposals offer creditors a debt settlement based on monthly payments, and not based on surrendering assets.

Read More: What can I keep if I file a Consumer Proposal?

What happens to my income during bankruptcy?

After you have filed for bankruptcy, your earnings continue to go directly to you.

If creditors had a wage garnishment for debts being included in your bankruptcy, the Trustee will immediately send legal notice to stop the collection actions against you.

Read More: What happens to my income during bankruptcy?

Can Revenue Canada debt be included in a Consumer Proposal?

Consumer Proposals can deal with all debts to Canada Revenue Agency, including debt for personal income tax, GST, payroll remittances or corporate tax.

A Consumer Proposal is the ONLY mechanism in Canada that can be used to settle government debts for less than the full amount owing, besides bankruptcy.

Read More: Can Revenue Canada debt be included in a Consumer Proposal?

What is surplus income in bankruptcy?

Surplus income is a calculation used to determine:

• How long a person’s bankruptcy will last; and
• How much a person in bankruptcy needs to pay each month.

Surplus income is the amount that your net income exceeds the Superintendent’s Monthly Income Standards.

Read More: What is surplus income in bankruptcy?

What is financial counselling?

As part of the bankruptcy process, you will need to attend two financial counselling sessions.

These one-on-one sessions are typically held at the office of your Licensed Insolvency Trustee, and the cost for each is already included in the bankruptcy payments.

Read More: What is financial counselling?

Can student loans be included in a Consumer Proposal?

Yes - private, provincial and federal student loans can be included in a Consumer Proposal.

A Consumer Proposal is the ONLY option to reduce government and private student loans, besides bankruptcy.

Read More: Can student loans be included in a Consumer Proposal?

What debts are not included in a Consumer Proposal?

There are some debts that are not extinguished by filing a Consumer Proposal.

These debts include court fines, court awards for damages associated with bodily harm or sexual assault, arrears of spousal or child support, debts incurred through fraud or misrepresentation, and student loans incurred within seven years of filing the Consumer Proposal.

Read More: What debts are not included in a Consumer Proposal?

What happens to my tax returns during bankruptcy?

The year you file for bankruptcy will be split into two tax returns: a pre-bankruptcy tax return and a post-bankruptcy tax return.

These returns will be filed by your Licensed Insolvency Trustee, using information you provide (ie. T4s, etc.).

Read More: What happens to my tax returns during bankruptcy?

How much does it cost to file a Consumer Proposal in British Columbia?

Most people will just make a first monthly proposal payment at the time they sign their official documents – no extra payments are required to start a Consumer Proposal. The Licensed Insolvency Trustee’s fees in a Consumer Proposal are set by government tariff.

These fees are deducted from the funds the creditors receive and there is no additional cost to the person above what they are offering to their creditors in the Consumer Proposal.

Read More: How much does it cost to file a Consumer Proposal in British Columbia?

How long will a bankruptcy show on my credit report?

A personal bankruptcy will be reflected on a person’s credit history for six years following the person’s discharge (release) from bankruptcy.

This does not prevent you from seeking new credit before the bankruptcy expires from your credit history report.

Read More: How long will a bankruptcy show on my credit report?

Can I file for bankruptcy if I have been bankrupt before?

It is possible to file for bankruptcy more than once, provided you were discharged (released) from your previous bankruptcy.

Read More: Can I file for bankruptcy if I have been bankrupt before?

How long will a Consumer Proposal show on my credit history?

A Consumer Proposal will be reflected on a person’s credit history for two to three years following completion of the Consumer Proposal.

This is the same credit rating impact as traditional or non-profit credit counselling programs.

This does not prevent you from seeking new credit before the Consumer Proposal expires from your credit history report.

Read More: How long will a Consumer Proposal show on my credit history?

What happens if my Consumer Proposal is rejected?

Consumer Proposals are almost always accepted by creditors.

In the rare event a Consumer Proposal is rejected by creditors, it may be because the creditor wishes to negotiate some term of the proposal (payment amount or length). In that case, the person has the option to adjust the proposal terms offered or allow the proposal to be voted down.

Read More: What happens if my Consumer Proposal is rejected?

What if my situation changes and I can't finish my Consumer Proposal?

If your situation changes and your ability to complete the terms of your Consumer Proposal is impacted, it may be possible for your Licensed Insolvency Trustee to modify your debt settlement terms by filing an amended Consumer Proposal.

Read More: What if my situation changes and I can't finish my Consumer Proposal?

Can I make a Consumer Proposal if I’ve filed bankruptcy before?

Yes – a Consumer Proposal can be made by a person who previously filed a bankruptcy.

Read More: Can I make a Consumer Proposal if I’ve filed bankruptcy before?