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Frequently Asked Questions

There are several different options available for debt help in BC and this can be overwhelming. It’s difficult to know where to start, what questions to ask and who to trust.

We’ve put together a list of commonly asked questions that will provide you with the answers and trusted resources you need to make an informed decision.

A Licensed Insolvency Trustee can also help walk you through all of your options and answer any questions you might have about the process.

Personal Bankruptcy FAQs

Filing for bankruptcy in BC is confidential and private. In most cases, when you file for personal bankruptcy, only your Licensed Insolvency Trustee, the Office of the Superintendent of Bankruptcy (OSB), your creditors and credit reporting agencies will know about the proceedings.

In many cases, you will not have to go to court for bankruptcy proceedings. If you are eligible for an automatic discharge, there is no court hearing necessary. You will be released automatically, and your trustee will send you a copy of your discharge papers. You can qualify for an automatic discharge if you complete all your bankruptcy duties and no one opposes the discharge. On the other hand, if you do not qualify for an automatic discharge, you may have to appear in court with your trustee to review the discharge before it is finalized.

Following notification of your bankruptcy, most credit card companies will cancel your card, so you can no longer use them. This means you will not be able to keep current credit cards after you file and may have to wait several months before you’re eligible for another. However, you can apply for a pre-paid credit card for situations where a credit card is necessary.

All bankruptcy fees are regulated by the federal government and are consistent from LIT to LIT. The fees do vary depending on each individual’s unique financial situation. You can discuss what the costs of filing for bankruptcy would look like for you with a LIT during your free, initial consultation.

Not always. While there are some cases where bankruptcy can clear all debts, that is usually not the case. Some debts cannot be included in bankruptcy, such as child support payments, criminal fines, etc. In addition, debts you accrued through secured creditors receive special treatment, even when you file bankruptcy. A secured creditor is one that has a right to a specific asset. This can include creditors that financed your car or home. The effects of bankruptcy on secured debts will vary in every situation. A Licensed Insolvency Trustee will be able to help you understand the process better.

Unless your spouse is a joint owner and has co-signed your debt, there should be no impact to your spouse if you declare bankruptcy. The unpaid debts will not transfer from one spouse to the other.

However, if your spouse is a co-signer, co-borrower or co-cardholder and you file bankruptcy, your spouse would remain responsible for repaying the full balance of the joint debt.

Filing for bankruptcy in BC will eliminate nearly all types of debt, including (but not limited to):

  • Credit card debt
  • Lines of credit & overdraft debt
  • Payday loans
  • Medical bills
  • ICBC debts
  • Income tax debts (income taxes, GST, etc.)
  • Student loan debt (federal, provincial & private)
  • Secured debt shortfalls if you decide to end the commitment (vehicle shortfall, mortgage foreclosure)
  • Personal loans

Bankruptcy will eliminate most of your debts, but some debts are not eligible. Those debts include:

  • Alimony or child support payments
  • Court-imposed fines
  • Debt incurred by misrepresentation (fraud)
  • Debt for damages imposed by Civil Court for intentional bodily harm, sexual assault, or wrongful death
  • Student loans (if the bankruptcy occurs prior to 7 years since your last date of study)

If you declare personal bankruptcy, your creditors will be automatically notified and will be forced to stop contacting you. In addition, they will have to stop all legal actions against you, including pending lawsuits and wage garnishments. However, secured debts, like mortgages and car loans, may remain active, meaning you must keep up with these payments or risk losing the asset. Most of your other assets will be handed over to a Licensed Insolvency Trustee as part of the process.

When you file for bankruptcy, you agree to hand over many, if not all, of your personal assets in return for debt relief. However, there are some items that you will be able to keep. These items are referred to as bankruptcy exemptions because they are exempt from seizure. Exempt items will vary from situation to situation but may include clothing, household furnishings, some land, sentimental items, pensions and retirement plans, and more. It’s important to know that you will be surrendering some of your assets when you file for bankruptcy. However, the process will help you get out of debt and start over.

Filing for bankruptcy should not impact your home, car, or any other secured debts, as long as you continue to make payments and there is little-to-no equity in your secured assets.

The Bankruptcy and Insolvency Act provides protection for your RRSPs. You’re allowed 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.

Consumer Proposal FAQs

A consumer proposal is a formal offer to your creditors that allows you to settle your unsecured debts. Secured debts, such as your mortgage or car loan, cannot be included.

A proposal is a debt relief solution that allows you to get things back on track with your finances and is an alternative to bankruptcy.

Every person has a unique financial situation, which means they’ll need to consider all their options when deciding how to best solve their problems. A consumer proposal is an excellent alternative to filing bankruptcy and offers numerous benefits. Some of the best parts about filing a consumer proposal include:

  • Interest Stops: As soon as you file a consumer proposal, interest will stop accruing on your debts, which will make it easier for you to repay what you owe and get your financial situation under control.
  • Collection Calls Stop: Your creditors will have to stop the incessant collection calls when you file a consumer proposal.
  • Protection from Legal Action: A consumer proposal protects you from legal action by your creditors, including wage garnishments, freezing of bank accounts, and collector calls.
  • No Forfeiture of Assets: Because you make an agreement with creditors to pay off a portion of your debt, you will not have to surrender your assets.
  • One Monthly Payment: You can make a single monthly payment that is significantly lower than having to pay all your creditors individually.
  • Possibility of Early Payment: If you have the funds to do so, you can potentially pay off your debts early, allowing you to complete the process sooner than planned.
  • Avoid Bankruptcy: You will avoid bankruptcy, which would otherwise negatively impact your credit for years.

A consumer proposal covers virtually all forms of debt, except secured debt.  All unsecured debts are eligible to be included in the consumer proposal process. Unsecured debts are debts that are not secured by some form of collateral. These types of debt include:

  • Credit card debt
  • Unsecured lines of credit
  • Personal loans
  • CRA debt
  • Student loan debt
  • ICBC debt

Consumer proposals can eliminate almost all debts, but there some that can’t be included. Unsecured debts, like credit card debt and CRA debt, are fair game but secured debts cannot be included. Some common examples of secured debts are:

  • Mortgages
  • Car loans

Some other debts that cannot be included in your consumer proposal are:

  • Child support payments
  • Spousal support payments
  • Student loans (*if it hasn’t been 7 years since your last date of study)
  • Fines imposed by a court
  • Money owing for things stolen
  • Property or services obtained through fraudulent circumstances
  • Award of damages by a court for intentionally inflicting bodily harm or sexual assault

All of these types of debts cannot be included in a consumer proposal, and creditors of secured debt can still attempt to collect the collateral if you don’t make payments.

Filing a consumer proposal isn’t always the best option for every financial situation and filing a proposal does have a few disadvantages:

  • Secured debts can’t be included: A secured debt is when you are required to put up an asset as security or collateral for the loan.  Common types of secured debts are mortgages and car loans, in which the item being financed becomes the collateral for the financing.
  • It will negatively impact your credit score: A consumer proposal will affect your credit rating, but less drastically than a personal bankruptcy and you can begin rebuilding your credit throughout your proposal.  It’s important to note that your credit score is only one part of what lenders use to determine whether they’ll loan you money or give you credit and filing for a consumer proposal provides you with a pathway to becoming credit-worthy.
  • It will show on your credit report: Your consumer proposal will be noted on your credit report 3 years after you pay off all the debts included in the proposal (or 6 years after you sign the proposal) and you will be considered a high-risk borrower.
  • Student loans that are less than 7 years old can’t be included: You can still file a consumer proposal, but if you have not been out of school for longer than seven years, you will still be responsible for student loan payments after your proposal is complete
  • Your proposal could be rejected by your creditors: This is very rare, but if your creditors do reject your proposal, they often do so with a counter-offer. If they do make a counteroffer, you and your Trustee can either accept or reject it or make another counteroffer.

Filing a consumer proposal isn’t always the best option for every financial situation and filing a proposal does have a few disadvantages:

  • Secured debts can’t be included: A secured debt is when you are required to put up an asset as security or collateral for the loan.  Common types of secured debts are mortgages and car loans, in which the item being financed becomes the collateral for the financing.
  • It will negatively impact your credit score: A consumer proposal will affect your credit rating, but less drastically than a personal bankruptcy and you can begin rebuilding your credit throughout your proposal.  It’s important to note that your credit score is only one part of what lenders use to determine whether they’ll loan you money or give you credit and filing for a consumer proposal provides you with a pathway to becoming credit-worthy.
  • It will show on your credit report: Your consumer proposal will be noted on your credit report 3 years after you pay off all the debts included in the proposal (or 6 years after you sign the proposal) and you will be considered a high-risk borrower.
  • Student loans that are less than 7 years old can’t be included: You can still file a consumer proposal, but if you have not been out of school for longer than seven years, you will still be responsible for student loan payments after your proposal is complete
  • Your proposal could be rejected by your creditors: This is very rare, but if your creditors do reject your proposal, they often do so with a counter-offer. If they do make a counteroffer, you and your Trustee can either accept or reject it or make another counteroffer.

You can file for a Consumer Proposal in British Columbia if you have between $1,000 and $250,000 of unsecured debt (excluding your mortgage).

If you’re are dealing with more than $250,000 of unsecured debt, you may still be able to file, but some different rules will apply to your proposal. A Licensed Insolvency Trustee (formally known as a Bankruptcy Trustee) will be able to fully explain this option to you.

A consumer proposal will usually not affect your assets. If you continue to make the monthly payments on your mortgage and car loans as required, you will be able to keep those assets. In addition, if your creditors accept your proposal, you will be able to keep your other assets as well. Any money you have invested in certain funds will be protected when you file a consumer proposal. However, our team will be able to give you more specific information about what will happen to specific assets during the process, as it can vary from case to case.

Yes, you can and in fact it’s often encouraged that spouses file a joint Consumer Proposal if they have joint or common debts. This will allow you to manage your family’s financial situation together.

It’s not required that all debts included in the Consumer Proposal are joint debts, but the debts that are in both people’s names should be the majority of the debt included.

When you file your consumer proposal, you are typically required to hand over all your credit cards to your Licensed Insolvency Trustee. It might be difficult to obtain a new credit card while you’re completing your proposal, but you will be to use a prepaid or secured credit card during your proposal to help establish credit during your consumer proposal.

Yes, you can keep your car in a proposal. If you keep up to date with your car loan payments as they come due, you can keep this (and any other) asset.

Though a consumer proposal and bankruptcy both provide a way to relieve debt, there are some key differences between the two options. Understanding these differences will help to make it easier when deciding which option is best for your situation. The primary differences between these two debt relief solutions include:

  • Assets: In a consumer proposal, you will not have to surrender your assets, whereas, if you declare bankruptcy, you might have to.
  • Pre-Approval: A consumer proposal requires pre-approval by your creditors before it can be accepted. However, a bankruptcy is automatic, even though your creditors can still attempt to oppose your discharge.
  • Negotiated Payments: In a consumer proposal, your monthly payment amount will be negotiated upfront and agreed upon by you and your creditors. In contrast, payments during a bankruptcy are set by legislation and can potentially increase if your income rises.
  • Early Pay-Off: You may have the opportunity to pay off your consumer proposal early. On the other hand, bankruptcies have a pre-determined length set during the legislation.
  • Required Duties: You’ll have fewer required duties during a consumer proposal than you would during a bankruptcy. One example of this is that you don’t have to report your income and expenses in a consumer proposal.

The answer to this question will depend on what your creditors are willing to accept. In most cases, creditors will agree to accept a proposal that offers to pay only a percentage of what is owed. Creditors are willing to accept proposals because it still allows them to recover more of the debt than a bankruptcy would. This means you will likely only have to pay a percentage of what you owe, which helps you get out of debt faster.

Debt Consolidation FAQs

If you feel that your debt is becoming a problem, the first step you want to take is to analyze your spending and determine where you are spending your money and how your debt keeps increasing. Are you using your credit to make a lot of purchases? Are you only making the minimum payments on your credit card?

If you can identify these problem areas, you may be able to regain control of your debt on your own by spending less and putting more each month toward debt repayment. However, if your problems persist and you are struggling to make monthly payments, it may be time to talk to a Licensed Insolvency Trustee about your options. A professional will be able to help you navigate the issues and determine if a consumer proposal or bankruptcy is your best solution to get out of debt.

In order to save yourself from spiraling financial problems, it’s important to recognize that you’re in trouble early. This will help you act fast and prevent the problem from becoming even worse. As you get further and further into trouble, it can be difficult to recognize the signs, as they can quickly become a normal part of life. You may want to seek financial help if you are experiencing any of the following:

  • Your creditors have begun garnishing your wages to collect on your outstanding debts.
  • You are hesitant to answer your phone because you are concerned it is a debt collector calling.
  • Your creditors have threatened to sue you, repossess your property, or hire a collection agency to get their money back.
  • You have to borrow money from family or friends to cover expenses between paycheques.
  • You are beginning to use credit cards every month as a way to cover necessary expenses, rather than using them only for convenience.
  • You are only able to pay one creditor each month because you don’t have enough money to pay multiple.
  • You are receiving second notices about overdue accounts.
  • One or more of your utilities has been cut off due to outstanding bills.

If you need help with your growing debt problems, the best solution is to go to a Licensed Insolvency Trustee for assistance. They will be able to assess your current financial situation by evaluating your debt amount and income. Licensed Insolvency Trustees are the only professionals that can help you become debt free through a consumer proposal or filing for bankruptcy. Smythe Insolvency is a Licensed Insolvency Trustee firm that can help you through this process from beginning to end.

Insolvency is a term used in bankruptcy law to describe a situation in which a person has a high amount of debt. You are considered insolvent if your debts exceed the value of your assets or if you are unable to pay your debts on time. Insolvency is a more formal term that is used in legal proceedings and may not necessarily mean the person has to file bankruptcy. Those who are considered insolvent may also be able to use a consumer proposal to get out of debt.

A Licensed Insolvency Trustee (LIT) is a professional who is authorized to provide advice and services to people and businesses facing debt problems. These professionals are federally regulated to ensure they are providing their clients with the help and guidance they need. Meeting with a LIT will help you gain a better understanding of your situation, allowing you to make informed decisions about how to deal with your financial situation. A LIT will help you in the following ways:

  • Assist you in deciding which option is the best to help you handle your debt
  • Deal directly with creditors on your behalf
  • Oversee the sale of your assets in a bankruptcy and the distribution of the proceeds to your creditors
  • Prepare and file all paperwork for consumer proposals and bankruptcies

 

One of the alternatives to bankruptcy is filing a consumer proposal. This process allows you to propose an alternative repayment plan which your creditors can then choose to accept or reject during a voting process. In most cases, a consumer proposal allows you to pay only a percentage of your debts owed. Creditors are likely to agree to the terms because they’ll recover more than if you file bankruptcy. Some of the main differences between a consumer proposal and a bankruptcy include:

  • You’ll Set Your Payments: With the help of your LIT, you’ll propose a monthly payment amount that will be shared among your creditors, and they’ll have an opportunity to negotiate it. This is different than a bankruptcy where your monthly payment amount will be set by the court.
  • Your Assets Are Protected: During a bankruptcy, you often have to surrender your assets in return for the discharge of your debts. However, you won’t have to do this in a consumer proposal. Rather, you’ll pay your creditors a set monthly payment that you can afford.
  • You Can Pay It Off Early: Bankruptcies have a pre-determined time frame for completion. But consumer proposals can be paid off early if you have the funds to do so. This allows you to recover from your debts faster.

 

If you know you need to take legal action to help yourself get out of debt, you may now be wondering whether you should choose to file a bankruptcy or a consumer proposal. However, it’s important to know that in some cases, you may not have the choice between the two. There are certain eligibility requirements for each option. For example, you may not be able to file a consumer proposal if your debt is too high and you’re not earning enough money to cover the monthly payments, making bankruptcy the only option. Our team can help you determine which options you are eligible for. In most cases, a consumer proposal is a good idea if you have a steady income and can afford to make a monthly payment. However, if you cannot make payments, bankruptcy may be your only option, and you may have to surrender your assets to pay back your creditors.

Filing for bankruptcy and consumer proposals only work to forgive unsecured debts. Unsecured debt includes any type of debt that is not secured by collateral. This includes credit card debt, personal loans, and unsecured lines of credit. Unfortunately, secured debts, or debts that give the creditor claim to the asset, cannot be forgiven by bankruptcy or consumer proposals. Secured debts include your mortgage or vehicle loan, where the asset acts as collateral for the creditor. Even if you file for bankruptcy, unsecured creditors can attempt to collect the collateral if you do not make payments.

You can request a copy of your credit report by calling a credit bureau, like Equifax or TransUnion, and following the telephone prompts. In order for your request to be accepted, you must first confirm your identity by answering a series of personal and financial questions. You may also need to provide your Social Insurance Number or your credit card number. Once your identity is confirmed, you will receive your credit report in the mail.