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Collection Agencies & the Law (Ontario)

Collection agencies must abide by laws and rules set aside by federal and provincial governments. For instance, in Ontario, collection agencies must be registered with the Government of Ontario and must follow any rule set in the Collection and Debt Settlement Services Act.

What happens if I have an account that is with a collection agency?

Collection agencies must provide you a written notice through regular mail before they can contact you via telephone.

The notice must include the creditor’s name, the amount of money that the creditor says you owe and the name of the collection agency. There is also a statement that needs to be written that shows that the creditor has obtained this collection agency. Once the notice is sent, the agency must wait six days before they can contact you via telephone or in person. The Collection and Debt Settlement Services Act defines a “contact” as where the collection agent actually speaks with you. If a collector sends you an e-mail or leaves you a voice mail message, this is also considered a contact. If you do not answer the phone, or they do not leave a message, it doesn’t count as a contact. Regular mail also does not count as a contact. The number of contacts in a seven day period can vary based on province. In Ontario, a collection agency can’t contact you more than three times in a seven day period without your consent.

The Collection and Debt Settlement Services Act has specific prohibited acts when dealing with collection representatives. A collection agency cannot:

  • contact you on any day of the week between 9 p.m. and 7 a.m.
  • contact you on a Sunday, except between 1 p.m. and 5 p.m.
  • contact you on a holiday.
  • use intimidating, profane, threatening or coercive language
  • use excessive or unreasonable pressure
  • harass you
  • charge you any fee

What is a collection agency is calling me when they shouldn’t be?

Collection agencies may be forwarded an account from a creditor with no further instructions besides to collect the debt. You may inform the collection agent of the current status of the account. They cannot keep contacting you if:

  •  you send a registered letter to the agency stating that you dispute the debt and suggest the matter be taken to court. This is a form of a cease and desist notice to a collection agency.
  •  you (or your lawyer or paralegal) send a registered letter with your lawyer or paralegal’s contact information telling the agency to communicate only with your lawyer or paralegal
  • you tell them that you are not the person they are looking for, unless the agency has taken reasonable steps to make sure you are the person they are looking for

What happens if they contact my employer or family?

A collection agency, generally, can only contact your employer once to get your employment information.

A collection agency cannot contact your employer unless

  • your employer has guaranteed the debt
  • you have given them written permission to contact them
  • it’s about a court order or an automatic deduction from your salary (also called assignment of wages)

A collection agency cannot contact your spouse, family member, neighbour or friend except to get your address and telephone number. Some exceptions would be if the person has guaranteed the debt or you have given permission for the person to be contacted to act on your behalf.

A collection agency cannot give false or misleading information to any person. They also cannot recommend that a creditor take legal action against you without sending a notice first.

What if I feel as if the collection agency has violated the law?

If you feel like the collection agency you are dealing with may be breaking the law (E.G. Being coercive and threatening or providing misinformation and misrepresentation), please contact the offices of Rabideau Debt Law. We will be able to look over your case and provide you with information that would help you deal with the collection agencies and your debt.

If you do feel they have broken the rules, you may send them a letter and advise them on what you believe they did wrong and that you expect them to follow the law. If this does not resolve the problem, you may file a complaint with the Ministry of Government and Consumer Services. All complaints should have any supportive evidence and documents.

What if I can’t deal with this anymore? How do I deal with all this debt?

When an account gets sent to a collection agency, the goal is trying to get the payment in full as soon as possible. Obviously, this is difficult for most, so trying to arrange monthly payments can be another option.

Creditors you owe money to might:

  • take you to court and get a judgement against you, allowing them to seize your assets or take part of your salary
  • sell your debt to another person or collection agency
  • report the debt to a credit reporting agency such as Equifax, which could lead to you having a poor credit record

When you are paying off your debt, make sure to:

  • never send cash and always get a receipt or proof of payment
  • not bounce cheques or miss payments
  • contact the agency in writing if your financial situation changes
  • deal only with the collection agency to avoid any confusion

Debt is a stressful topic to deal with. The large payments, constant phone calls and intimidating letters can be overwhelming for some. Remember, you are not alone. The professionals at Rabideau Debt Law can assist you in resolving your unsecured debt. We have programs set to assist you based on your financial needs and help you become debt free with your unsecured debt.

Call us today and let us help guide you to a healthy financial future.

Income Tax filing Tips

As we approach the April 30th deadline for filing your income taxes I wanted to share with you some income tax filing tips our friends from Investia Financial Services shared with us.

• Be sure to take advantage of all income-splitting and pension-sharing opportunities. Taxpayers can apply to share their Canada Pension Plan (CPP) retirement income with their partners if both are 60 or over. While pension sharing is not considered to be the same as pension income splitting, CPP pension sharing accomplishes much the same thing — putting more income into the hands of the lower-income partner. You can find out more about CPP retirement pension sharing here. The post-retirement CPP benefit, which was introduced in the 2012 tax year, is not eligible for pension sharing.
• Those 65 and over can split several kinds of pension income, such as life annuity payments from a company pension plan, RRIF payments and annuity payments from an RRSP or deferred profit sharing plan. This is also possible for those under 65, when the spouse has died.
• Be sure to claim all eligible medical expenses. Tax experts say missed medical expenses are one of the most overlooked tax breaks. Many people don’t bother to add everything up because of the income-related threshold: only expenses that exceed the lesser of $2,171 or three per cent of net income can be claimed.
• Know the limits of using tax software or online tax-filing programs. Once you tell most of the well-known tax software programs that you’re a student, or a senior, or a parent, or have medical expenses, or have a spouse or equivalent, they’ll prompt you with relevant questions and automatically make sure you end up applying for any relevant credits. You can also avoid those pesky math errors.
• Please go to CRA’s website for a quick look at new income tax deductions for 2014 http://www.cra-arc.gc.ca/nwsrm/txtps/2014/tt141208-eng.html

Canadian Limitations & Exemptions

Newfoundland & Labrador

Time Limit from the date of Last Activity:
6 Years

Exemptions:

  • Food & fuel required by the debtor and his or her dependents during the next 12 months
  • Necessary clothing of the debtor and dependents up to $4,000;
  • Household furnishings, utensils, equipment and appliances up to $4,000;
  • One motor vehicle valued up to $2,000;
  • Medical and dental aids required by the debtor and his or her dependents;
  • Items of sentimental value up to $500;
  • Domesticated animals (pets) not used for business purpose;
  • Principal Residence to a maximum of $10,000;
  • Either: personal property used to earn income from an occupation, trade, business or calling up to $10,000 or if debtors’ primary occupation is a farming, fishing or aquaculture, personal property up to $10,000
  • A pension plan;
  • Property as prescribed by regulation;
  • Net income to a maximum prescribed amount.

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Alberta

Time Limit from the date of Last Activity:
2 Years

Exemptions:

  • Food for a 12 month period;
  • $4,000 for household furnishings and appliances
  • $5,000 for one motor vehicle
  • $10,000 for tools and other personal property used to earn income
  • Clothing up to a value of $4,000
  • Equity in a principal residence up to $40,000 (reduced to the debtor’s share if there is a co-owner)
  • If a bona fide farmer, 160 acres of land if the principal residence is located on the 160 acres
  • Farm property required for 12 months’ operations
  • Personal property required to earn an income to a maximum of $10,000
  • Social allowance, handicap benefit or widow’s pension, if these benefits are not intermingled with other funds
  • Health aids.

This province can either Seize or Sue not both.

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British Columbia

Time Limit from the date of Last Activity:
2 Years**
(Effective 01 June 2013)
**If the creditors right to sue a debtor first arose on or after 01 June 2013, the new Limitation Act would apply. However, if the creditors right to sue a debtor first arose before 01 June 2013, then the former 6 year Limitation Act may still apply provided the creditor discovered it prior to 01 Jun 2013.

Exemptions:

  • $4,000 for household furnishings and appliances
  • $5,000 for one motor vehicle ( the vehicle exemption is reduced to $2,000 if the debtor is has not made child maintenance payments)
  • $10,000 for tools and other personal property used to earn income
  • All essential clothing, medical and dental aids
  • Home equity of a Principal Residence of $12,000 if located within the Capital Regional District (Victoria) or Metro Vancouver, and $9,000 if located elsewhere. If two spouses own a principal residence together and both declare bankruptcy, they may each be able to claim a $9,000 or $12,000 exemption on the equity

This province can either Seize or Sue not both.

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Manitoba

Time Limit from the date of Last Activity:
6 Years

Exemptions:

  • 70% of any wages bound under section 4 is exempt from seizure or attachment or garnishment under a garnishing order issued out of any court but in no case shall the amount of the exemption be less than $250 for any person without dependants or $350 for any person with one or more dependants
  • All beds, bedding and bedsteads (including perambulators or cradles) in ordinary use by the debtor and his family
  • The necessary and ordinary wearing apparel if the debtor and his family
  • One cooking stove with pipes and furnishings, one other heating stove with pipes, two towels, one washbasin, one kitchen table, one tea kettle, one tea pot, one saucepan, one frying pan, and for each member of the family the following namely: one chair, one cup and saucer, one plate, one knife, one fork and one spoon
  • All necessary fuel, meat, fish, flour and vegetables for the ordinary consumption of the debtor and his family for 30 days
  • The tools, agricultural implements and necessaries used by the debtor in the practice of his trade, profession or occupation, to the value of $600
  • 50 volumes of books, the books of a professional one, one axe, one saw.

This province can either Seize or Sue not both.

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New Brunswick

Time Limit from the date of Last Activity:
2 Years

Exemptions:

  • Property held by the bankrupt in trust for other persons
  • Furniture, household furnishings and appliances used by the debtor or a dependent to a realizable value of five thousand dollars or to any greater amount that may be prescribed
  • Consumer goods in the possession and use of the debtor or a dependent if, on application, the Court determines that (i) the loss of the consumer goods would cause serious hardship to the debtor or dependent, or (ii) the costs of seizing and selling the goods would be disproportionate to the value that would be realized.
  • One motor vehicle having a realizable value of not more than six thousand five hundred dollars at the time the claim for exemption is made, or not more than any greater amount that may be prescribed, if the motor vehicle is required by the debtor in the course of or to retain employment or in the course of and necessary to the debtor’s trade, profession or occupation or for transportation to a place of employment where public transportation facilities are not reasonably available
  • Tools and equipment used by the judgement debtor in the practice of his or her profession or occupation
  • Medical and dental aides
  • GST credit payments and prescribed payments relating to the essential needs of individuals;
  • Income*
  • Retirement Funds**

*In determining how much of a judgement debtor’s income is exempt, the sheriff and the court may have regard to, but are not bound by any directives issued by the Superintendent of Bankruptcy under Section 68 of the Bankruptcy and Insolvency Act (Canada) relating to determining the surplus income of a bankrupt.
**In determining how much of a retirement fund is exempt, the sheriff shall have regard to: (a) the amount of income that will be exempt when the judgement debtor retires and the ability of the of the retirement fund to provide it, and (b) other income that will be available to the judgement debtor when the judgement debtor retires, including a pension from a fund that another Act prevents from being seized.

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Nova Scotia

Time Limit from the date of Last Activity:
2 Years

Exemptions:

  • Furniture, household furnishings and appliances used by debtor or a dependent to a realizable value of $5,000 or to any greater amount that may be prescribed
  • One motor vehicle having a realizable value of not more than $6,500 at the time of the claim for exemption is made, or not more than any greater amount that may be prescribed if the motor vehicle is required by the debtor in the course of or to retain employment or in the course of an necessary to the debtor’s trade, profession, or occupation or for transportation to place of employment where public transportation facilities are not reasonably available
  • Medical or health aids necessary to enable the debtor or dependent to work or to sustain health
  • Consumer goods in the possession and use of the debtor or a dependent if, on application , the court determines that (i) the loss of the consumer goods would cause serious hardship to the debtor or dependant, or (ii) the costs of seizing and selling the goods would be disproportionate to the value that would be realized.

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Yukon, Nunavut and Northwest Territories

Time Limit from the date of Last Activity:
6 Years

Exemptions*:

  • A 12 month supply of food and fuel;
  • Clothing (no dollar limit)
  • Household furniture and appliances up to $200
  • Health aids
  • Tools and animals of one’s trade, including motor vehicle, up to $600
  • Equity in a principal residence up to $3,000
  • RRSP’s associated with insurance policies

*Exemptions do not apply if a debtor is behind on child or spousal payments or has absconded from the territories, leaving no spouse or family behind.

Ontario

Time Limit from the date of Last Activity:
2 Years

Exemptions:

  • Necessary and ordinary clothing of the debtor and his/her family up to $5,650
  • Household furniture, utensils, equipment, food and fuel contained in and forming part of the debtors permanent home up to $11,300
  • Business tools, instruments and other chattels up to $11,300
  • If the debtor is a farmer, livestock, fowl, bees, books, tools and implements and other chattels up to $28,300
  • A motor vehicle valued up to $5,650
  • Most pension plans and life insurance policies

This province can both Seize and Sue.

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Prince Edward Island

Time Limit from the date of Last Activity:
6 Years

Exemptions:

  • Furniture, household furnishings and appliances used by the debtor or a dependant to a realizable of $5,000 or to any greater amount that may be prescribed
  • One motor vehicle having a realizable value of not more than $6,500 at the time the claim for exemption is made, or not more than required by the debtor in the course of or to retain employment or in the course of and necessary to the debtor’s trade, profession or occupation or for transportation to a place of employment where public transportation facilities are not reasonably available
  • Medical or health aids necessary to enable the debtor or a dependent to work or to sustain health
  • Consumer goods in the possession and use of the debtor or a dependent if, on application, the court determines that (i) the loss of the consumer goods would cause serious hardship to the debtor or dependent, or (ii) the costs of seizing and selling the goods would be disproportionate to the value that would be realized

This province can either Seize or Sue not both.

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Quebec

Time Limit from the date of Last Activity:
3 Years

Exemptions:

  • Unlimited Food and Fuel
  • Unlimited clothing
  • Household furniture and appliances up to $6,000
  • Motor vehicle (no dollar limit)
  • Disability aids and accident benefits
  • Tools of your trade (no dollar limit)
  • Farm property (no dollar limit)
  • An immovable service as principal residence, in certain cases, where the amount of the claim is less than $10,000
  • Support that has been court-ordered, donated or deceived in a bequest
  • Property declared exempt by a donor or a will
  • A portion of salary, based on the number of the debtor’s dependants
  • Benefits payable and employer contributions under a pension plan
  • Family papers and portraits, medals and other decorations and documents
  • Items used in religious worship
  • Income for services as a minister of religion
  • Food, lodging and transportation passes received for employment travel

This province generally requires a judgement for seizure. Client would need to first get sued before anything could be seized.

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Saskatchewan

Time Limit from the date of Last Activity:
2 Years

General Exemptions:

  • Necessary and ordinary clothing, including jewelry up to $7500 in value
  • Medical & dental aids required
  • Household furnishings
  • Pets up to a value of $2,000
  • One motor vehicle up to $10,000
  • Personal property required to earn income
  • Funds received as a result of compensation for injury
  • Prepaid funeral services
  • The homestead exemptions
  • Equity in your active residences (including trailers) up to $50,000
  • Most RRSP’s, RRIF;s and Pensions

Farm Property Exemptions:

  • Clothing, including jewelry, with a cumulative value that does not exceed the prescribed amount
  • Medical and dental aids or other devices required or ordinarily used by the farmer or a dependant of the farmer due to a physical or mental disability
  • Household furnishings, utensils, equipment and appliances
  • Domestic animals that are kept solely as pets with a cumulative value that does not exceed the prescribed amount
  • Produce of a farm sufficient, when converted into cash, to provide food and fuel for heating purposes for the farmer and his family until the next harvest
  • All livestock, farm machinery and equipment, including one automobile or one farm truck, that are reasonably necessary for the proper and efficient conduct of the farmer’s agricultural operations for the next 12 months
  • One motor vehicle, where it is necessary for the proper and efficient conduct of the farmer’s business, trade, calling or profession, but only if that motor vehicle is not in addition to one mentioned in (6)
  • Books related to any profession practiced by the farmer
  • Tools and necessary implements and office furniture and equipment, used be the farmer in the practice of his business, trade, calling or profession with a value that does not exceed the prescribed amount
  • Employment income in the amount set out in section 95 of the Enforcement of Money Judgements Act

This province can either Seize or Sue not both.

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Click on a province or territory to see the time limitation an unsecured creditor has to sue and assets that are exempt from seizure if a judgment is awarded.

Image Map Newfoundland and Labrador Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia Yukon Northwest Territories Nunavut

An unsecured creditor has a legal right to collect on an unpaid debt for a specified period of time from the date of the last activity on the account.

Unsecured creditor means a creditor that has not registered a mortgage or lien against a piece of property, example of unsecured creditor is a credit card.
Date of Last Activity means the date of the last payment or partial payment or the date that a debtor last acknowledged owing the debt to the creditor.

To Learn more about time limitations in Ontario and whether you have to pay your debt, please visit this blog.

How Bankruptcy affects your Home

Whether it is your first home or your third, everyone has an emotional attachment to their home. So it may be of great relief to find out that just because you file for bankruptcy does not mean you will automatically lose your home. The determining factors are:

  1. The amount of equity you have in your home
  2. Whether you can maintain payments associated with your home (mortgage, taxes, utilities etc.)

Keeping Your Home

Home equity is the difference between the home’s worth on the market and the outstanding balance of all liens on the property (Mortgage, taxes etc.).

If there is no equity in your home all you need to do is maintain the associated payments. Your mortgage lender cannot foreclose on your property just because you filed for bankruptcy.

If your home does have equity than you will need to pay the equivalent amount to the trustee in Bankruptcy.

Example: Based on recent sales of similar homes in her neighbourhood, Sally estimates her Ontario home would sell for $350,000. (The trustee may require confirmation of the value as part of the bankruptcy process.) Sally’s remaining mortgage is $340,000 and she has $900 outstanding on her property taxes. Below is the calculation of the estimated equity that Sally has in her home:

​Current market value of Sally’s home ​$350,000
Less:​
Remaining mortgage amount​ ​$340,000
​Property tax arrears ​$900
​Total liens ​$340,900
​Sally’s estimated home equity* ​$9,100

 

In Sally’s case, to file for bankruptcy and keep her home, she would have to pay the trustee $9,100 before her bankruptcy was complete. If she did not have any equity or negative equity (where the mortgage balance is greater than the value of the home), she could still keep her house and continue to pay the secured creditor. However, It is important for Sally to ensure that she can afford to maintain her home without jeopardizing her financial future, before deciding to keep it.

What if I have too much equity in my home?

Let’s take a look at Sally’s situation again but this time it’s many, many years down the road and the remaining mortgage amount is much lower.

​Current market value of Sally’s home ​$350,000
Less:​
Remaining mortgage amount​ ​$140,000
​Property tax arrears ​$900
​Total liens ​$140,900
​Sally’s estimated home equity* ​$209,100

 

In this scenario, in order for Sally to file for bankruptcy and keep her home, she would need to pay the trustee in Bankruptcy $209,100.00 before her bankruptcy was complete.  For many people this is simply not feasible and in most cases a person cannot be classified as insolvent. In cases like these we often recommend looking into other debt relief options such as an informal proposal, debt settlement or credit counselling where you can still manage to repay on your debts and not have your home factor into your repayment on such debts.

*For illustrative purposes only. Further deductions to home equity such as mortgage penalties, may also need to be considered

 

 

What is Bankruptcy?

Frequently Asked Questions

Bankruptcy might be the right option for you if you have little to no assets and the amount owing is beyond what you could expect to pay back in seven years time.

What is bankruptcy?

Bankruptcy is a formal, legally binding process, whereby you would file an assignment into bankruptcy which would eliminate most if not all of your outstanding tax and unsecured debt obligations.

What debts are not eliminated by bankruptcy?

  1. Fines imposed by a court;
  2. Money owing for things stolen;
  3. Things obtained by misrepresentation;
  4. Spousal support (alimony) or child support;
  5. Awards of damages by a court for intentionally inflicting bodily harm or sexual assault;
  6. Student loans that are less than 7 years old, (however, some student loans, older than 5 years but less than 7, may be eliminated based on hardship);
  7. Money owing due to fraud;
  8. Mortgages or lines of credit on real property that you continue to keep;
  9. Car loans on vehicles you continue to keep.

When is bankruptcy appropriate?

To find out if bankruptcy (or a different option) is the right choice for you, set up a meeting with one of our debt experts to discuss your personal circumstances.

We will evaluate your financial situation and explains the pros and cons of the various options that could help you solve your financial problems.

What protection does bankruptcy offer?

Bankruptcy provides a stay of proceedings and halts any legal actions that have been commenced against you. It would halt any garnishments against your wages and bank accounts. In addition, it would halt any harassing collections calls and collection letters.

What assets am I allowed to keep in bankruptcy?

Each province and territory has its own laws indicating what is exempt from seizure. For further information please visit this blog.

What responsibilities does bankruptcy entail?

If you file an assignment into bankruptcy, you must:

  • Provide complete financial disclosure including your sources of income, assets and liabilities;
  • Attend any meeting of creditors, if a meeting is requested (see below);
  • attend two counselling sessions;
  • advise of any change in your address, employment, income, assets, etc.;
  • pay surplus income if required;
  • generally be responsive and assist with any information that is needed or requested by your trustee.

How does bankruptcy work?

  1. We would work with you to discuss your current financial situation, to review your exempt and non-exempt assets and prepare your bankruptcy cost outline.  If you would like to keep certain non-exempt assets, such as your house, we would have any such non-exempt assets appraised by appraisers of our choosing. Once we have the complete financial picture put together, we would confirm with you all the details of what assets can be kept, which can be purchased from the trustee and what amount you would need to pay for surplus income, if required, during bankruptcy.
  2. Thereafter, you would sign the necessary paperwork with a trustee of our choosing in our offices or in the trustee’s office with one of our representatives.
  3. The trustee would file the assignment with the Office of the Superintendant of Bankruptcy (OSB).
  4. The trustee would forward a package to your creditors informing them of your assignment into bankruptcy, this package would also provide your creditors with a Notice of Claim, which your creditors would complete and return to the trustee in order to validate any debts they claim owing to them.
  5. If you decided not to keep certain non-exempt assets the trustee would seize such assets and sell them off with any proceeds of the sale being distributed to your creditors on a pro-rata basis.
  6. If your household income is above a certain amount per month you will need to pay half of the surplus income to the trustee.

What is Surplus income?

In addition to paying the trustee’s fees, you may be required to make additional payments to your trustee for distribution to your creditors. These are called surplus income payments.

Surplus income is the part of your earnings that exceeds the amount of income a family needs to maintain a reasonable standard of living. This amount is set by the OSB annually. The larger your family, the more you are allowed to keep; the more you earn, the more you are required to contribute.

If you have surplus income and it is more than $200 per month, then you will be required to contribute 50 percent of that amount to the trustee to be divided amongst your creditors.

What is a discharge from bankruptcy?

Being discharged from bankruptcy is the event that brings the bankruptcy to its end. It is what releases you from the obligation to pay any of your debts you had as of the date you filed for bankruptcy.

Timing of your discharge from bankruptcy (automatic discharge)

If this is your first bankruptcy and you are not required to make surplus income payments, because your surplus income is less than $200 per month, you will be eligible for an automatic discharge from bankruptcy in nine months. If your surplus income is higher, your bankruptcy will be extended to 21 months and you will be required to make payments from your surplus income.

Your discharge from bankruptcy will happen automatically if

  • the discharge is not opposed by the trustee, a creditor or the Office of the Superintendent of Bankruptcy;
  • you have attended the mandatory financial counselling sessions; and
  • this is your first or second bankruptcy.

To ensure that a greater percentage of debts are repaid to creditors, the following are the standards set out for when to expect that an automatic discharge will occur.

Timing of your discharge from bankruptcy (automatic discharge)

First bankruptcy Timing of discharge
Not required to make surplus income payments (surplus income is less than $200 per month) 9 months after filing
Surplus income is greater than $200 per month 21 months after filing

 

Timing of your discharge from bankruptcy (automatic discharge)

Second bankruptcy Timing of discharge
Not required to make surplus income payments (surplus income is less than $200 per month) 24 months after filing
Surplus income is greater than $200 per month 36 months after filing

Discharge hearing (non-automatic discharge)

If you do not qualify for an automatic discharge, the trustee will ask the court to hear your application for discharge. The court will then schedule a date for the discharge hearing.

I didn’t get my discharge from bankruptcy. How do I obtain one?

We often receive calls from individuals that have gone bankrupt on their own, did not use our representation, and did not receive an automatic discharge.

There are various reasons why you may not have been automatically discharged. They could range from something as simple as you failed to attend the two counselling sessions to something more complex as your creditors have challenged your discharge based on the fact that they have proof that you committed an offence under the Bankruptcy and Insolvency Act. An example of this would be: you transferred your house solely into your spouse’ ownership in an attempt to protect it from your creditors or hide it from your trustee.

In such instances, where we have been retained, we have been very successful at the discharge hearing and were able to get our clients discharged.

If this is the situation you find yourself in, I invite you to contact our office to discuss your options at 1-866-570-9988.

What is the Impact of bankruptcy on my credit rating?

A person who declares bankruptcy is assigned the lowest possible credit rating (credit score) of an R9.

The information in your credit report that affects your credit score is usually removed after a certain period of time. The amount of time depends on the type of information and where you live. Generally, it will be removed after six or seven years for a first bankruptcy, and after 14 years for subsequent bankruptcies.

Whether you can obtain credit after your discharge from bankruptcy will depend on your ability to convince lenders of your financial maturity and ability to repay the debt. There are no guarantees—no one is required to give you credit. However, there are measures that we utilize to assist our clients to rebuild their credit.

What is the impact of bankruptcy on my house or car?

Bankruptcies generally do not affect the rights of secured creditors. If you have decided to keep a non-exempt asset and you have continued to make the payments your ownership of such asset should not be affected initially.  You may have trouble refinancing your mortgage when it matures however, so typically it is best to renew your mortgage at that time, rather than shopping around for a new lender, who will require you to go through the entire application process, which would include pulling your credit report.

What is the impact of bankruptcy on my spouse?

Your debts are your own; however, if you and your spouse have a joint (co-signed) debt, and you file for bankruptcy, the creditor will look to your spouse to cover the entire amount of debt outstanding and if your spouse does not make the necessary payments the creditor may pursue legal action against them.

Only the portion of assets that you own is included in your bankruptcy. So, if you own assets jointly with your spouse, your portion may have to be sold and distributed to your creditors. Thus, a house that is solely in your spouse’s name would not be an asset to be divided in your bankruptcy.  However, if you recently transferred the house out of your ownership this would be viewed as fraud and, if not disclosed, would be an offence under the Bankruptcy and Insolvency Act, and would result in you not receiving your automatic discharge.

Your bankruptcy would not affect your spouse’s credit rating, as long as your spouse continues to keep up to date on the necessary payments to which they co-signed.

What is the impact of bankruptcy on someone who co-signed my loan?

Anyone who co-signed a loan for you will still be responsible for making the loan payments after you go bankrupt.

What is the impact of bankruptcy on my Wages?

Wages are not affected by bankruptcy; however, if you have surplus income, then you would be required to pay half of such amount to the trustee.

What is the impact of bankruptcy on student loan debt?

There are programs available to help if you are experiencing financial difficulty because of student loans.

The Government of Canada’s Repayment Assistance Plan helps those with federal student loans pay back what they can reasonably afford. If you have a student loan issued by your provincial or territorial government, contact the appropriate student financial assistance office to find out about their repayment assistance programs.

A discharge from bankruptcy will release you from your obligation to repay your student loans if you filed for bankruptcy at least seven years after you stopped being a part-time or full-time student. In the event that repaying the student loan will result in undue hardship, and provided you have made efforts to repay your loans, the court can reduce this period to five years.

What is a Consumer Proposal?

A consumer proposal might be the right option for you if the total outstanding balance on your unsecured debts does not exceed $250,000.

What is a consumer proposal?

A consumer proposal is a formal, legally binding process, whereby we would work with you to develop a “proposal” to pay a percentage of your outstanding debts to your creditors.

The payment under a proposal can take the form of a lump sum payment or a monthly payment for a term not exceeding five years or it could encompass part lump sum and part monthly payment.

The goal is to come to an amicable solution with your creditors which would allow you to avoid bankruptcy and ensure your creditors would be paid back more than they would receive in the event you filed a bankruptcy.

When is a consumer proposal appropriate?

To find out if a consumer proposal (or a different option) is the right choice for you, set up a meeting with one of our debt experts to discuss your personal circumstances.

We will evaluate your financial situation and explain the pros and cons of the various options that could help you solve your financial problems.

What protection does a proposal offer?

The proposal provides a stay of proceedings and halts any legal actions that have been commenced against you. In addition, you are allowed to keep all your assets, your house, your car, your RRSP and even your income tax return, if one is owed.

Your responsibilities

If you file a consumer proposal, you must

  • Provide complete financial disclosure including your sources of income, assets and liabilities;
  • attend the first meeting of creditors, if a meeting is requested (see below);
  • attend two counselling sessions;
  • advise of any change in your address; and,
  • generally be responsive and assist with any information that is needed to allow your creditors to decided whether or not to accept the proposal.

How a consumer proposal works

  1. We would work with you to discuss your current financial situation and prepare a proposal which would be provided to a trustee of our choosing.
  2. The trustee would file the proposal with the Office of the Superintendent of Bankruptcy (OSB) and submit your proposal to your unsecured creditors. The proposal would include the report on your personal situation and the causes of your financial difficulties.
  3. Creditors then have 45 days to either accept or reject the proposal.
  4. In order to be accepted a majority of your creditors, by dollar value, would need to accept the proposal. In the event that the majority of creditors would not accept the proposal, they would typically come back with a counter-offer for a higher amount or they would respond with a request for more information.
  5. Even though some proposals are not accepted immediately, after some negotiation and document disclosure, Rabideau Debt Law is seeing over 90% of our proposals being accepted.
  6. The creditors could also request and require you to attend a meeting of creditors.

When is a meeting of creditors held?

A meeting of creditors is held if one is requested by one or more creditors provided they are owed at least 25% of the total value of the proven claims.

A request for a meeting must be made by the creditors within 45 days of the filing of the proposal. The OSB can also direct the trustee to call a meeting of creditors at any time within that same period.

The meeting of creditors must be held within 21 days after being called. At the meeting, the creditors vote to either accept or refuse the proposal.

Understanding the vote to accept or refuse the proposal

At the meeting of creditors, a creditor’s acceptance or refusal of a proposal counts as a vote, provided it is received at or before the meeting. (If there is no meeting, an objection does not count as a vote on the proposal.)

As mentioned above, the number of votes corresponds to the total dollar value of the proven claims. The vote is decided by a simple majority of this dollar value (i.e., 50% plus 1).

If your proposal is accepted, the OSB (or any other interested party) has 15 days to ask the trustee to apply to the court to have the proposal reviewed. If no such request is made, the proposal will be deemed to have been approved by the court.

When your consumer proposal is accepted

If your consumer proposal is accepted, you will

  • be responsible for paying either a lump sum or periodic payments to the trustee;
  • be required to adhere to any other conditions in the proposal;
  • retain your assets (provided you make your payments to your secured creditors); and
  • be required to attend two financial counselling sessions.

If your consumer proposal is not accepted

If your consumer proposal is not accepted, you can

  • make changes to the proposal and resubmit it;
  • consider other options for solving your financial problems; or
  • declare bankruptcy.

How will a consumer proposal affect my credit rating?

A person who submits a consumer proposal is assigned an R7 for the specific debts included in the proposal.

This information will be removed from your credit report 3 years after you make the final payment on your proposal.

Your ability to obtain and use credit after a consumer proposal depends on convincing lenders of your personal financial maturity and ability to repay the debt; there are no guarantees that anyone will give you credit again, however, we have seen clients receive new credit facilities within 12 months of paying off their proposal. This, however, is based on your income versus expenses, your assets and your payment history since signing the proposal.

Once you have fulfilled the terms of your consumer proposal, you will receive a “certificate of full performance.” To ensure your credit record is updated we would invite you to send a copy of this document to the major credit reporting agencies.

If you meet the conditions of your proposal

If you meet the conditions in full, you will be legally released from the debts included in the proposal.

However, if you are making monthly payments and miss three payments or if your payment schedule is less frequent but your last payment is more than three months past due, the proposal will be deemed annulled. This means your creditors will be able to take action to collect the money you owe them, unless the court has ordered otherwise or unless an amendment to the consumer proposal has been filed. A consumer proposal that has been deemed annulled may be revived under certain conditions.

Important Tax Numbers for 2015

Can’t remember how much you can claim and for what? Here’s a list of the important tax numbers you need to remember for 2015 courtesy of our friends at Hamilton Insurance & Financial Management.

Working Clients:

• Maximum RRSP Contribution: The maximum contribution for 2016 is $25,370, and for 2015 is $24,930.
• TFSA limit: The TFSA limit for 2015 is $5,500 for a total of $36,500 in room available for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009.
• Maximum pensionable earnings: For 2015, the maximum pensionable earnings is $53,600, and the basic exemption amount is $3,500.
• Maximum EI insurable earnings: The maximum annual insurance earnings (federal) for 2015 is $49,500.
• Lifetime capital gains exemption: The lifetime capital gains exemption is $813,600 in 2015.
• Low-interest loans: The current family loan rate is 1%.
• Home buyers’ amount: Did you buy your home last year? You may be able to claim a non-refundable tax credit of up to $750.
• Medical expenses threshold: For the 2014 tax year, the maximum is 3% of net income or $2,171, whichever is less.
• Donation tax credits: after March 20, 2013, the first-time donor super credit is 25% for up to $1,000 in donations, for one tax year between 2013 and 2017.

Older Clients:

• Age amount: You can claim this amount if you were 65 years of age or older on December 31, 2014, and your net income was less than $80,980. The maximum amount you can claim is $6,916.
• Pension income amount: You may be able to claim up to $2,000 if you reported eligible pension, superannuation, or annuity payments.
• OAS recovery threshold: If your net world income exceeds $70,954 for 2015, you may have to repay part of or the entire OAS pension.

Clients with Children:

• Children’s fitness tax credit: If you have children that have played baseball, soccer, or participated in some other program of physical activity in 2014, you may be able to claim up to $1,000, per child, of the cost of these programs. You can claim an additional $1,000 for each eligible child who qualifies for the disability amount and for whom you’ve paid at least $100 in registration or membership fees for an eligible program.
• Children’s arts tax credit: If your children participated in a program of artistic, cultural, recreational, or developmental activity such as tutoring in 2014, you may be able to claim up to $500 of the fees paid, per child, on these programs. You can claim an additional $500 for each eligible child who qualifies for the disability amount and for whom you have paid at least $100 in registration or membership fees for an eligible program.
• Family caregiver amount: If you have a dependant who’s physically or mentally impaired, you may be able to claim up to an additional $2,058 in calculating certain non-refundable tax credits.
• Working income tax benefit (WITB): The maximum benefit for single individuals without children is $998. The maximum benefit for families is $1,813.
• Disability amount: The amount for tax year 2014 is $7,766.
• Child disability benefit: The Child Disability Benefit is a tax-free benefit of up to $2,650 per year ($220.83 per month) for families who care for a child under age 18 with a severe and prolonged impairment in physical or mental functions.
• Universal child care benefit (UCCB): The UCCB is a monthly payment of $160 per eligible child under the age of 6 years. For 2015, there is a proposed new benefit of up to $60 per month for children aged 6-17.

What is Debt Settlement?

Debt settlement is the process whereby we will negotiate, on your behalf, with your creditors a reduced amount in exchange for a lump sum payment.

Only unsecured debts, such as credit card debts, lines of credits, loans and medical expenses to name a few, can be enrolled into the program.  Secured debts, such as mortgages, car loans (where you are still in possession of the vehicle) and line of credits secured by the equity in your home, cannot be enrolled in the program. Canada Revenue income tax, HST and source deduction debts, student loans, court orders and fines and amounts required to be paid in order to receive a discharge from bankruptcy cannot be enrolled in the program.

The lump sum payment can be achieved in a few ways:

  1. By using the equity in your home with an institutional or private mortgage;
  2. Loans from an institutional or private lender;
  3. Funds saved on a monthly basis into a trust account.

For clients that have equity in their home and can qualify for a mortgage, either by refinancing or applying for a private second mortgage, we would use those mortgage funds to negotiate your debts and receive substantial savings.

The same is true for clients that can qualify for a personal or business loan; we are able to use those funds to settle debts on a lump sum basis.

For clients that are unable to put together a lump sum amount, we offer the option for our client’s to save funds, on a monthly basis, into a trust account where funds accumulate over time for the settlement process. Once enough funds are saved we will begin negotiating with your creditors on an individual basis.

Our legal fee for negotiating your debts is 17% (plus taxes) of the total enrolled debt amount. For the lump sum settlement plans, this 17% would be paid out with each debt that is settled. For instance, if we were to settle your Visa credit card debt of $10,000, on paying out such settlement we would collect our legal fee of $1,700 (plus taxes).

For settlement plans where funds need to accumulate in a trust account, our legal fee would be paid out over the first 18 months of the program for programs that are 36 months or more, or over half the duration of the term for programs that are less than 36 months. For instance, taking into consideration that same $10,000 Visa credit card, we would collect our legal fee of $1,700 (plus taxes) over the first 18 months of the program.

In addition, for monthly payment settlement plans, there is a monthly bank fee in the amount of $11.35. Lastly, there is a monthly maintenance fee which is $49  (plus applicable provincial and federal taxes) for each month that you are enrolled in the program after the initial 18 months, or after half the duration of the program, whichever is shorter.

Advantages of Debt Settlement

Very often we are able to settle debts with our client’s creditors for 30% – 50% of the existing balances. This is because we have built up a familiarity with the credit card companies and can come to a settlement agreement quicker and at a more favorable rate than you would be able to on your own.

Disadvantages of Debt Settlement

The most obvious disadvantage is that you are going to encounter annoying calls from your creditors because you have decided to withhold payments from them. Another disadvantage is that your credit rating will be damaged. The exact extent of the damage is client specific and takes into account many factors that are explained in a series of blogs on credit: Credit Rating. Another possibility is that your creditors may decide to commence legal action against you if they are able to track down any assets of yours, using a skip tracer. If they discover, in their search, an asset or assets that would satisfy the amount owing to them they could commence litigation.

How we protect your legal/financial interests?

Since we are a law firm we are able to advice you on the steps that are necessary to defend against any legal actions or claims. We offer many other debt resolution plans besides debt settlements and can, if you choose, transfer you into one of those options, being a consumer proposal or bankruptcy.

In addition, often but not always, we are able to negotiate with your creditors and have the whole debt purged from your credit report which minimizes any damage to your credit report.