BANKRUPTCY PROTECTION FAQ


Which are the first signs of financial difficulties?

  • Are you turning to credit to cover monthly expenses?
  • Do you frequently turn to overdraft on your banking account?
  • Are you only paying the monthly minimum to credit cards accounts?
  • Are you asking for new loans in order to pay the old ones?
  • Are you behind on your rental expenses, mortgages or utilities?
  • Are any of your creditors threatening to sue you?
  • Is your salary being garnished?
  • Are money problems causing you instability in your family?
  • Do you frequently feel tormented because of your money problems?

If you answered yes to any or all of these questions, it is strongly recommended you seek advice from a certified Debt Counsellor. Remember, the sooner you assess your financial situation, the more options you will have to be in control and resolve your financial problems faster.

Possible solutions you may encounter depending on your situation:

  • Advising on financial subject and budgets
  • Possibility of obtaining loans for consolidation of debt if you act on time
  • Direct arrangements with creditors
  • A Consumer Proposal (a formal payment arrangement)
  • Bankruptcy protection


What must I know when meeting with a Certified Debt Counsellor?

When you need to meet with any certified Debt Counsellor, it is very important to have references and to know of experiences that other people may have had. You must be sure that he/she understands your concerns and that he/she has the experience to deal with this type of situations. You must feel at ease with the Debt counsellor; he/she must be a receptive and understanding person. At the same time, the Debt Counsellor must offer sufficient information so that you may make an informed decision; do not feel under any pressure on the first meeting. Not all the Debt Counsellors are alike. Here are some tips you should know before meeting with a Debt counsellor:

  • What is the reputation of the Debt Counsellor?
  • Do you have references and know of experiences that other persons may have had with this Debt counsellor?
  • Is the Debt Counsellor known to be a highly understanding, receptive and empathic person to deal with persons that have this so-stressing type of situations?
  • Is the Debt Counsellor prepared to provide you with sufficient information without forcing you to make a decision on “the first meeting?”
  • In “the first meeting”, does the Debt Counsellor present oneself as a sensible person that helps and understands your problems?
  • Does the Debt Counsellor provide you with different possible alternatives to eliminate your financial problems?
  • Is the debt Counsellor experienced?


What must I obtain on the first meeting with a Certified Debt Counsellor?

It is essential for you to feel at ease with your Certified Debt Counsellor. After all, your Debt Counsellor is the person who is going to guide you during a very difficult period of your life.

At the same time, the Debt Counsellor must offer sufficient information so that you can make an educated decision; do not feel under any pressure on the first meeting.

After the first meeting, you must well understand what needs to be done to recuperate your financial freedom and your peace of mind. You must have a complete panorama of your financial situation, including the amount of your debts, the value of your properties, your monthly income and expenses. At the end of the meeting, you should obtain different available options, and at the same time, you will know what can happen to your diverse properties, according to the different options.


What is a consumer proposal and how it can help me to resolve my case?

The proposal is a settlement between you and your creditors; this settlement allows you to reduce the amount of your debts. When you present a Consumer Proposal, the interest stops. After the proposal is accepted, and you make the agreed payments without interest, the total of your debts is considered to be liquidated after finishing the proposal. A Consumer proposal allows you to keep all your properties and at the same time it reduces the load of your debt.


What are the advantages of a Consumer Proposal?

The consumer proposal allows you to adjust your monthly payments according to your personal situation, keep your properties and accumulate more properties with no danger of leans, stop interest payments, and stop the most part of law suits. Usually, your creditors accept an amount lower than the total payment; your degree of solvency is less affected that in the cases of a bankruptcy. However, to prepare a Proposal can be very complex; therefore, it is important to rely on a qualified Debt Counsellor. This way, you receive the best possible advice without having to directly deal with your creditors.

  •  You do not have to declare Bankruptcy.
  •  You will be able to keep your assets (as long as you continue to make payments on your secured loans).
  •  Your unsecured creditors will have to stop all of their collection actions against you.
  •  Any garnishees on your wages will be stopped.
  • You will be able to pay back your unsecured creditors at reduced amounts, based on your actual ability to pay at the time the Proposal is filed.
  • Interest and penalties stop accumulating upon filing your proposal


What is bankruptcy protection?

A bankruptcy is a legal process that immediately stops all collections and actions of the creditors, including demands on properties and salary; it gives you the opportunity of releasing from your debts and the chance of a new beginning. This process includes counselling sessions that will help you recover control over your finances. In the majority of cases you can inclusively keep properties, such as your home and your automobile.


How do I know which is my best option?

May it be a consumer proposal or a bankruptcy protection, both options present advantages and disadvantages depending on your personal situation. In order to be able to understand which the best option for you is, it is wise to consult with a Certified Debt Counselor who will be able to help you to organize a plan of action that best suites you.


How will a consumer proposal or a declaration of bankruptcy protection affect my credit record?

If your payments are delayed, it is probable that the credit bureau may have been notified and the record be ruined. In spite of this, when a proposal or a bankruptcy declaration is presented, the credit bureau is notified. A first bankruptcy remains registered in your record during a six years period; a second bankruptcy during 14 years; a Consumer Proposal remains registered in your record for a three years period after having paid in full your Proposal. During the consulting sessions you learn about some tools to begin constructing the credit on an immediate form.


What is the meaning of a discharge?

The discharge is the legal process of a bankruptcy that will release you of your debts. The time it takes varies depending on the number of times you have declared bankruptcy. For the first timers, it will last 9 or 21 months. If you have declared a bankruptcy more than once, the process lasts 24 or 36 months.


What debts are not affected by a Bankruptcy or by a Consumer Proposal?

The bankruptcy process alleviates persons from all the normal debts, including credit cards, banking loans and debts that your may have with the Ministries that are responsible for taxes (Canada Revenue Agency). However, there are certain debts that cannot be extinguished, including child support and alimony; indemnifications for damages and prejudice, corporal damages, sexual assault or death caused by negligence; Court’s fines including traffic infractions; responsibilities in case of fraud and student loans of less than seven years of attending studies. With the help of a Debt Counsellor, you can be able to stop legal actions interposed by these creditors until your rehabilitation, and/or reduce the amount of your debt.


I am not in the position of paying my student’s loan. What must I do?


If you declare a bankruptcy or make a Proposal within the seven years after leaving school, the actual legislations rule that you must pay your student’s loan. In spite of this, you can reach a certain level of protection when presenting a Consumer Proposal or declaring a bankruptcy. These protections create a period during which the authorities in charge of the student’s loans can not initiate a legal action against you. Besides, they allow you to pay your debts that are not student’s loans in a much more organized and manageable manner, which provides you with a future cash flow more solid in order to deal with your future student’s loans payments.


Will the Canada Revenue Agency accept the presentation of a Proposal in relation with taxes that I owe?

In many cases, the Canada Revenue Agency (CRA) is treated as a regular creditor, and it can accept or reject your proposal, just the same as the other creditors. The CRA has recently created specials teams for situation of proposals and bankruptcies with the finality of handling these situations.


What happens if I can't afford to keep paying my Proposal?

If you miss three months of your payments on your Proposal and do not file an Amendment to your Proposal, your Proposal will no longer be a legally binding agreement and your creditors will be free to take legal action against you for the full amount of the debt you owe them, your next option may be to declare bankruptcy protection.


What are the advantages of Bankruptcy Protection?

  • Your unsecured creditors will have to stop all of their collection actions against you including legal actions and garnishees on your wages or bank accounts
  • You will be able to make a ‘fresh start’ and move on with your life
  • It’s usually the fastest way to get rid of your debts

How much does a bankruptcy cost?

The cost of your bankruptcy will be dependent on a number of factors including the value of your bankruptcy estate, and your household income.


Are all my debts covered by a bankruptcy?

Personal Bankruptcy only covers your unsecured debts. However, there are certain unsecured debts that are not covered by a bankruptcy, such as child support, alimony, fines and penalties imposed by the Court, and debts that are found to be fraudulent. Student loans may be covered by bankruptcy if the individual ceased to be a student more than 7 years ago. Secured debts such as mortgages and car loans are also not covered in bankruptcies unless you relinquish ownership of these assets.


How long a bankruptcy last?

Normally, a bankruptcy from filing to discharge takes nine months, however there are a number of factors that can change the length of a bankruptcy. For example: if there is ‘surplus income’, if this is not your first bankruptcy, if there are disputes from your creditors regarding your bankruptcy, or you fail to comply with your duties as a Bankrupt, etc.


How do I rebuild my credit after Bankruptcy or filing a Consumer Proposal?

It will take time to re-build your credit rating – but it can be done. Your Debt counsellor will help you identify those things you can do to re-establish your credit rating faster.


How long will a Consumer Proposal or Bankruptcy stay on my credit record?

A Consumer Proposal stays on your credit record for three years after it is completed, and a Bankruptcy (if it is your first Bankruptcy) stays on your credit record for six years after discharged.


What is my credit rating when I file a Bankruptcy or Consumer Proposal?

Presently a bankruptcy is rated as an R9 (bad debt) and a Proposal is rated as an R7 (making regular payments through a special arrangement to settle your debts).


Can I sponsor a family member if I file a Consumer Proposal?

Yes, only a bankruptcy will affect you in this regard.


What if some of my debts have a guarantor or co-signer?

If you file a consumer proposal or bankruptcy protection, a guarantor, co-signer or supplementary credit card holder will likely be held responsible for the debt, the proposal or bankruptcy will protect you not your guarantors.


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