Ask yourself if you are:

• Afraid to answer the phone because it might be a collection agency calling
• Using credit cards as a necessity rather than a convenience
• Only make the minimum payment on several credit card balances
• Your bank would not approve a consolidation loan
• Financial problems are affecting your health, job or marriage
• Received second notices about overdue accounts
• Creditors have threatened to sue
• Utility companies have cut off services because of outstanding bills

A Licensed Insolvency Trustee (formerly Trustee in Bankruptcy) is a person licensed by the federal government to administer proposals (which are financial settlements with creditors) and bankruptcies (when a proposal is not affordable) and most trustees are also authorized credit counsellors.  The trustee can give a debtor (someone who owes money) information and advice about the proposal process, the bankruptcy process, as well as several other options.

Depending on your specific financial situation, there may be several different options.

These include:

• Filing a Proposal to your Creditors
• Filing Bankruptcy
• Refinancing your Mortgage
• Obtaining a Consolidation Loan
• Credit Counselling
• Negotiations with Major Creditors
• Assistance from Family and Friends

Please be aware that sometimes a combination of the above options is required and that Credit Counselling is always provided by the Trustee under both Proposal and Bankruptcy options.

A Consumer proposal is an agreement prepared with your Trustee to offer a settlement (i.e. less than full payment) to your creditors, when you are unable to afford your regular monthly debt payments.  The filing of a Proposal stops all legal actions undertaken or contemplated by your unsecured creditors. It also creates ‘breathing room’ so that creditors can be approached and the financial situation explained to them by your Trustee.

Most Proposals are funded by monthly payments; the monthly amount is determined with your Trustee and is based on your income, living expenses and family responsibilities.

Bankruptcy is a legal process (similar to a Proposal) that provides immediate relief from your unsecured creditors when you can’t pay your debts and a Proposal is not affordable.

Proposals should provide a better result for the unsecured creditors than a bankruptcy would, as a majority of the unsecured creditors (based on dollar value) must approve the Proposal plan.

Proposals may be a better choice when:

• Person’s job may not allow them to be bankrupt;
• Income is significant and would require large payments based on the bankruptcy guidelines;
• To avoid risk of losing assets in a bankruptcy;
• The person does not want the bankruptcy option for personal reasons.

Consumer Proposals are for settling with unsecured creditors.  Secured creditors such as car loans and mortgages still have to be paid, or else the secured creditor seizes the asset.

Unsecured debts include:

• Credit cards
• Income taxes
• Personal loans
• Payday loans

Certain types of debt are not erased by the bankrupt’s discharge.

They are:

• Fines imposed by a Court;
• Debts owing relating to stolen property;
• Alimony, support and/or maintenance payments (arrears and future payments);
• Student loans if bankruptcy is filed before the seven year anniversary of the finish of studies.

The Administrator is paid out of the total Proposal payments, based on the fees prescribed by the Bankruptcy and Insolvency Act.   Each situation is unique, accordingly, we recommend that you contact McLennan & Company Ltd. so that we can review your situation with you.

The procedure begins at the office of a Licensed Insolvency Trustee (formerly Trustee in Bankruptcy) who acts as Administrator of Consumer Proposals.  He or she will ask you about your financial situation, assess it, and advise you about what kind of a Proposal may be best for you and your creditors, or if a Proposal is the right option.  Your creditors will then have 45 days to vote on your Proposal, which results are reviewed with you by the Administrator.

Yes, income tax debts are included under both Proposal and Bankruptcy options; meeting with a Trustee often motivates people to file their outstanding income tax returns, so that we can estimate how much is owed.

Student loan debt greater than seven years old will be included in a bankruptcy or a proposal. Bankruptcy does not release a student loan if the bankruptcy occurs within seven years after finishing studies. On application by a discharged bankrupt, the Court can order the discharge from a student loan at any time after five years, if the person has acted in good faith and will continue to experience financial difficulty in paying the student loan.

Many people have assets with security against them and have no equity, such as their house or car.  As long as the payments are up to date with the secured creditors you will be allowed to keep those assets.

Unsecured assets you’re allowed to keep are as follows:

• House Equity $10,000.00;
• Furniture and Household Effects up to $13,150.00;
• Vehicle up to $6,600.00;
• Tools of Trade up to $11,300.00;
• Personal Effects (includes jewellery, personal items, etc) up to $5,650.00;
• RRSPs (except for funds that have been contributed in the year preceding bankruptcy in some cases).

To keep your house you must continue to make your mortgage payments and the Trustee must assess if there is any equity in the house. If equity greater than $10,000.00 exists, you need to make arrangements to buy back the equity with the Trustee.

The exact cost of filing a bankruptcy may vary if you have surplus income based on the bankruptcy guidelines or assets that are not exempt.  At McLennan & Company Ltd., monthly payments are arranged to cover the costs.   However, it is important that you come in for a free initial meeting so that we can go over your specific situation.