Naturally, you have a lot of questions about consumer proposals, bankruptcy, and the services a Licensed Insolvency Trustee can provide. This FAQ is here to give you at least some of the answers you need. Below are the most common questions that Melanie receives from people that contact her for help. If you still have questions, just call Melanie at (780) 784-8638 and she’ll be happy to provide all the answers you need.
Consumer Proposal Questions
First, it’s important to note that there are no upfront costs that you pay before setting up a consumer proposal. You can meet with a trustee for a free debt assessment to learn about your options and how a proposal would work. Then you can decide if you want to move forward.
If you do, all fees and costs will be included in the payments you make during your proposal’s repayment period. You pay nothing out-of-pocket. The fees are deducted from the payments to your creditors.
There is a filing fee for the Government of Canada that is currently $104.24.
Consumer proposal notations remain for three years from the date you complete the proposal.
Debts repaid under the proposal will have an R7 or I7 designation for revolving credit lines and installment loans respectively.
After three years, these notations will fall off your credit report automatically.
This depends on your financial situation and the terms of the proposal that you and your trustee develop. By law, a consumer proposal can take no longer than 60 months, so the longest it can take is five years.
However, proposals can less time in many situations. For example, if you can make a lump-sum payment, either by selling an asset or getting assistance from a family member, this can reduce the amount of time your proposal will take.
You and your trustee will evaluate your finances during your free debt assessment to determine how your proposal will be structured and how much time it will take. You will know that timeline by the end of your assessment, then you can decide if you want to get started.
This depends on your financial situation. Most consumer proposals are paid with monthly fixed installment payments. You make the same payment every month throughout the term of your proposal. In some cases, payments may be less frequent. There can also be lump-sum payments made in certain situations.
The payment plan for your consumer proposal will be set during your free debt assessment with your trustee.
You will send your payments directly to your Licensed Insolvency Trustee. Then the trustee distributes the payments among your creditors as agreed in your proposal.
It is possible to amend a consumer proposal if you are unable to make your payments as scheduled. If your financial situation takes a turn for the worse during the repayment period, contact your Licensed Insolvency Trustee immediately. The trustee will help you evaluate your new financial situation to determine what adjustment needs, if any, can be made to your repayment schedule.
Be aware that the amendment will need to be approved by your creditors, just as your initial proposal was approved. Once approved, the new payment schedule gets filed by your trustee and takes effect immediately.
If you are having trouble making your payments, contact your Licensed Insolvency Trustee as soon as possible. They will do what they can to ensure that you can keep up with your proposal, including amending your payments if your financial situation takes a turn for the worse after you file.
By law, you can miss or defer two payments during a consumer proposal if you have trouble. However, if you miss three monthly payments or one payment by more than three months if you’re not on a monthly repayment schedule, your consumer proposal will be automatically annulled.
There is a possibility that your proposal can be reinstated, but it is subject to creditor or court approval.
You may file more than one consumer proposal, but not for the same debts. If your first consumer proposal is annulled, you cannot file a new proposal to pay off those debts afterwards.
However, you can file a subsequent proposal for new debts. If you filed a previous proposal and now face new challenges with new debts, you can file again. You can do so regardless of whether the previous proposal was completed or annulled.
In most cases, no one—except for you, your trustee and your creditors.
The filing will become part of a permanent public record of filings with the Office of Superintendent of Bankruptcy (OSB) Canada. But this record is really only checked and reported publicly in the paper for high-asset filings.
The amount of time your bankruptcy will take will vary based on two factors:
- how many times you have filed for bankruptcy
- if you need to make surplus income payments as part of your duties
If it is your first time filing and you do not have surplus income payments, you can receive an automatic discharge in nine months if you complete all your duties. If you have surplus income payments to make, you can receive a discharge in 21 months.
If you have filed before and do not have surplus income payments, you will receive an automatic discharge in 24 months. If you have surplus income payments, you should receive a discharge in 36 months.
Declaring bankruptcy will have a negative effect on your credit. Debts discharged through bankruptcy will have R9 notations for revolving debt and I9 notations for installment debt. This status will remain on your credit report for six years after you receive the final discharge of your debts.
If you have filed before, the bankruptcy notations in your credit report will remain for fourteen years from the date of discharge.
If you’re like most people, the answer will be no. You will not lose your assets by declaring bankruptcy.
In most cases, your assets will qualify for exemptions. Exemptions are set based on the territory or province where you live. Provinces like Alberta have broad rules for exempted assets that allow most people to keep everything.
In some cases, you may need to pay equity costs as part of your duties during bankruptcy to keep secured assets, such as your home or vehicle. This will depend on the equity of your assets, which is the current value of the asset minus the remaining balance owed on its loan.
Your trustee will evaluate your assets during your free debt assessment and let you know about the exemptions where you live. By the end of the assessment, you will be fully informed on how exemptions will apply to your assets and how much, if any, equity costs you will need to pay if you file.
Certain debts will not be eligible for discharge at the end of your bankruptcy. This includes court-ordered alimony and maintenance, as well as student loans less than seven years old.
However, those debts will still participate in your bankruptcy. In fact, they are given preferred status. That means that these debts will be paid first out of any payments you make as part of your duties.
This can be highly beneficial. For example, let’s say you have maintenance and alimony payments of $500 that you haven’t been able to make for the past 12 months due to your financial hardship.
As you make payments during your bankruptcy, that claim would be paid first out of any payments you make. This will help you pay down the arrears faster. At the end of your bankruptcy filing, you will still be responsible for paying any remaining arrears owed.
In most cases, the only people that will know about your filing will be you, your trustee, and your creditors.
Bankruptcies are officially filed as part of a permanent public record with the Office of the Superintendent Bankruptcy (OSB). As the name suggests, this file is publicly accessible. However, unless you are a public figure or involved in a high-asset bankruptcy with more than $15,000 realizable assets, it is unlikely that anyone will know.
Licensed Insolvency Trustee Questions
Trustees that oversee bankruptcies and consumer proposals are licensed by the province or territory where they operate. They are federally regulated by the Office of the Superintendent of Bankruptcy (OSB) Canada. They must adhere to all federally mandated practices and follow a strict Code of Ethics for Trustees.
There is no fee charged to meet with a Licensed Insolvency Trustee (LIT). You can receive a free debt assessment from a trustee at no charge. This allows you to have the trustee review your finances and discuss options for relief without incurring a bill.
Your trustee will be paid out of the payments you make through a consumer proposal or your bankruptcy duties once it is filed with the OSB.
There is a national Licensed Insolvency Trustee registry that you can access and search for trustees in your area based on your location. Once you conduct this search, make sure to check online for independent reviews of trustees and assess their experience through their website or your free consultation.