Bankruptcy London

When I meet with people or talk to them over the phone about their financial situation, the above question is one that is asked quite often.

For those of us in this business,it sometimes comes as a surprise, because a trustee in bankruptcy does not take money from a paycheque.

The bankruptcy/proposal process looks at household income and compares it to the Superintendent of Bankruptcy’s standards. These numbers have been compiled from data across the country and all debtors are required to follow the same guidelines.

If you earn more than the standard for the number of people in your household, while looking at issues like support payments or child care costs or medical expenses, then there is a requirement to pay a portion of that extra amount into the personal bankruptcy or make it available to the creditors in a consumer proposal.

A trustee is able to garnish wages under Section 68 of The Bankruptcy and Insolvency Act, but surplus income payments are expected to be made voluntarily.

If you wish to investigate more on this topic, please see our website at www.hoyes.com and look at Download Application and Surplus Income Worksheet. If you wish to talk to me about your situation in person, please call our London office at 519-435-1500 or 310-PLAN. We can look at various options that would be available to you.

In my last posting I spoke about whether a debt is dischargeable and realized this can be somewhat confusing to the people I meet.

Some debts are very clear, such as child or spousal support, when deciding if they are dischargeable. Others are not.

A quick and simple list of non-dischargeable debts is:
- fines, penalties, restitution orders (this means things like parking or speeding tickets, a court order to pay monies for damages of some sort);
- alimony, child or spousal support (as ordered by the courts or separation/divorce agreements);
- student loans 10 years old or less (if guaranteed by a government body - do not get confused with financial institutions who offer a student line of credit)
- amount a creditor would have received who was not disclosed to the trustee (this is why it is important to disclose all people/creditors to whom you owe money, whether related or not);
- fraud, embezzlement, misappropriaton of funds and obtaining property by false pretences or fraudulent misrepresentation (this one is more complicated and must be proven in a court of law).

If you are experiencing financial difficulties and visit our offices, I will review your list and advise if there could be a problem with a non-dischargeable debt. However, it is ultimately the creditor who decides if they will pursue a debt through the courts after discharge. If your relationship with a creditor is honest, unless it meets one of the above criteria, it should be dischargeable. The trustee cannot guarantee all your debts will be discharged in a personal bankruptcy or a consumer proposal.

Call Hoyes, Michalos and Associates Inc. at 310-PLAN to receive a free initial consultation in London to discuss your financial situation.

There are many types of lawsuits and the impact can be slight or severe on a debtor’s financial situation.

Creditors must issue a statement of claim, one of the first steps in a lawsuit, in order to collect funds by garnishment or court orders. This is what collection agencies mean when they say the next step is “legal”. See our website at www.hoyes.com to find out more information about this process.

Another type of lawsuit is when someone has been sued for car accidents, or injuries or loss of income or something similiar to that. These lawsuits also have to be considered in a bankruptcy or proposal situation and the trustee has to ensure that if a lawsuit is ongoing that the debtor understands the impact of doing the consumer proposal or personal bankruptcy.

If the lawsuit is settled and the judgement is rendered prior to the date of insolvency, then the trustee should be able to tell you if the debt is dischargeable or whether you would have to pay it when the bankruptcy or proposal is completed. If the lawsuit is ongoing, the usual course is for the applicant to get leave of the Bankruptcy Court to continue the action in order to come up with definitive numbers so a claim can be filed in the bankruptcy. Sometimes insurance companies are involved and they also require final numbers in order to write off the claim or settle it.

This is why it is important for the trustee to review the lawsuit documents to discuss all these factors with the debtor. The more information available, the better informed a decision can be as to whether The Bankruptcy and Insolvency Act can be used.

There can be many more issues surrounding lawsuits, so if you find you may be facing one that will put you into a financial crisis, call our offices at 310-PLAN or 519-435-1500 locally in London to set up an appointment to discuss the situation. Lawsuits just don’t happen in the BIG cities!!

And you are thinking: how can I make a proposal such that the creditors will accept it?

I just met with someone who has income that can vary from as high as $2,800 a month to as low as $1,800 a month. This person wanted to do a proposal but during the lower income months it would be hard to pay a proposal that could be paid more easily during the higher income months. The person wanted to make some compensatory payments to their creditors so we planned the consumer proposal very carefully.

We have offered the creditors one amount for the months when income is low and another amount which is much higher for those months when income is increased. The overall effect to the creditors meant the proposal could be paid in a shorter period of time but still offer much more than would be received by them in a bankruptcy.

This way both the debtor and the creditors win as more of the debt is repaid and the payments more reflect what the debtor is earning.

If you think a consumer proposal is not an option because of your changing income, call our offices for a consultation in London at 310-PLAN or 519-435-1500. We will try to work out a plan that will benefit both you and your creditors.

Until April 15, 2001 there was no exemption amount for vehicles in the Province of Ontario. On that date, the provincial government changed the Execution Act so that vehicles with a value of $5,000 or less would be exempt from seizure.

Because of a glitch in the writing of the new exemption, a court case which is referred to as Fields gave a ruling that if the value of a vehicle was greater than $5,000, there could be no exemption amount claimed by the debtor.

On December 14, 2005, the exemption value for vehicles was changed from $5,000 to $5,650 but the value problem still remained.

The good news is that on June 22, 2006, the Government of Ontario passed the Good Government Act, 2005. In that Bill, a new section was added to the Execution Act such that if the value of a vehicle is greater than $5,650, the debtor is allowed the amount of $5,650 plus costs of the sale. In a consumer proposal or a personal bankruptcy this means that if a vehicle is valued at more than $5,650 after selling costs are calculated, the debtor could “purchase” the difference between the value and $5,650 from the trustee.

If you are experiencing financial difficulties and are worried about losing your vehicle, please contact our offices at 310-PLAN or local to London 519-435-1500 to set up an appointment to discuss your situation in detail.

Many people who I meet have not completed the previous year or in some cases several years worth of income tax returns. They are afraid that Canada Revenue Agency (”CRA”)will “do” something to them if they file, even as drastic as being put in jail.

Avoiding the tax department is probably more serious than trying to work with them. You cannot be put in jail for not filing income tax returns, but CRA will often look at any T4s that have been submitted to them, or review the last tax return filed if you are self-employed and base assessments for years you have not filed returns on that information. This means that sometimes you may be entitled to refunds that could offset a debt with them but they do not know this because they are basing what you owe on a higher income.

You might also not file a tax return because there will be a refund and CRA will take it. Even filing for bankruptcy or a proposal under the Bankruptcy and Insolvency Act will not protect these refunds. CRA has the right of offset or taking them to pay down what you owe.

It is better to get the returns completed and filed and it helps a trustee like myself to discuss your options in better detail and with a better knowledge of how much you owe CRA. If the debt is too big to work out once you have filed the returns call our offices at 310-PLAN to discuss your situation with myself or one of our professionals. Having the right information with you when you discuss your situation will help you make better informed choices.

A worry for many people going bankrupt is whether their spouse will be affected?

My answer to that question is: did your spouse sign on any of your debts?

If the answer is yes, then the answer to the original question is that your spouse will be affected.

Many people assume debts are 50-50, that is, they are shared equally between whomever owes the money. Most debts however, are joint and severally liable. These are fancy words meaning that if one person cannot pay the debts, then the other person becomes liable for the full amount. This means that if one person who has signed on the debt goes bankrupt, the other person becomes responsible to pay the full amount.

If you are experiencing financial problems, do not hide them from your spouse - they probably have a good idea something is bothering you. And if they have co-signed on the debt, they will know soon enough if you are unable to pay that debt.

Make an appointment with our office by calling 310-PLAN or 435-1500 for the London office and come in with your spouse to discuss your situation and learn about your options.

I just met someone whose income fluctuates from summer to winter. In the summer, there is a large amount of income, but in the winter it drops to about half the amount.

The calculation of surplus income (see the www.hoyes.com website for information on surplus income)means the payments are high in the summer but lower in the winter.

Reviewing the situation, it made sense to offer the creditors a proposal. This means the payments will be equal throughout the year, but the debtor will always know how much has to be paid. Another option in the proposal would have been to make the payments higher during the summer months when there was more income and lower during the winter months.

Proposals can be made with any terms that make it easier for the debtor to cope with fluctuating income as long as there is enough funds available to cover the household expenses. If the amounts are fair and reasonable, hopefully the creditors will accept the payments as presented.

If you are experiencing fluctuating income and need to work out a plan to repay your creditors, please contact our London office at 519-435-1500.

You are in financial trouble and now you find out it will cost money to go bankruptcy. How do you find out how much it will cost you?

Very often trustees will quote a monthly fee. This fee is usually a base fee that will cover the minimum costs of administrating a file. This can be misleading because the cost of the bankruptcy will be your assets and will also be based on your household income.

If you think you have no assets and your income is below a certain level, then yes, all you might pay would be the monthly fee. If for example, you have RSPs, house equity or a car valued over the exemption amount, then you might have to pay more or lose those assets. If your income is over the Superintendent of Bankruptcy’s standards, then you also might have to pay more.

This is just a short glimpse into what is discussed at an initial consultation at our London office. If you need to talk to someone about your financial troubles, call us at 519-435-1500 to set up an appointment for a free initial consultation.

You are not the only person in financial trouble.

In 2005, over 100,000 consumer filings were made in Canada. This means over 100,000 people filed bankruptcies or proposals under the Bankruptcy and Insolvency Act.

In London, the filing rate dropped by 13% from 323 in 2004 to 281 in 2005. This can be explained by people continuing to hold their jobs, low interest rates and new employment opportunities in the London area.

Should you be someone who is not able to continue fulfilling your debt obligations, please contact us at 310-PLAN in order to discuss your options.