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Filing a consumer proposal or filing for bankruptcy can be a daunting task. Fortunately, you do not have to face your debt problems alone. At Crowe MacKay & Company, our experienced team of Licensed Insolvency Trustees help provide the answers to your most common debt and bankruptcy questions.

About Licensed Insolvency Trustees

What is a Licensed Insolvency Trustee?

Effective April 1, 2016, Bankruptcy Trustees have a new designation and are known as “Licensed Insolvency Trustees” (LIT).

There have been no changes to the actual duties of a Trustee. It is simply a change in title. The new LIT designation can only be used by professionals who have successfully completed the rigorous training, education and examinations required to be licensed with the Office of the Superintendent of Bankruptcy.

The new designation also helps in removing some fear people may have in speaking with a ‘Bankruptcy Trustee’ as it is now clearer that Licensed Insolvency Trustees provide a wide range of debt management solutions other than bankruptcy which may include proposals to creditors.

Why Do I Need a Licensed Insolvency Trustee?

Having the LIT designation means that we are the only professionals authorized to handle insolvency proceedings, including bankruptcy and consumer proposals. There are several reasons to consult an LIT:

  • Qualified and licensed by the Government of Canada and Office of the Superintendent of Bankruptcy
  • Federally regulated by the OSB and adhering to the Code of Ethics
  • Fees charged are regulated by the federal government
When Do I Need a Licensed Insolvency Trustee?

Insolvency is generally defined as a situation where your liabilities exceed your assets and, accordingly, the inability to settle your obligations in the ordinary course of business.

If you are facing a situation where creditors are demanding payment but you find that there is simply no reasonable prospect of repaying them given your current financial situation, you should get in touch with a Licensed Insolvency Trustee to review your options.

LIT’s can help you in many ways. We can:

  • Make an assessment of your current financial situation by reviewing your assets, liabilities, income, expenses and cash flow;
  • Review both informal and formal options available for dealing with your debt;
  • Assist you in negotiating an informal arrangement with your creditors;
  • Advise you as to formal restructuring options in situations where informal proceedings are not possible or advisable;
  • Prepare and file the necessary documents to initiate either a proposal to your creditors or, if the situation is more dire, to effect an assignment in bankruptcy;
  • Guide you through your duties under the proposal or bankruptcy process;
  • Administer the proposal or bankruptcy process from start to finish; and
  • Get you the fresh financial start you need.

FAQs on Bankruptcy

What is bankruptcy?

Bankruptcy is a legal process in which a person in financial difficulty disposes of their property, generally by voluntary means. This procedure must be administered through a Trustee, in virtue of the provisions of the Bankruptcy and Insolvency Act. Under this approach, the bankrupt is discharged from all debt. This solution should only be considered when all other alternatives are not feasible.

How much does filing for bankruptcy cost?

The costs of filing for bankruptcy with minimal assets is set out by a tariff under the Bankruptcy and Insolvency Act. Essentially this means that the government sets a prescribed rate.

The prescribed rate for a first-time bankruptcy is $1,900. For those going bankrupt for a second time, the cost is $2,050.

Will I lose all of my assets after claiming bankruptcy?

Generally, in bankruptcy proceedings, all of your assets are assigned to a Trustee for the benefit of creditors. These assets include cash, investments, retirement savings plans, antiques, works of art, valuable collections, personal effects, cars, tools and real estate, subject to the exemptions outlined below. You may know someone who has gone into bankruptcy and didn’t seem to lose anything. That is likely because they do not have anything except assets that are exempt from seizure or assets that are fully encumbered.

You are entitled to retain assets that are exempt from seizure. This means that creditors, through a Sheriff’s seizure or a Trustee cannot take those assets from you.

In the Province of B.C., you are entitled to keep:

  • Personal Effects to a garage sale value of $4,000. In the case of a married couple, that means $4,000 each.
  • Motor Vehicle: You are entitled, as exempt from seizure, to a motor vehicle to a value of $5,000. If you happen to be in arrears under the Family Maintenance Enforcement Program, then the $5,000 is reduced to $2,000 as exempt from seizure.
  • Tools of Trade: Persons in business for themselves, such as mechanics, contractors or accountants, are entitled to retain from seizure tools of the trade to a value of $10,000. This would be, in the case of the mechanic who is in business for himself, a service vehicle and tools. The accountant would retain computers, etc.
  • Home: You are entitled to keep equity in your principal residence at the date of bankruptcy to a value of $12,000 in the Vancouver and Victoria Regional Districts. In the case of a married couple where the home is owned jointly, the equity retained would be $24,000. Outside of Vancouver and Victoria Regional Districts, the equity exempt from seizure is $9,000 individually or $18,000 where the home is owned jointly.

If there is no equity in your car, but you owe approximately its value (the same would apply to your residence), the Trustee will not deal with the car. It will be released to the secured lender. You may be able to make an agreement with the secured lender whereby if you continue your payments, they will not seize your vehicle or commence foreclosure proceedings against your home. This would be negotiated on an individual basis because, under most contracts, bankruptcy is a breach of the contract, which would allow repossession.

Medical devices, pension plans and certain life insurance policies are exempt, as well as RRSPs, with the exception of contributions made within the 12-month period preceding the bankruptcy.

Do I have to turn in my credit cards?

Yes, a bankrupt person is required to deliver to the Trustee all credit cards issued to and in possession or control of the bankrupt. If you require a credit card for business travel, then you can hold a credit card in another person’s name. Perhaps your spouse can get a credit card with you as an authorized user. Alternatively, your employer may provide you with a credit card.

Must I include all my creditors, even my friends and family members, in the event of bankruptcy?
Yes, all creditors must be declared when filing for bankruptcy. The objective of the Bankruptcy and Insolvency Act is that all creditors will be treated equally.
Am I required to make payments during the period of my bankruptcy?
You are required to make payments on a monthly basis only if there is a surplus family income. Surplus family income is set out in a schedule prescribed by the Superintendent of Bankruptcy (see Superintendent’s Standards 2021 below). The surplus is calculated by taking your net income and deducting any prescribed medical expenses, maintenance, and certain other expenses. To encourage you to improve your income, only half of the surplus is to be paid to the Trustee for the benefit of your creditors; you get to keep the other half.
What are the superintendent’s standards 2021?
The Superintendent’s Standards (“S”) are derived from the Low-Income Cutoffs (LICO) released by Statistics Canada. The Superintendent uses the before-tax LICO for urban areas with 500,000 people and over. The 2021 standards are updated by applying a 1.36% adjustment to the 2020 LICO to reflect the 2021 CPI (Consumer Price Index) expectation.
Do I have to report to the trustee on a regular basis?
Yes, you are required to report your monthly income received and your expenses paid by the 15th of the following month. It is from this report that the surplus income, described above under the heading “Payments,” is calculated. Failure to make these reports regularly will jeopardize your chances of getting your discharge from bankruptcy.
Do I get to keep my wages or will creditors be able to seize them?
Creditors may not seize your wages after filing for bankruptcy. You are required, however, to pay surplus income to Crowe MacKay & Company, to be distributed to your creditors in accordance with the Bankruptcy and Insolvency Act.
What is surplus income?
Surplus income is defined by the Bankruptcy and Insolvency Act as income over and above what the Federal Government prescribes as the minimum amount to support an individual or family of a particular size.
Do I have to file all my tax returns?
We encourage you to file all your tax returns up to date. In the year of your bankruptcy, there will be two tax returns. Crowe MacKay & Company will file the return from January 1 to the date of your bankruptcy and for the period from the date of your bankruptcy to December 31. Income tax refunds are an asset of the bankrupt estate and must be turned over to the Trustee for the benefit of your creditors. Any amount owing on the post-bankruptcy tax return must be paid by the bankrupt.
What happens to someone who co-signs a loan for me when I go bankrupt?
The co-signer, usually a friend or family member, will be called upon to pay the outstanding debt. You cannot exclude a debt from bankruptcy because it has been co-signed, and you seek to protect the co-signer. All creditors must be included in your bankruptcy and be treated equally. In most cases, they will contact your creditors and attempt to work out a repayment plan that is satisfactory to both you and your creditors.
If I win a lottery or am named in a will, do I get to keep the money?
Any assets that you acquire such as windfalls after your bankruptcy but before you are discharged from bankruptcy are subject to the claims of creditors. Yes, they have to be turned over to Crowe MacKay & Company. Any windfalls after your discharge from bankruptcy are yours to keep.
Are there any debts that are not discharged when filing for bankruptcy?
Yes, some debts are not discharged. Generally, these are debts arising out of fines or dishonesty, debts for maintenance of spouse or children, and student loan debts.
How do I get my discharge from bankruptcy?
Assigning into bankruptcy does not discharge your debts. You still owe the money. What you are doing by assigning your assets and liabilities to the Trustee is getting a stay of proceedings. A stay of proceedings means your creditors can not garnishee your salary or seize assets. They must deal with the Trustee and wait for the process to be completed. However, secured creditors, for example, those who finance your vehicle, will have the right of repossession after they satisfy the Trustee that they have a valid and enforceable charge against your property. All other debts are covered by the bankruptcy, but you still owe the money. It is not until you receive your discharge that the debts are discharged.

A first-time bankrupt with no surplus income is eligible for an automatic discharge in nine months. A first-time bankrupt with surplus income is required to contribute part of the surplus income to their estate for 21 months, after which they are eligible for an automatic discharge.

A second-time bankrupt with no surplus income is eligible for an automatic discharge in 24 months. A second-time bankrupt with surplus income is required to contribute part of the surplus income to their estate for 36 months, after which they are eligible for an automatic discharge.

If no one, including your creditors, the Trustee, or the Superintendent of Bankruptcy, opposes your discharge, then you will receive your automatic discharge and will no longer owe the money. If, however, somebody does file an objection to your discharge, then there will be an application to the Court for the discharge.

If there is a Court application for discharge, the Court will consider all circumstances, including your conduct, family responsibilities, and your income. It will also consider your responsibility to creditors and the request from a creditor that you not be discharged. The Court will then make one of three Orders:

  • Conditional Order: a Conditional Order is an Order from the Court whereby you are discharged upon satisfying the terms of the Order. The Order might provide that you should pay a sum of money either in a lump sum or monthly for a set period of time. We can only recommend the terms of such an Order but bear in mind that your family obligations will be the first consideration of the Court.
  • Suspended Order: the Court may suspend the Order for a set period of time. This means that you will not be required to make payments, but for whatever reason, the Court believes that you would benefit by remaining in bankruptcy. This could go on for a period of months or a year or more.
  • Order Absolute: this is where the Court Orders that, despite any objections from creditors, you are discharged. At this point you no longer owe your creditors anything.
Will filing for bankruptcy stop creditors from garnishing my salary?

Yes, as soon as a bankruptcy or proposal is filed, all Garnishing Orders are stopped. The garnishee creditors are stopped from taking action just like all other creditors and they will deal with the Trustee.

Will my student loans be discharged by my bankruptcy?

Unless you completed your studies or left the education institution more than seven years from the date of your proposal or bankruptcy, your student loans will survive and you will have to repay them.

Will I be required to attend counselling after I file for bankruptcy?

Individuals who file an assignment in bankruptcy are required to attend two counselling sessions. The sessions deal with causes of insolvency, budgeting, and dealing with credit. Each counselling session takes approximately one hour.

Will I have to attend a creditors’ meeting?

There will be no creditors’ meeting unless sufficient creditors (25% of proven claims) request one. In the vast majority of cases, there is no creditors’ meeting. However, if one is requested, you will have to attend.

Is bankruptcy the only option?

Bankruptcy may not be the only option for you. The sooner you take steps to regain control of your finances, the wider your options are. A Licensed Insolvency Trustee can help review all your options with you, including debt management programs, consumer proposals and debt consolidation. Please contact our office for a free initial consultation.

FAQs on Consumer Proposals

What Is a Consumer Proposal?

A consumer proposal involves making a settlement offer to your creditors by extending them between two to five years. To be valid, this proposal must be accepted by the majority of creditors, subject to a vote carried out according to the Bankruptcy and Insolvency Act. If this proposal is accepted, you will only have to make one monthly payment adapted to your budget and the requirements that meet your obligations toward your creditors. You can then keep all your property.

How much does filing a proposal cost?

The costs of a proposal for consumers with minimal assets are set out by a tariff under the Bankruptcy and Insolvency Act. Essentially this means that the government sets a prescribed rate.

The prescribed rate for a proposal is a little more complex, but you should expect to pay a small deposit, the amount of which we will negotiate with you.

What happens to someone who co-signs a loan for me when I make a consumer proposal?

The co-signer, usually a friend or family member, will be called upon to pay the outstanding debt. You cannot exclude a debt from bankruptcy because it has been co-signed, and you seek to protect the co-signer. All creditors must be included in your bankruptcy and be treated equally. In most cases, they will contact your creditors and attempt to work out a repayment plan that is satisfactory to both you and your creditors.

Will I be required to attend counselling after I make a consumer proposal?

Individuals who make a consumer proposal are required to attend two counselling sessions. The sessions deal with causes of insolvency, budgeting and dealing with credit. Each counselling session takes approximately one hour.

Must I include all my creditors, even my friends and family members, in the event of bankruptcy or consumer proposal?

Yes, all creditors must be declared in a proposal. The objective of the Bankruptcy and Insolvency Act is that all creditors will be treated equally.

Will I have to attend a creditors’ meeting?

There will be no creditors’ meeting unless sufficient creditors (25% of proven claims) request one. In the vast majority of cases, there is no creditors’ meeting. However, if one is requested, you will have to attend.

Are There Any Debts That Are Not Discharged by a Proposal?

Yes, some debts are not discharged. Generally, these are debts arising out of fines or dishonesty, debts for maintenance of spouse or children, and student loan debts.

How do I get my discharge from a proposal?

Filing a proposal does not discharge your debts. You still owe the money. What you are doing by assigning your assets and liabilities to the Trustee is getting a stay of proceedings. A stay of proceedings means that your creditors can not garnishee your salary or seize assets. They must deal with the Trustee and wait for the process to be completed. However, secured creditors, for example, those who finance your vehicle, will have the right of repossession after they satisfy the Trustee that they have a valid and enforceable charge against your property. If you file a You will be discharged when you satisfy the terms of the proposal; that is when you make the payments you said you would make under the proposal.

A first-time bankrupt with no surplus income is eligible for an automatic discharge in nine months. A first-time bankrupt with surplus income is required to contribute part of the surplus income to their estate for 21 months, after which they are eligible for an automatic discharge.

A second-time bankrupt with no surplus income is eligible for an automatic discharge in 24 months. A second-time bankrupt with surplus income is required to contribute part of the surplus income to their estate for 36 months, after which they are eligible for an automatic discharge.

If no one, including your creditors, the Trustee, or the Superintendent of Bankruptcy, opposes your discharge, then you will receive your automatic discharge and will no longer owe the money. If, however, somebody does file an objection to your discharge, then there will be an application to the Court for the discharge.

If there is a Court application for discharge, the Court will consider all circumstances, including your conduct, family responsibilities, and your income. It will also consider your responsibility to creditors and the request from a creditor that you not be discharged. The Court will then make one of three Orders:

  • Conditional Order: a Conditional Order is an Order from the Court whereby you are discharged upon satisfying the terms of the Order. The Order might provide that you should pay a sum of money either in a lump sum or monthly for a set period of time. We can only recommend the terms of such an Order but bear in mind that your family obligations will be the first consideration of the Court.
  • Suspended Order: the Court may suspend the Order for a set period of time. This means that you will not be required to make payments, but for whatever reason, the Court believes that you would benefit by remaining in bankruptcy. This could go on for a period of months or a year or more.
  • Order Absolute: this is where the Court Orders that, despite any objections from creditors, you are discharged. At this point you no longer owe your creditors anything.
Will a proposal stop creditors from garnishing my salary?

Yes, as soon as a proposal is filed, all Garnishing Orders are stopped. The garnishee creditors are stopped from taking action just like all other creditors and they will deal with the Trustee.

Will my student loans be discharged by my proposal?

Unless you completed your studies or left the education institution more than seven years from the date of your proposal or bankruptcy, your student loans will survive and you will have to repay them.

Do I get to keep my wages or will creditors be able to seize them?

Creditors may not seize your wages after proposal or bankruptcy. You are required, however, to pay surplus income (see above) to Crowe MacKay & Company, to be distributed to your creditors in accordance with the Bankruptcy and Insolvency Act.

Common FAQs

How do I obtain my credit report?

You can obtain your credit report for free by simply filling out a request form, attaching a photocopy of two pieces of ID and faxing or mailing the request to the Credit Bureau. There are two credit-reporting agencies in Canada:

  • Equifax
  • Transunion

Therefore, you will need to complete a request form for each of them. See below for links to the request forms. If you require additional information with respect to your credit report, please visit the Financial Consumer Agency of Canada.

How do I fix errors on your credit report?

If there are errors on your credit report, you should notify the credit bureau in writing immediately and provide the credit bureau with any supporting documentation available. The credit bureau will provide you confirmation in writing that the error has been corrected.

Contact Our Trusted Licensed Insolvency Trustees

If you’d like to connect with one of our Licensed Insolvency Trustees in Vancouver or Surrey, call (604) 689 3928, email trustee@crowemackay.ca, or fill in the form below.

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