Q: Can I solve my financial problems without losing my house or my car?

Yes, you can. In our article, “Can I resolve my financial difficulties without losing my house or vehicle?” our trustees explain the various solutions. Some solutions will allow you to reduce your expenses in order to create a monthly budget surplus, helping you keep your house or vehicle. When such a reduction is impossible or insufficient, a debt reduction plan may be necessary. Among the range of possibilities, there is the consumer proposal and, as a last resort, bankruptcy—both of which may allow you to keep your house and/or your car. For more details, we invite you to read our blog, and if needed, contact us for a virtual meeting (by phone or video) or an in-person consultation. It’s free, confidential, and without obligation. Don’t hesitate to reach out for an appointment or any other questions you may have.

Question 1

A friend is asking me to lend them money, what should I do?

Accepted Answer

This is a very delicate situation which cannot be resumed in a few words. To help you make an informed decision, we invite you to read our blog &#8220;Our 10 tips to guide you.&#8221; As you will see, several factors should be considered, not only when deciding whether to agree but also in terms of the precautions to take if you decide to lend the money.

Question 2

Can co-signing a loan for someone else affect my credit score?

Accepted Answer

Yes and no. Co-signing or guaranteeing a loan will have a direct impact on your future borrowing capacity. When a financial institution calculates your debt-to-income ratio, it will include the loan you guaranteed as if it were your own. As a result, because you are more indebted, you will be limited in the amount you can borrow.

That being said, co-signing does not necessarily harm your credit score. However, if the borrower (i.e., the person you guaranteed) defaults on the loan, the creditor can then ask you to repay the entire outstanding balance. You could be required not only to continue making payments on the loan itself but also to pay off the entire balance. If you are unable to pay that amount, your credit score will be affected, and you may face legal proceedings for the repayment of the loan.

What you need to keep in mind is that, aside from helping someone, guaranteeing or co-signing a loan carries several disadvantages and no benefits for you.

To learn more about the consequences of this generous act, we invite you to read our blog, “Does co-signing a loan for someone else affect my credit score?“

Question 3

Can I simply hand over the keys of my house to the bank if I can no longer pay the mortgage?

Accepted Answer

Yes, it is possible, but not without consequences. If you wish to voluntarily surrender your home to your financial institution, the bank will have 2 options, which we explain in our blog, &#8220;Voluntary surrender of a house when unable to pay the mortgage.&#8221; Depending on the option they choose, you may (or may not) be responsible for the financial loss they incur, and you may (or may not) benefit from a profitable sale, if that is the case. However, it is important to note that regardless of how the bank proceeds, your mortgage will be associated with an M-9 credit rating, which is the note given when you file for bankruptcy.

Question 4

Can I solve my financial problems without losing my house or my car?

Accepted Answer

Yes, you can. In our article, &#8220;Can I resolve my financial difficulties without losing my house or vehicle?&#8221; our trustees explain the various solutions. Some solutions will allow you to reduce your expenses in order to create a monthly budget surplus, helping you keep your house or vehicle. When such a reduction is impossible or insufficient, a debt reduction plan may be necessary. Among the range of possibilities, there is the consumer proposal and, as a last resort, bankruptcy—both of which may allow you to keep your house and/or your car. For more details, we invite you to read our blog, and if needed, contact us for a virtual meeting (by phone or video) or an in-person consultation. It’s free, confidential, and without obligation. Don’t hesitate to reach out for an appointment or any other questions you may have.

Question 5

How do I choose the best solution for me?

Accepted Answer

When faced with financial difficulties, we can have the tendency to see things worst than they actually are. Indeed, emotions sometimes cloud our judgment, and it can be hard to imagine solutions if we don’t know what they are. That is why you should never hesitate to consult professionals such as Licensed Insolvency Trustees for an analysis of your financial situation, to answer all your questions, and to explain the various solutions available to you. Our article, &#8220;What are the solutions to get out of debt?&#8221; explains the 6 main solutions to debt and will give you an overview of the options available to you.

Question 6

How to choose a Licensed Insolvency Trustee?

Accepted Answer

Understanding the issues surrounding personal finances, debts, and solutions to overcome them is a very important step. To achieve this, it is important to choose a recognized and competent professional, and most importantly, someone with whom you feel comfortable talking to. Being well-supported throughout this process will be the key to a successful reorganization.

To help guide you in choosing your Licensed Insolvency Trustee, we invite you to read our blog “What factors should guide me choosing a Licensed Insolvency Trustee?“.

Question 7

What are the risks of a high debt ratio?

Accepted Answer

A high debt ratio can seriously affect your financial health and well-being. In the blog &#8220;What are the risks of a high debt ratio?&#8220;, we explain what is a debt ratio, how to calculate it and we explain how to interpret the results. Finally, we review in detail the risks associated with a high ratio. Being well informed on this subject will help you be better prepared to take the necessary measures to avoid falling into a debt spiral.

Question 8

What are the warning signs of financial problems?

Accepted Answer

As with any illness or health issues, prevention is always the best remedy. Knowing how to identify the red flags can help you avoid a debt problem from turning into over-indebtedness. It has been proven that the sooner you can intervene to correct a situation, the better your chances of resolving it with minimal inconveniences.

If you’re concerned about your budget or debts, or if you fear something might be wrong, we invite you to read our blog “Early warning signs of financial problems.” Our experts reveal the signs that can be early indicators of financial difficulties, as well as the actions to prioritize to rectify the situation.

Question 9

What should I expect from a first meeting with a bankruptcy trustee?

Accepted Answer

The informational meeting is offered free of charge and will provide you with a complete analysis of your financial situation, as well as the different solutions to help you get out of debt.

We invite you to learn more about the goals and topics covered during the first meeting with one of our Licensed Insolvency Trustees by reading our article, “What can I expect from a first meeting with an insolvency trustee?“

Question 10

What will be the impact of my decision (debt consolidation, consumer proposal, bankruptcy, doing nothing) on my credit score?

Accepted Answer

Often, the impact of our decision on our credit score is the biggest fear that people with financial problems have. Unfortunately, this fear prevents them from asking advice to find out more on the different options available to them. However, those who do seek advice are often surprised to find that debt solutions are not as drastic as they imagined. They leave our office with answers to their questions and potential solutions to get out of debt.

To learn more about the different options and their impact on your credit score, we invite you to read our blog, “How will my decision affect my credit score?“

Question 11

Am I discharged from all of my debts?

Accepted Answer

The discharge from bankruptcy will erase all debts, except those listed in Section 178 of the Act which reads as follows: Any fine or penalty imposed by a court in respect of an offense, or any debt arising out a recognizance or bail. Any award of damages by a court in respect of bodily harm intentionally inflicted, or sexual assault, or wrongful death resulting therefrom. Any debt or liability for alimony. Any debt or liability under an order for the maintenance and support of a spouse or child living apart from the bankrupt. Any debt or liability arising out of fraud, embezzlement, misappropriation while acting in a fiduciary capacity. Any debt or liability for obtaining property by false pretenses or fraudulent misrepresentation. Any liability for the dividend that a creditor would have been entitled to receive on any provable claim not disclosed to the trustee. Any debt or obligation in respect of a student loan guaranteed by the government where the date of bankruptcy occurred before the date on which the bankrupt ceased to be a student or within 7 years after the date on which the bankrupt ceased to be student. Any debt for interest owed on any of the above noted non-dischargeable debts.

Question 12

Am I entitled to have or open a bank account?

Accepted Answer

Under the Act, you have the right to have or open a personal bank account even if: You are unemployed. You do not have money to deposit in it immediately. You have declared bankruptcy. However, the Bank is entitled to refuse to open an account if: It believes that you will use the account in an illegal or fraudulent manner. You have ever engaged in illegal or fraudulent activity at a bank over the past 7 years. You have provided it with misleading information. You do not agree that it verify the information described above. You are unable to present proper identification. If you are dissatisfied with any decision or action taken by a financial institution, you can complain to the Ombudsman for the bank. His role is to analyze the situation objectively and make corrections when necessary.

Question 13

Can I declare bankruptcy for only some of my debt?

Accepted Answer

No. If you declare bankruptcy, you do so for all of your debts. However, if for any reason, moral or otherwise, you wish to repay a debt to a family member or close friend, although your are not obliged to do so, you may repay such a debt after your discharge from bankruptcy.

Question 14

Can I declare bankruptcy if I am unemployed?

Accepted Answer

Yes. Often times, people with financial problems are out of work, and nothing can prevent them from declaring bankruptcy. Nevertheless, you will have to make monthly payments, to the Trustee, during the nine month period of the bankruptcy. (Please refer to the question “What is the duration of a bankruptcy?”

Question 15

Can I filed bankrupt without losing my house or vehicle?

Accepted Answer

Yes. Situations where someone loses a property unintentionally or without prior knowledge are rare. Discover all the details about your car here. See what impact bankruptcy could have on your house here.

Question 16

Can I keep one or more of my credit cards?

Accepted Answer

If you declare bankruptcy, you are required to turn in all of your credit cards, whether or not amounts are owed. On the other hand, although you are not required to turn in your credit cards if you file a proposal, the issuer will likely cancel said card if there is an amount owed or if the issuer is otherwise informed of your proposal.

Question 17

Can my creditors refuse my bankruptcy?

Accepted Answer

No, only the Court can annul a bankruptcy at the request of a creditor. This procedure is exceptional rare and hardly ever seen. However, in certain circumstances, creditors may oppose your discharge from bankruptcy for the following reasons: if the creditors can prove that, prior to your bankruptcy, you acted irresponsibly to their detriment, that you sold, disposed of, or hid some of your assets, or if you continued to increase your debts knowing that you would be declaring bankruptcy. In such cases, the court can suspend your discharge from bankruptcy and/or demand that additional amounts be paid to the bankruptcy as a condition of your discharge. These oppositions by the creditors are rare but still possible.

Question 18

Can my RRSP or my pension plan be seized?

Accepted Answer

There are many types of RRSP’s available to the consumer, and to answer the question, the individual contracts must be closely analyzed by the trustee. One must be aware, however, that the majority of RRSP’s can be seized with the exception of those mentioned below: For all cases filed from July 7, 2008, all types of RRSPs are non-seizable. Only the contributions made during the 12 months prior to your bankruptcy may be seized, and only if they were made in RRSP plans that would have been seizable in the absence of a bankruptcy or proposal. For any more accurate assessment, we would have to review all documentation related to your RRSP.

Question 19

Can overpayments of the CERB be included in a bankruptcy?

Accepted Answer

The Office of the Superintendent of Bankruptcy, a federal government agency, has addressed this issue and confirmed that an overpayment of the CERB is a debt that can be included in a bankruptcy. However, if the government believes that an individual was not eligible to receive the CERB, it can petition the court to have the debt declared non-dischargeable due to false representation. However, due to the number of cases involved (over 800,000 according to the latest estimates), the costs associated with such a petition, and the burden of proof the government must meet to convince a court that there was a false representation, these types of petitions are extremely rare, and to date, we have not had any in our files.

Question 20

Do I have to go bankrupt if my spouse goes bankrupt?

Accepted Answer

The fact that your spouse declares bankruptcy does not necessarily mean that you must also declare bankruptcy. Should the question arise, the trustee will verify whether or not you are jointly responsible for any of your spouse’s debts or obligations. In the event that you are jointly responsible for an unpaid debt or obligation, the creditors may demand, from you, full payment of the debt or obligation, unless you also file a proposal or bankruptcy.

Question 21

Does bankruptcy protect me from legal action or seizure?

Accepted Answer

Yes, by filing for bankruptcy, you immediately become protected by law. Thus, any seizure or legal proceedings are stopped, except for 3 exceptions: Secured creditors (e.g., mortgage lenders) can initiate or continue legal action if you are in default under your contract. However, this action is limited to the repossession of the property, and they cannot hold you responsible for any monetary loss they incur as a result of the repossession. A garnishment for alimony that you must pay. If the creditor has obtained permission from the court. This situation is very rare and usually occurs when the debt is of a fraudulent nature.

Question 22

Duration of a bankruptcy?

Accepted Answer

We invite you to read our article to learn more about the factors that influence the duration of a bankruptcy.

Question 23

How bankruptcy affects my credit?

Accepted Answer

With a bankruptcy, the credit rating is R9 for 6 years after your bankruptcy discharge (7 years for TransUnion). Thus, bankruptcy impacts your credit report, but often it is already affected by excessive debt or past mistakes that remain on your record for 6 years. One does not file for bankruptcy because everything is going well and they simply want to save money. It is done when the current state of one&#8217;s finances is no longer viable, and month after month, one sinks further into debt. As long as your debt persists, you will not be able to improve your credit report. To break the cycle of debt, sometimes the best or only way out is bankruptcy. As soon as the bankruptcy is over, your debts will be erased, and you can then start on a solid foundation and improve your credit report.

Question 24

How to file for bankruptcy?

Accepted Answer

If you are facing financial difficulties that require you to consider personal bankruptcy as a solution, here are the steps you will need to follow. The very 1st step is an in-person, video, or phone meeting with one of our advisors to analyze your financial situation to ensure that bankruptcy is the only or best option for you. In reality, it is often possible to avoid bankruptcy. This is our primary goal. Otherwise, we will take the time to answer all your questions and reassure you about the consequences of bankruptcy. Often, these are much less significant than you might be led to believe. All available solutions come with advantages and disadvantages. Our role is to explain them to you to help you make an informed decision. These informative meetings are confidential, free, and without obligation. The 4 main steps of a bankruptcy process are as follows: Analysis of your financial situation and explanations. Preparation and filing of your bankruptcy file. Monthly contributions during your bankruptcy, budget consultations, and income review. Discharge from your bankruptcy. As for the time required to be placed under the protection of the law, the preparation of documents can be done as quickly as 24 hours following your 1st meeting. For more information, we invite you to consult the detailed steps to declare bankruptcy.

Question 25

If I file for bankruptcy, what is the elusive property?

Accepted Answer

What are the seizable and non-seizable assets in a bankruptcy? See the answer in this article.

Question 26

If my spouse is paying alimony and goes bankrupt, what happens to the alimony obligation?

Accepted Answer

If your former spouse declares bankruptcy, it does not release you in any way from continuing to pay alimony, child support, or any arrears. As well, if you owe your former spouse alimony, or child support payments, you could have your wages garnished notwithstanding the bankruptcy. Alimony, child support and arrears are very well protected and these debts will live on after the bankruptcy.

Question 27

Is there a minimum amount of debt required before I can declare bankruptcy?

Accepted Answer

The minimum amount of debt required by the Act before you can declare bankruptcy is $1,000. On the other hand, it stands to reason that with a debt of only $1,000, you should not consider bankruptcy as an immediate solution. Moreover, according to the Act, your must also be insolvent, in other words, you cannot honour your financial obligations as they generally become due.

Question 28

On the other hand, if there are arrears in alimony payments, are these debts erased in bankruptcy?

Accepted Answer

If your former spouse declares bankruptcy, it does not release you in any way from continuing to pay alimony, child support, or any arrears. As well, if you owe your former spouse alimony, or child support payments, you could have your wages garnished notwithstanding the bankruptcy. Alimony, child support and arrears are very well protected and these debts will live on after the bankruptcy.

Question 29

What are the costs of a bankruptcy?

Accepted Answer

The cost of bankruptcy depends on 3 factors: 1. Is this your first bankruptcy? If it is your first bankruptcy, you will need to make monthly payments for the duration of the bankruptcy. At Jean Fortin, this amount is $170 per month for 9 months, provided you do not have surplus income (see point 2). If it is your second bankruptcy, the monthly payment will be $125 per month for 24 months in the absence of surplus income. 2. Do you have &#8220;surplus income&#8221;? To find out if you are likely to have surplus income or not, click here. During the first meeting, your advisor will make the necessary calculations to determine if you have surplus income and will explain the circumstances that could influence your case along the way. Having surplus income will affect the duration of your bankruptcy. The existence of such income can extend your bankruptcy by an additional 12 months, which will impact the cost of your bankruptcy since you will have to pay over a longer period. 3. Do you own any assets? If you want to keep your house, for example, but it is worth more than the balance of the mortgage, you will need to make an arrangement with your trustee to, in a way, &#8220;buy back&#8221; this equity from your creditors. This payment arrangement can be spread over months or even years. It is negotiated with your trustee, who must then submit it to the creditors for approval. The agreed-upon payment for the asset buyback will be added to the monthly payments you will have to make, increasing the cost of the bankruptcy. Finally, among the consequences of a bankruptcy, a federal tax refund (but not provincial) and GST (up to a threshold established by Law) will be considered seizable assets, as well as any inheritance (except for exceptions) or lottery winnings you may receive before or during your bankruptcy. From your first meeting, your advisor will analyze your financial situation and inform you of all the details specific to your case, as each case is unique.

Question 30

What happens if I used my credit cards just before declaring bankruptcy?

Accepted Answer

It goes without saying that if, just prior to your declaring bankruptcy, you used your credit cards and made purchases knowing full well that the charges would not be paid back, such actions are not acceptable under the Act. In such cases, the Act provides that the creditors may oppose your discharge, or they may ask the court to have you pay additional amounts to the trustee or to have the debt declared non-dischargeable. This last recourse would mean that the debt would have to be paid back after your discharge from your bankruptcy, with interest. This type of behavior is not recommended.

Question 31

What happens to my student loan if I go bankrupt?

Accepted Answer

Since June 18th 1998, student loans are no longer discharged if the bankruptcy or consumer proposal proceedings are initiated less than 7 years following the end of your studies. The end of your studies is considered by the ministry as the date at which the teaching establishment declares that you have stopped studying. If you choose to, or have no choice but, to file a bankruptcy or a Consumer Proposal within 7 after the end of your studies, you may, after 5 years, submit an application to the Court, asking to be discharged from the debt. Based on certain criteria, the Court may, at its sole discretion, discharge you. Should you satisfy the criteria and the court sees fit your application, a judgement may be rendered and your debt may be discharged.

Question 32

What is surplus income?

Accepted Answer

The cost and duration of a bankruptcy are directly related to the existence of so-called &#8216;surplus income,&#8217; which is income exceeding a standard set by the government. To calculate this, the average net income earned during the bankruptcy, the number of dependents, expenses for childcare, alimony (to be paid), and costs related to a medical condition and your employment will be taken into account. Thus, if you do not have &#8221;surplus income&#8221;, the bankruptcy will last 9 months for a 1st bankruptcy and 24 months for a 2nd one. The monthly contributions at Jean Fortin are $170 per month for 9 months for a 1st bankruptcy or $125 per month for 24 months for a 2nd bankruptcy. If you have &#8221;surplus income&#8221;, the duration will be extended by an additional 12 months, and the monthly contribution will be determined according to a mathematical formula established by law. From the 1st appointment with your advisor, they will explain in detail how to calculate the amounts to be paid and for how many months you will be in bankruptcy, based on the information available at that time.

Question 33

What is the impact of bankruptcy on filing my tax return?

Accepted Answer

When you declare bankruptcy, it&#8217;s a fresh start, and you&#8217;re entitled to include any tax debt up to the day you file for bankruptcy. There are 2 tax reports: One report covers from January 1st to the day before your bankruptcy date. The second report covers from the date of your bankruptcy to December 31st of the year of your bankruptcy.

Question 34

What property may I keep if I go bankrupt?

Accepted Answer

Property that you may keep and that cannot be seized are provided for in articles 694 to 701 of the Code of Civil Procedure and, in general, include primarily the following items, which is not all inclusive: The moveable property which furnishes the main residence, used by and necessary for the life of the household, up to a market value of $7,000. The food and clothing. The tools and instruments needed for the personal exercise of a professional activity (ex. Mechanic’s tools). The personal documents and family portraits. The alimony and child support paid to you. The equipment necessary for a handicapped person to get around. All goods received in an inheritance (provide that the last will contains the appropriate covenant). CSST and invalidity indemnities.

Question 35

What will happen to my income tax refunds, and does the fact that I filed a Bankruptcy affect the filing of my personal tax returns?

Accepted Answer

Provincial: The Provincial income tax refunds are not seizable by the Trustee, which means that you may keep the refunds despite the fact that you filed a Bankruptcy. However, you should be aware that if there is an amount owing to the Agence du revenu du Québec (the “ARQ”) for a period prior to the date of the Bankruptcy, the ARQ may apply your income tax refunds against any amount owing for a period prior to the Bankruptcy, but not for any period subsequent to the Bankruptcy. Federal: The Federal income tax refunds for the periods prior to the Bankruptcy, as well as for the calendar year of the Bankruptcy, will be seized for the benefit of your creditors. The Federal income tax refunds for the years subsequent to the Bankruptcy may not be seized by the Trustee. The filing of your income tax returns: In the event that you file a Bankruptcy, you may consider this a fresh start, and you will be entitled to include any income tax debt owing up to the date of the Bankruptcy. As such, there will be two (2) income tax returns to be filed, the first for the period from the 1 st of January to the day prior to the date of the Bankruptcy, and the second, for the period from the date of the Bankruptcy to December 31. The Trustee will prepare the income tax returns, free of charge, (exceptions may apply).

Question 36

Will I be allowed to operate my business?

Accepted Answer

If you declare bankruptcy, the law requires a merchant who is bankrupt to disclose this fact to those they do business with, but nothing prevents them from continuing to earn a living. However, you will no longer be able to be a director of an incorporated company until you are discharged from your bankruptcy. That being said, the primary purpose of the Bankruptcy and Insolvency Act is to allow for your financial rehabilitation. As such, thousands of self-employed individuals have been able to continue their operations after bankruptcy.

Question 37

Am I discharged from all of my debts if I file a consumer proposal?

Accepted Answer

The law aims to promote your financial rehabilitation and your right to work and rebuild your financial health. Thus, all debts, except for the following debts, are dischargeable at the end of your proposal (section 178 of the Bankruptcy and Insolvency Act): Any award of damages by a court in respect of bodily harm intentionally inflicted, or sexual assault, or wrongful death resulting therefrom. Any debt or liability for alimony. Any debt or liability under an order for the maintenance and support of a spouse or child living apart from the bankrupt. Any debt or liability arising out of fraud, embezzlement, misappropriation while acting in a fiduciary capacity. Any debt or liability for obtaining property by false pretenses  or fraudulent misrepresentation. Any liability for the dividend that a creditor would have been entitled to receive on any provable claim not disclosed to the trustee. Any debt or obligation in respect of a student loan guaranteed by the government where the date of bankruptcy occurred before the date on which the bankrupt ceased to be a student or within 7 years after the date on which the bankrupt ceased to be student. Any debt for interest owed on any of the above noted non-dischargeable debts.

Question 38

Am I entitled to have or open a bank account?

Accepted Answer

Under the Act, you have the right to have or open a personal bank account even if: You are unemployed. You do not have money to deposit in it immediately. You have declared bankruptcy. However, the bank is entitled to refuse to open an account if: It believes that you will use the account in an illegal or fraudulent manner. You have ever engaged in illegal or fraudulent activity at a bank over the past 7 years. You have provided it with misleading information. You are unable to present proper identification. If you are dissatisfied with any decision or action taken by a financial institution, you can file a complaint to the bank’s Ombudsman. Its role is to analyze the situation objectively and make corrections when necessary.

Question 39

Can a consumer proposal stop legal proceedings including the seizure of my property or the garnishment of my wages?

Accepted Answer

Declaring a consumer proposal immediately places you under the protection of the law. This means that any seizure or legal proceedings against you are stopped. However, there are exceptions if one of these 3 situations arises: A secured creditor (ex: mortgage or car loan) may initiate or continue recourse if you default on payments under your contract. However, this recourse is limited to repossession of the asset, and the creditor cannot hold you responsible for any monetary loss resulting from the repossession. For example, if you have stopped paying your mortgage or have chosen to return the keys to your car because the monthly payments were too high, the creditor can repossess the asset, but they will not have the option to pursue you afterward for the loss they incurred. However, please note that for such a debt to be included in your proposal or bankruptcy, your intention to abandon the property must be clearly stated in said proposal or bankruptcy. Seizure for child support payments you owe will not be suspended. If a creditor obtains permission from the court, they may continue their recourse. Rest assured, this scenario occurs very rarely and typically only arises in cases of fraudulent debt.

Question 40

Can an overpayment of the CERB be included in a consumer proposal?

Accepted Answer

The Office of the Superintendent of Bankruptcy, an agency of the federal government, has addressed the issue and confirmed that an overpayment of the CERB is a debt that can be included in a consumer proposal (and bankruptcy). However, if the government believes that a person was not eligible to receive the CERB, it may apply to the court to have the debt declared non-included due to false declaration. However, due to the number of cases involved (over 800,000 according to the latest estimates), the costs involved in such an application, and the burden of proof that the government must meet to convince a court that there was a false declaration, such requests are extremely rare and, to date, we have not had any in our files.

Question 41

Can I file a proposal for certain debts only?

Accepted Answer

No. if you file a proposal, you do so for all your debts, except for those secured by assets you wish to retain (e.g., your home or your car). However, nothing prevents you (but there is no obligation either) after completing your proposal, from repaying a creditor for a debt you consider &#8220;moral&#8221;, but be careful not to compromise your financial stability. After a proposal, you should finally be able to breathe easier. Your efforts should rather be directed towards creating an emergency fund to deal with any unforeseen events and saving for your future projects and retirement.

Question 42

Can I keep a credit card if I file a consumer proposal?

Accepted Answer

Yes, you are not required to surrender your credit cards to the trustee when you file a consumer proposal. However, if you have an outstanding balance on a credit card or with the financial institution that issued the card, the institution may (and almost always does) cancel it.

Question 43

Do ALL of my creditors have to agree with my proposal to be accepted?

Accepted Answer

No. A favorable vote from a simple majority (50% plus one, 1$ = 1 vote) of your creditors is sufficient for all to be automatically bound by it. Therefore, it is not necessary to convince all of them. However, if a majority of your creditors does not accept your initial proposal, your trustee can negotiate, on your behalf and with your authorization, amendments that would be acceptable to all parties.

Question 44

How is my credit rating affected if I file a consumer proposal?

Accepted Answer

For bankruptcy, the credit rating is R-9 for 6 years after your bankruptcy discharge (7 years for TransUnion). For a consumer proposal, the rating is R-9 during the proposal and R-7 as soon as you have been discharged, and it remains on your credit report for 3 years from the discharge date. However, did you know that the R-9 rating is also recorded in the following circumstances: bad debt, debt placed in collections, moving without leaving a new address? So, you may already have one or more R-9 ratings on your credit report at this time. If that is the case, your credit file might already be affected. Secondly, a creditor grants new credit based on 4 criteria (all of which must be met): A good credit rating (R-1 or R-2) for each debt An overall credit score from moderate to high A debt-to-income ratio below 40% Stable employment. So, even if you have a good credit score, having debts can make it impossible to obtain new credit. In these cases, getting rid of debts with a proposal or bankruptcy could allow you to recover more quickly than trying in vain to pay only the minimum payments in the hope of getting by someday. Furthermore, any negative mention is recorded on the credit bureau for 6 years (from the date of the last mention to the bureau by the creditor), even if you have fully paid off your debts. Thus, if you take 7 years to pay off arrears of a debt, your R-9 rating could remain on the credit bureau for a total of 13 years (7 years to pay + 6 years).

Question 45

How to determine the cost of a consumer proposal?

Accepted Answer

The amount of a consumer proposal is based on a combination of several factors that determine your repayment capacity. The amount offered to your creditors is therefore unique to each individual. We answer this question in detail in our article &#8220;How much does a consumer proposal cost?&#8220;.

Question 46

How to make a consumer proposal?

Accepted Answer

If you are experiencing financial difficulties that lead you to consider the consumer proposal as a solution, here are the steps you will need to follow: Book an appointment with us for an evaluation of your financial situation. With our help, preparation of a proposal based on your financial capacity. Presentation of your proposal to creditors and voting by said creditors. If approved, monthly payments and 2 budget consultations with your advisor. Final payment and the beginning of your debt-free life! We invite you to review the 5 steps of the consumer proposal in detail.

Question 47

If I file a consumer proposal, will I be able to keep all of my assets?

Accepted Answer

Yes, the consumer proposal will allow you to retain all your assets, such as your house or your vehicle, if that&#8217;s what you desire. At the same time, you will be able to reduce your level of debt. Obviously, for a proposal to be acceptable to your creditors, the amount offered must take into account the net value of your assets and your income. Thus, the higher the value of your assets, the more appealing your offer will need to be for your creditors; the licensed insolvency trustee can advise and guide you through this stage. That being said, there may be certain assets that you would be happy to part with. Such as a car whose payment weighs too heavily on your budget, or a house whose mortgage is financially suffocating. The same goes for a property where you may have discovered hidden defects, making its resale difficult, if not impossible. In these circumstances, handing over the keys to the creditor could be a real relief! The loss suffered by the creditor will be included in the amount of the proposal you make to all your creditors, and your budget will be more easily balanced as a result.

Question 48

If I owe my ex-spouse arrears in alimony payments, are these debts erased in consumer proposal?

Accepted Answer

You might see your wages garnished despite your consumer proposal to repay the arrears you owe to your spouse. Child support arrears are not debts dischargeable through a consumer proposal. Please consult with your advisor on your specific situation.

Question 49

If my spouse is paying alimony and goes on proposal, what happens to the alimony obligation?

Accepted Answer

If your ex-spouse files a consumer proposal, it does not annul their obligation to continue paying you alimony and any arrears owed, if applicable.

Question 50

What happens if I used my credit cards just before filing a bankruptcy?

Accepted Answer

It goes without saying that if, just prior to filing a proposal, you used your credit cards and made purchases knowing full well that the charges would not be paid back, such actions are not acceptable under the law. In such cases, the law provides that the creditors may oppose your discharge, or they may ask the court to have you pay additional amounts to the trustee or to have the debt declared non-dischargeable. This last recourse would mean that the debt would have to be paid back after your discharge from your bankruptcy, with interest. For obvious reasons, this type of behavior is not recommended.

Question 51

What happens if I used my credit cards just before filing a proposal?

Accepted Answer

It goes without saying that if, just prior to your declaring bankruptcy, you used your credit cards and made purchases knowing full well that the charges would not be paid back, such actions are not acceptable under the Act. In such cases, the Act provides that the creditors may oppose your discharge, or they may ask the court to have you pay additional amounts to the trustee or to have the debt declared non-dischargeable. This last recourse would mean that the debt would have to be paid back after your discharge from your bankruptcy, with interest. This type of behavior is not recommended.

Question 52

What happens to my student loan if I go proposal?

Accepted Answer

Student loans are not dischargeable debts through a consumer proposal if these procedures are filed less than 7 years following the completion of your last studies. The completion of your studies is considered by the ministry to be the date when the educational institution certifies that you have ceased studying for the last time. If you must or decide to declare bankruptcy or file a consumer proposal less than 7 years following the completion of your studies, however, at the expiration of 5 years following the completion of your studies, you can petition the court to be released from this debt. Depending on certain criteria, the court may discharge you from it if deemed appropriate. We invite you to learn more about student debts.

Question 53

What is the duration of a consumer proposal?

Accepted Answer

The duration of a consumer proposal can be up to 60 months. However, this period can be negotiated and adjusted depending on the financial circumstances specific to your situation and can depend on the requirements of the creditors. During the proposal, it is always possible to pay more rapidly if your situation allows it. When possible, that is highly recommended since the credit file will start to get better once the proposal is completed. We discuss this in detail in our article &#8220;How long does a consumer proposal last?&#8220;.

Question 54

What is the impact of a consumer proposal on your spouse?

Accepted Answer

Your spouse&#8217;s proposal does not necessarily affect your situation. The trustee will analyze with you whether you are responsible for one or more debts of your spouse, because in this case, creditors may demand payment from you. If you have a joint debt, you remain responsible for that debt even if your spouse makes a consumer proposal and does not have to pay it. If you reach an agreement with this creditor by letting them know that you are willing to comply with the agreed payment terms and pay as agreed, your credit file will not be affected by your spouse&#8217;s decision to make a consumer proposal. If you do not have any joint debts, your spouse&#8217;s decision to make a proposal does not affect your credit file in any way. Each individual has their own file. Their payment habits and decisions only affect their own.

Question 55

Will I be allowed to operate my business?

Accepted Answer

Yes, this disclosure requirement doesn&#8217;t exist, except in exceptional cases, if you&#8217;re making a proposal. Also, you have the right to be a shareholder and director of an incorporated company even if you&#8217;re in a proposal. In fact, this is one of the reasons why a large proportion of businessmen and businesswomen opt for consumer proposals. The restrictions are almost nonexistent.

Question 56

Is debt consolidation a good solution for me?

Accepted Answer

Debt consolidation involves requesting a loan from your financial institution to pay off the debts that would wish to consolidate. This loan allows you to regroup all your monthly payments in one single payment and, by consolidating the debts with a high interest rate, to reduce your interest costs. This could be a good option for you if: You have debts with a higher interest rate than your consolidation. Such a loan typically has a rate between 12% and 15%, depending on your credit risk. If you have credit cards with rates of 20%, for example, debt consolidation is clearly a good choice. HOwever, if you have a personal loan at 7% interest or a credit line at 11%, it would be better to consider another solution. The goal is to reduce the interest fees you pay each month, not increase them! You can afford the loan’s monthly payment. A consolidation loan will normally last for 5 years. Make sure that you will be able to afford the monthly payment without too much effort. If you struggle just as much to make ends meet after consolidation as before, it is not worth it. Your financial institution does not require a co-signer. If they fear that you might have problems paying off the consolidation loan, the bank will ask for a guarantor (someone that will guarantee payment if you default).  If they do, this should be seen as a red flag. If the bank has doubts on your financial capacity, maybe you should too. The last thing you want is to involve a loved one in your financial affairs. If you meet all these conditions, debt consolidation could be an interesting option for you. If you want to find out more, please do not hesitate to contact a personal finance advisor at Jean Fortin.

Question 57

On what factors does a financial institution base its decision to grant a loan?

Accepted Answer

Here are 4 criteria on which your request will be evaluated when applying for a loan: A good credit rating (R-1 or R-2) for each creditor. An overall credit score ranging from moderate to high (usually over 680). A debt ratio below 40%. Stable job. Past payment delays on your debts remain on your credit file for 6 years, and although they heavily influence your score, they will have less impact with time. We recommend always checking your credit report before applying for a loan to ensure it does not contain errors that could reduce your chances. Additionally, we strongly advise calculating your own debt ratio using the debt ratio tool. A debt ratio exceeding 40% is a sign of over-indebtedness that might prevent you from having access to new credit and that will require debt reduction measures. If you have questions or need help, do not hesitate to contact a personal finance advisor for Jean Fortin.

Question 58

What factors should be considered for debt consolidation?

Accepted Answer

Debt consolidation is a loan you obtain from a financial institution to merge all your debts into a single loan. Firstly, you need to: Check the interest rates of your debts. Ensure that all the debts you are consolidating have an interest rate higher than the interest rate of your consolidation loan (between 12% and 15%, depending on your credit risk). The aim is to reduce your costs, not increase them. Ensure that you will be able to make the monthly payment required by the financial institution. Use our Loan Calculator tool to find out how much your loan would cost you. There&#8217;s no point in consolidating if you face as much financial difficulty after consolidation as before. To determine if you would be able to handle such a payment, create your budget. Ensure that the financial institution does not require a guarantor (co-signer). If it does, it indicates doubts not concerning your willingness to pay but rather about your financial capacity. And the last thing you want is to burden someone close to you with your debts.

Question 59

What is the difference between debt consolidation and consumer proposal?

Accepted Answer

If you’re struggling to make ends meet, you may have 2 options to regain control of your finances and avoid bankruptcy. Both debt consolidation and consumer proposals allow you to repay your debts, but under different conditions. See which one and understand the difference!

Question 60

Who offers debt consolidation loans?

Accepted Answer

All financial institutions offer consolidations, but since this type of loan carries more risks than a regular loan, they may be more demanding in terms of eligibility requirements. Keep in mind that you would be better off consulting first with the financial institution you already deal with, as they have a better understanding of your payment habits. Furthermore, remember that a bank is less inclined to assume the debts of another institution. Indeed, the one that already holds the most debts is already &#8220;at risk,&#8221; and therefore, it is advantageous for them to help you reduce your costs and improve your repayment capacity rather than a &#8220;new&#8221; institution.

Question 61

Why is the interest rate on a consolidation loan higher than a regular loan?

Accepted Answer

When a financial institution grants you a loan to purchase an asset, your balance sheet (total of your assets and debts) remains the same because the loan is offset by a new asset, as is the case, for example when you purchase a car. Thus, when you purchase a house worth $300,000, the mortgage you have taken out is offset by an additional asset of $300,000 (the value of the house) on your balance sheet. In the case of a consolidation loan, the financial institution lends you money not to increase your assets, but rather to simply repay your debts. The bank is supporting alone the risk that your previous creditors had. Furthermore, once your debts are repaid with the consolidation loan, there is no guarantee that you will not incur new debt. Any such debts would be in addition to your consolidation loan, exposing you to financial difficulties. The bank granting you a consolidation loan is therefore taking on more risk and the higher interest rate is there to compensate for that.

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