How Claiming Bankruptcy Affects ICBC Debt
It is interesting to meet people who have different stress thresholds when it comes to debt. Some people are terrified about having $10,000 in debt while others are quite comfortable when the number is ten times higher. When it comes to having a lot of debt, one of the main contributors can be motor vehicle indebtedness to the Insurance Corporation of BC (ICBC).
We have helped individuals who have owed ICBC Collections Department more than a million dollars. Any type or amount of debt can be daunting but especially so if the lender has the power to take your driver’s license away. You may be wondering how claiming bankruptcy affects ICBC debt.
If you are contemplating bankruptcy, it is beneficial for you to know your rights in regards to ICBC debt. It does not matter if you are living in Port Hardy or Parksville, we all have to deal with ICBC when it comes to driving. They are a unique creditor that has certain rights, unlike, for instance, credit card debt, that enables them to force you to pay in order to drive. The good news is that claiming bankruptcy will extinguish most types of ICBC debt upon your discharge. A Consumer Proposal can also be used to do the same. However, there are other points to consider.
A Privilege Not a Right
The position ICBC may take in regards to their debt is dependent on the facts of the particular situation. Therefore, it is difficult for ICBC to have a general policy in effect. However, you should be aware that it is up to ICBC to decide, as part of its licensing power, whether or not you will be reinstated the privilege of operating a motor vehicle. ICBC feels that driving a motor vehicle is a privilege and not a right. In our experience, most people are able to continue to be able to drive.
Renewing Your Driver’s License
It is important for you to be aware of the date your driver’s license comes up for renewal, which is thankfully, only every 5 years. If your license comes up for renewal while in bankruptcy, ICBC may not want to renew your license until after your discharge from bankruptcy. Depending on your circumstances, this may be 9 months, 21 months, 24 months, or longer. However, if you decide to just “grin and bear it” and just pay all the debt that would not be extinguished under the Bankruptcy and Insolvency Act (BIA), there is a possibility that ICBC may remove their “Refusal to Issue” in relation to your driver’s license or Insurance renewal. Of course, this option would only be practical if the debt was minimal.
Exceptions for Hardship
If you prove hardship, ICBC may review your case to determine the renewal status of your license. This could be the result of:
- Needing your driver’s license in order to work. In some cases, you may have to provide a letter to ICBC from your employer to state that you would lose your job if your license was suspended.
- ICBC may consider hardship as not living in an area that has public transportation to get you to work and back home.
You should also expect to experience restrictions on financing with ICBC if you seek bankruptcy protection for ICBC debt. You would not be immediately eligible for the Autoplan 12 financing option. ICBC has other alternatives for payment plans, such as:
- cash payments for a set period,
- followed by the possibility of 6-month financing leading up to reinstating the Autoplan 12-month financing. You would discuss these options with an ICBC representative.
Types of ICBC Debt that Survive Bankruptcy
There are certain types of ICBC debt that would survive Bankruptcy.
- Driver Penalty Point premiums (DPP) may survive bankruptcy. DPP’s are incurred if you are guilty of driving offenses under the Motor Vehicle Act. In addition, a DUI is a court-imposed fine and would survive bankruptcy. This type of debt is payable directly to the courthouse.
- Driver Risk Premiums (DRP) may also survive bankruptcy. A Driver Risk Premium is also imposed if you have two or more convictions for using an electronic device while driving, such as a cell phone.
- Multiple Crash Premiums (MCP) are in the same category as DPP’s and DRP’s.
Generally, all of the premiums mentioned above are billed and owed at the beginning of a term and earned throughout the term (usually 12 months). Therefore, amounts earned prior to the date of the bankruptcy filing are extinguished by bankruptcy, amounts earned after the bankruptcy start date will survive.
- If a debt arises from fraud or dishonest conduct and/or an intentional act of violence that is supported through Court proceedings, then regardless of the amount of debt, ICBC would take the position that it would survive pursuant to Section 178 of the Bankruptcy and Insolvency Act. Additionally, ICBC will, if necessary, pursue the appropriate Court Orders to enable their continued right to collect on this debt.
If you are in a situation where you have a secured vehicle loan and want to stop payments on the loan, usually because the loan is much greater than the value of the vehicle, you can allow the secured creditor to seize the vehicle. Under the Personal Property Security Act of BC (PPSA), once the secured creditor seizes the vehicle, that is the end of the loan. This is often referred to as “seize or sue”.
If this is your intended course of action you should ensure the plates have been removed and returned to ICBC for cancellation, otherwise, insurance may continue to be billed as post-bankruptcy debt which you would be responsible to pay. Also, ensure that you have removed all your personal possessions from the vehicle as tow truck drivers act quickly and sometimes without very much notice.
One of the difficult things we encounter in our capacity as a Licensed Insolvency Trustee office is when there are surprises that come up. In order to avoid a bad surprise with ICBC debt, we can make an inquiry to ICBC Collections on your behalf to confirm what portion of the debt may survive bankruptcy, if any. We would do this prior to you making a decision to proceed with filing a bankruptcy or a Consumer Proposal. This would avoid any unexpected surprises such as the amount of debt that may survive bankruptcy after you are discharged.
Please feel free to reach out to us and take advantage of our no cost, complimentary consultation so we can discuss the particulars of your situation. It is important to obtain as much information as you can before making an important decision like this.