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Bankruptcy and Consumer Proposal FAQ

Q: Will anyone know if I file for bankruptcy?

A: Your creditors, your trustee and the Federal Government via the Superintendent of Bankruptcy are the only parties that are informed about your bankruptcy. They are required to keep this information confidential.

Q: Will my spouse have to pay my debts in a bankruptcy or Consumer Proposal?

A: Usually, a spouse isn’t required to pay your debts. However, a creditor could pursue a spouse if they have co-signed or guaranteed your debt.

Q: My parents co-signed on my loan. What will happen with their credit?

A: Your parents are legally obligated to pay the loan. Often, a creditor is open to accepting regular monthly payments from parents who co-sign a child’s loan. There should be no effect on the parent’s credit so long as the loan payments continue to be made.

Q: My wages are being garnished. Will filing for bankruptcy make that stop?

A: Yes, filing a bankruptcy or Consumer Proposal forces the removal of any wage garnishment. This is due to the fact that there is a powerful stay of proceedings that goes into effect which also stops creditors from phoning, sending letters or generally trying to collect in any way.

Q: Can I stop paying my creditors immediately in a bankruptcy or Consumer Proposal?

A: Yes, you will stop paying all creditors immediately

Q: Will I lose my car in a bankruptcy?

A: No, you don’t have to lose your car when you file for bankruptcy. If you have a loan secured by the car, you will keep paying that loan, the secured creditor is typically fine with this type of arrangement. If your car is free and clear of any loans then there is an exemption which allows you to retain it in most cases. Please contact us for more information.

Q: Do I get to keep my GST credit cheque in a Consumer Proposal?

A: Yes. This is different than in a bankruptcy as if you file for bankruptcy, your GST credit is forwarded to the bankruptcy by the Federal Government. In some cases, depending on other receipts, GST credits are returned to you after the bankruptcy. Please contact us for more information.

Q: Is there any impact on my tax return in a Consumer Proposal or bankruptcy?

A: There is no impact on your tax returns from filing a Consumer Proposal. For bankruptcy proceedings, any tax refunds are sent into the bankruptcy by Canada Revenue Agency for the benefit of your creditors. This applies to the calendar year that the bankruptcy begins and to prior years if unfiled.

Q: What happens to my credit rating during and after a bankruptcy?

A: Credit reporting agencies obtain information about insolvency filings from the Federal Government. Filing a Consumer Proposal or for bankruptcy will appear on your credit rating for some time. Please contact us for more information.

Q: Will I get help with budgeting after filing for bankruptcy?

A: Yes. There are two mandatory financial counselling sessions where budgeting is discussed. In addition, there are online resources provided to assist you.

Q: Will my employer know I filed for bankruptcy?

A: In most cases, bankruptcy will not affect your job. Unless you choose to disclose the information to your employer, there is usually no reason that they will need to know about it.

Q: What happens if I win the lottery during bankruptcy?

A: A lottery win is classified as after-acquired property. You will be required to remit any lottery winnings into the bankruptcy in order to pay your debts.

Q: Can my creditors stop me from beginning bankruptcy proceedings?

A: Your creditors can’t stop the bankruptcy from starting. They do, however, have the right to object to your discharge. Please contact us if you think this may occur.

Q: What happens if I don’t get a discharge from bankruptcy?

A: Eventually your file will be closed and your creditors will be able to seek collection from you again. For this reason, it’s important to get your discharge.

Q: Can I get bankruptcy protection if I have filed a previous bankruptcy years ago?

A: Yes. As long as you have received a discharge from a prior bankruptcy you can file a subsequent bankruptcy. However, you may wish to consider a Consumer Proposal instead.

Q: Does bankruptcy affect my ability to get a job?

A: In most cases, bankruptcy will not affect your job. In rare instances, where there are bonding requirements or professional boards, it may be problematic. Please contact us to discuss your specific situation.

Q: What alternatives are there to bankruptcy?

A: There are several alternatives to consider prior to a bankruptcy filing. Some of the alternatives would include seeking a consolidation loan from a bank or credit union, working with a reputable credit counsellor, selling off assets you don’t need, or making a Consumer Proposal that provides you the same protection that a bankruptcy filing does.

Q: How long does it take to start bankruptcy proceedings?

A: This depends on a variety of factors, primarily how long it takes to get the information together. We provide an application form that will assist you in gathering all of your relevant documents to get started.

Q: Will I lose my house in a bankruptcy?

A: If you are a homeowner, a careful analysis must be done in order to determine how much equity exists within your home. If there is minimal or no equity, then it is possible to keep your house even if you file for bankruptcy, as long as you continue with your mortgage payments.

Q: I have been served with foreclosure documents and stopped paying my mortgage months ago. What will happen next?

A: Your mortgage holder is using the foreclosure process to gain control of the sale of your home. Filing a Consumer Proposal or bankruptcy can protect you from any shortfall on the sale.

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