FAQs
Sean Stack Answers Your Questions
Not sure if Bankruptcy or a Consumer Proposal could be the right options for your personal debt management? Learn more with our Frequently Asked Questions, and Sean Stack’s answers.
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Are there any debts that cannot be included in a bankruptcy?
Yes, these include:
- Student loans that are less than seven (7) years old
- Fines and penalties imposed by the court
- Debts arising from recognizance or bail bond
- Debts arising from fraud, embezzlement or obtaining property by false pretenses
- Employment insurance overpayments
- Alimony
- Spousal support
- Child support
How long will I be bankrupt?
For a first time bankrupt, i.e.: someone who has never been bankrupt before, bankruptcy is usually either 9 months or 21 months depending on their income. For a second time bankrupt, i.e.: someone who was bankrupt once before, bankruptcy is usually either 24 months or 36 months depending on their income. Sean can walk you through how income affects a bankruptcy and what you can expect based on your own personal situation.
What will it cost to file for bankruptcy?
The cost of bankruptcy varies as it depends on what your household income is and also what equity you have in assets that you own. This is something that Sean will discuss with you during your free initial consultation.
If I have student loans can they be included in a bankruptcy?
If your student loans are more than seven (7) years old then yes, they can be included in a bankruptcy. If you have student loans you should contact your trustee to discuss because this can be a complicated issue that depends on what Canada Student Loans has as your end of study date but is also subject to case law based on court decisions.
How do my creditors find out that I am bankrupt?
Before you file for bankruptcy you will provide your trustee with a list of all your creditors. The trustee then sends notification of the bankruptcy to each creditor within five (5) days of you filing.
Who will know about my bankruptcy?
In most cases the only people that find out are your creditors, the Office of the Superintendent of Bankruptcy, your trustee and the Canada Revenue Agency.
Can I keep my house if I file for bankruptcy?
In many cases yes, people who file for bankruptcy can keep their house. There are a number of factors at play including the amount of equity in your home, your ability to fit the payment into your budget and whether you are up to date on your payments. It is best to contact your trustee to find out how your home might be affected.
I need to keep my car; will I lose it if I file for bankruptcy?
If your vehicle is financed and you are up to date on your payments and continue to make your payments after filing for bankruptcy then you can usually keep the vehicle. This is not the trustee’s decision; it is up to the lender that you financed with. Contact Sean to find out how this works.
Do I lose everything if I file for bankruptcy? Or, What can I keep if I go bankrupt?
If you file for bankruptcy there is a common misconception that you lose everything – this is not true. In Newfoundland and Labrador the Judgment Enforcement Act provides for certain exemptions, i.e.: things you are allowed to keep. These include:
- Equity in your principal residence up to $10,000
- One motor vehicle to a value of $2,000
- Household furniture to a value of $4,000
- Registered Retirement Savings Plans (RRSPs)
- Pensions
- Registered Retirement Income Funds (RIFs)
- Deferred Profit Sharing Plans (DPSPs)
- Tools of the trade to a value of $10,000
If you are wondering how these exemptions might affect you and your belongings you should contact Sean to discuss your situation.
What happens when if I file a Consumer Proposal?
When the Consumer Proposal is filed with the trustee there is a ‘Stay of Proceedings’ the prevents creditors from contacting your or taking action against you. The creditors get 45 days to vote on the proposal. Each dollar owing to a creditor is equivalent to one vote. If the majority of unsecured creditors vote in favour of the proposal then all the unsecured creditors are bound by it.
How long is a Consumer Proposal?
A Consumer Proposal can be for no more than five (5) years but depending on your situation it can be for less time as well.
How much does a Consumer Proposal cost?
The total cost of a Consumer Proposal depends primarily on what your household income is and what assets you own.
Who can file a Consumer Proposal?
An individual who owes less than $250,000 or less, not counting any mortgages on their principal residence, may be eligible to make a consumer proposal. If an individual owes more than $250,000, not counting any mortgages on their principal residence, they may be able to file a Division I proposal and should speak to a trustee about how that would work.
What is a Consumer Proposal?
A Consumer Proposal, aka Division II Proposal, is a legal process that can only be filed through a trustee in bankruptcy.
What happens if I miss a payment in a debt consolidation plan?
Missing a payment can lead to late fees, an increase in interest rates, and a negative impact on your credit score. Consistent missed payments may result in the cancellation of the consolidation plan, requiring you to manage debts individually again.
Can I still use my credit cards during the debt consolidation process?
In most cases, you’ll need to stop using your credit cards once they are included in a consolidation plan. Continuing to use them could lead to more debt and jeopardize your progress. A Licensed Insolvency Trustee can guide you on how to manage credit during this process.
How do I know if debt consolidation is the right option for me?
Debt consolidation may be a good option if you have multiple high-interest debts, can secure a lower interest rate, and can commit to regular payments. A Licensed Insolvency Trustee can assess your financial situation and help you decide if debt consolidation is the right choice.
Are there any risks associated with debt consolidation?
Yes, risks include accumulating more debt, paying more interest over time, negatively impacting your credit score, or risking assets if secured loans are used. Research options and work with your Licensed Insolvency Trustee to minimize risks.
Will debt consolidation affect my credit score?
Debt consolidation can temporarily lower your credit score due to hard credit inquiries and new accounts. However, timely payments and reduced credit utilization can improve your score over time.
What types of debts can be consolidated?
You can consolidate unsecured debts such as credit card balances, payday loans, personal loans, lines of credit, medical bills, and some student loans. Secured debts like mortgages or car loans are typically excluded.
How long does it take to complete a debt management program?
The length of a debt management program depends on the amount of debt you have and the terms agreed upon with your creditors. Typically, a debt management program may take several months to a few years to complete, depending on your financial situation.
Is debt management only for credit card debt?
No, debt management can apply to various types of unsecured debts, including personal loans, payday loans, medical bills, and other outstanding balances.
Can debt management help with overdue bills or collection accounts?
Yes, debt management can help by working with creditors or collection agencies to manage overdue bills and avoid further collection actions. A Licensed Insolvency Trustee can guide you through this process.
How can debt management help me reduce my monthly payments?
Debt management can lower monthly payments by negotiating with creditors for reduced interest rates, extending repayment terms, or consolidating your debts into one payment. This can make your payments more affordable.
How does business debt consolidation affect my business credit score?
Business debt consolidation can impact your business credit score in several ways:
- Short-term impact: Applying for a consolidation loan or restructuring your debt may result in a temporary dip in your credit score due to a hard credit inquiry.
- Long-term improvement: If consolidation reduces your debt load and allows you to make timely payments, it can improve your credit score over time by demonstrating responsible financial management.
- Credit utilization: Consolidating debts into one loan can lower your credit utilization ratio, which may positively affect your credit score.
Are there specific qualifications my business must meet to be eligible for debt consolidation?
To qualify for debt consolidation, your business must meet a few key criteria:
- Business Type: Sole proprietors, partnerships, and corporations may be eligible.
- Debt Amount: Multiple outstanding debts are required for consolidation.
- Financial Health: Positive cash flow and financial stability improve eligibility.
- Creditworthiness: Poor credit may still allow for consolidation with a Licensed Insolvency Trustee’s help.
- Cooperation with Creditors: Willingness to work with creditors is essential.
What is the process for consolidating business debts?
The process for consolidating business debts typically involves the following steps:
- Assessment of Debt: A Licensed Insolvency Trustee will assess your business’s current debts, including outstanding loans, credit lines, and vendor accounts.
- Exploring Options: Based on your financial situation, the Trustee will explore available options for consolidation, such as securing a consolidation loan or negotiating with creditors for better terms.
- Debt Negotiation: If necessary, the Trustee may negotiate with creditors to reduce interest rates or extend repayment terms, helping to ease your financial burden.
- Consolidation Loan: You may secure a consolidation loan to pay off the existing debts, which combines them into one manageable payment with a fixed interest rate.
- Ongoing Monitoring: The Trustee will help monitor the progress and ensure that your business remains on track to meet repayment terms and avoid future financial strain.
Working with a Licensed Insolvency Trustee ensures that the process is handled professionally and in the best interest of your business.
How can debt consolidation benefit my business?
Debt consolidation can help your business by simplifying your debt management. Instead of dealing with multiple creditors, you can combine your debts into one manageable loan or payment plan. This can reduce interest rates, lower monthly payments, and improve cash flow, allowing you to focus on growing your business. A Licensed Insolvency Trustee can help you explore options tailored to your business’s specific needs, ensuring the solution aligns with your financial goals.