MPs Urged to Reintroduce Bill C-62 - Student Debt

The Canadian Association of Insolvency and Restructuring Professionals or CAIRP (of which Boale, Wood & Company is a member) is urging Members of Parliament to Re-Introduce Bill C-62.

Bill C-62 is Insolvency Reform Legislation that addresses issues in Student Debt, more equitable treatment of RRSPs, wage earner and pension plan protection, and the preservation of employment. These reforms are required to improve the fairness, efficiency and effectiveness of the insolvency process.

Before Throwing Up Your Hands In Despair Look For An Alternative To Bankruptcy

Given the easy availability of goods and services on credit these days, it is easy for a person to fall into the pit of not being able to keep up with repaying debts taken or credit used and since there are thousands of new credit card applications being approved daily, you can well understand what a good business giving credit is. In fact, even people with less than satisfactory and even bad credit can obtain credit cards which often lead to reckless spending and getting mired in debt from which there is no other way out than to declare bankruptcy.

Will Not Solve Mounting Debt Problems

Still, there is an alternative to bankruptcy and before choosing the extreme step of filing bankruptcy it will be wise to explore the alternatives to bankruptcy, which though they may not solve your problem with mounting debts and will also not restore your credit rating will still prove to be a worthwhile alternative to bankruptcy since you can regain control of your finances if you look around hard and long enough.

You may want to first speak to a financial advisor who will help you in restoring your finances especially if you have valuable assets. Or, you can find an alternative to bankruptcy by seeking out online guides that will provide you with the necessary lowdown on the better alternative to bankruptcy and which will help you in evaluating different options. Another alternative to bankruptcy is consolidation of all of your existing loans into a single loan and thus arranging with creditors to make loan repayments that are easier to keep up on.

By consolidating your loans you get a number of advantages and this alternative to bankruptcy allows you to make single monthly payments, allows you to think up alternative repayment plans and also helps reduce interest rate on certain loans. In addition, this alternative to bankruptcy also lets you reset the clock on forbearances as well as deferments and you also get to restart the loan term on loans already in repayment.

Probably the best feature to this alternative to bankruptcy is that you can switch lenders to avail of better loan discounts though you should also be aware of certain caveats as well. These caveats include things such as there being a loss of grace period and also a loss of subsidized interest benefits with regard to Loans as well as other loss of benefits of the Loans.

Will I Have to Make Monthly Payments?

The Superintendent of Bankruptcy sets the guidelines pertaining to income. Depending on the amount of income and the number of people you have to support, you may be required to make monthly payments to the Trustee. You and your Trustee will determine the amount to be paid based on the guidelines and your personal circumstances. These payments will stop once you receive your discharge from bankruptcy.

What assets can I keep?

In BC, the exemptions are set out in the Court Order Enforcement Act. You are allowed to keep
• Household goods and furnishings up to $4,000
• Tools of the trade up to $10,000
• Equity in a motor vehicle up to $5,000 if there is no family maintenance debt
• Equity in a motor vehicle up to $2,000 if there is a family maintenance debt
• Equity in a home up to $12,000 in the GVRD and CRD $9,000 outside these areas).

Who is the Receiver General?

A Receiver or Receiver-Manager ("Receiver") may be appointed by a secured lender under a General Security Agreement ("GSA") covering all of the security of the debtor, under a specific mortgage such as a mortgage of an office building or apartment block, and may be appointed by the Court.

In the most common form of receivership, that is under a GSA, the Receiver is appointed to take possession of the assets, to manage them in such a manner that provides the secured lender will be paid out, or to liquidate them for the same purpose.

The Receiver acts primarily for the secured lender, but also has a fiduciary relationship to the debtor. The Receiver must act in good faith and preserve the assets of the debtor, but is not obligated to consider the long term objectives of the debtor. If the Receiver can realize sufficient funds to pay out the secured lender in the short term, then the Receiver will most likely be there only for the short term. Once the secured lender is paid out the surplus assets are returned to the debtor to be managed by its directors.

Before the secured creditor can call your loan and appoint a Receiver, it must provide you with statutory ten day Notice of Intention to Enforce Security pursuant to the provisions of the Bankruptcy and Insolvency Act.

Only after the expiry of the 10-day period can the secured creditor enforce its security. Prior to the expiry of the 10-day Notice, your Company would be able to file a Notice of Intention to File a Proposal to Creditors, which would stay the secured creditor from enforcing its security for a 30-day period.

If your Company receives the ten day notice from your bank or secured creditor, it is essential to consult with our insolvency professionals immediately. Otherwise the ability for you to restructure your financial affairs may be severely limited.

How will my credit rating be affected?

The fact that you have been bankrupt will remain on your credit report for 6 years after your discharge or 3 years after completion of a consumer proposal.

Insolvency Consultant and Bankruptcy Trustee: How will my credit rating be affected?

Insolvency Consultant and Bankruptcy Trustee: How will my credit rating be affected?

What is Bankruptcy?

Bankruptcy is a legal process, regulated by the Federal Government, that stops any legal action by creditors and allows a person to be discharged from most, if not all, of their debts. The main purpose of the bankruptcy process is to allow individuals to make a fresh start.

Proposal to Creditors

It is not always possible to implement an informal workout. There are formal options available under the provisions of the Bankruptcy and Insolvency Act which may assist you in saving your business.

An insolvent business can file a Notice of Intention to Make a Proposal. The filing of that notice will give your company an absolute Stay of Proceedings against all claims by creditors against your company, including:

• Your bank
• Canada Revenue Agency
• Your landlord
• Utility suppliers
• Any other creditor

The Stay of Proceedings will give you a minimum of 30 days to come up with a plan to deal with your creditors. The time period can be extended by applying to Court for a further 45-day extension to a maximum of 6 months. The purpose of the Stay is to give your company the "breathing’ room that it needs to develop a plan to save your business without the threat of garnishees or legal actions.

A Proposal can take any number of forms; however, a number of factors are required before any restructuring can be implemented:

• Recognition of the problem at an early date before the financial problems are insurmountable.
• The business must be viable and the debt manageable.
• Management must be committed to seeing the restructuring through to completion.
• Sufficient working capital must be available to continue operations during the restructuring process.
• A detailed, definitive, and realistic plan must be developed.
• The plan must be sold to the creditors by the proponent.

As long as the Proposal is approved by a majority of the creditors representing 2/3 of the value of the claims, the Proposal is binding on all the creditors, including those who vote against it.
The process of implementing a successful Proposal is obviously more complex than we have described and involves a detailed review and assessment of your company’s financial position.

Will my creditors stop calling me?

Yes. Our office will deal with your creditors. By law, actions against you cease when bankruptcy is filed. This includes garnishees, judgements and other legal actions. This does not apply to secured creditors such as banks holding, for example, a lien on a car.