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.

How long will I be in bankruptcy?

The bankruptcy process is normally 9 months long for a first time bankrupt. When the bankruptcy is over, your debts are discharged by law (you no longer have to pay back your debts). There are some exceptions to the rule, our bankrupcy trustees will explain these to you when we meet.

If you have been bankrupt before, or you do not perform your duties in the bankruptcy or if someone opposes your discharge, then instead of your discharge being given automatically at the end of nine months, the bankruptcy court will decide what type of discharge you will receive.

Who can file for bankruptcy?

In order to declare bankruptcy an individual must:

• owe at least $1,000
• be unable to pay their bills as they generally become due
• be insolvent

Will I lose my house if I file for bankruptcy?

You may be able to keep your house if you file for bankruptcy. This is a complicated area and depends on a number of things, including the amount of equity in the home and if the mortgage holder would be agreeable to letting you keep it. Each situation is different and your home will be discussed when you meet with us at the consultation. Visit our website to find out more and book an appointment

What if there is a lien on my vehicle?

You may be able to keep assets that you have pledged to creditors, such as a car, however, in these cases you will have to negotiate with the creditor directly. We will explain the provincial laws to you when you attend the free consultation.

What about student loans?

If the date of bankruptcy is more than 10 years after you completed your studies, the debt will be discharged with the bankruptcy. If the bankruptcy occurs within 10 years after the completion of studies the student loan debt is not released with the bankruptcy and survives the bankruptcy. The bankruptcy consultants at Boale, Wood can provide more detailed info

Will I be able to get another student loan?

Yes, Canada Student Loans now allows students who have been bankrupt or who are bankrupt to obtain additional loans for their education. For more information on this topic, see Canada Student Loans, or visit our bankruptcy vancouver website

Will notice of my bankruptcy be published in the newspaper?

No. For most consumer bankruptcies, no notice is required to be published in the newspaper. For more info contact the bankruptcy vancouver pros at Boale, Wood and Company

Personal or Consumer Proposal

Under the Bankruptcy and Insolvency Act, you may make a proposal or compromise to your creditors. This usually is a cents on the dollar compromise. Your offer maybe to compromise the total amount you owe your creditors or extend the time you have to pay your debts in full. Instead of monthly payments to your creditors, you could also offer to cash in certain assets to pay a portion or all of the debts. A Trustee in Bankruptcy will assist you in making a fair offer to your creditors. The filing of the proposal stops unwanted calls from creditors, stops your wages from being garnished, and allows you time to make arrangements to pay your creditors what you can afford.

In order to qualify for a consumer proposal you must owe less than $75,000 not counting mortgages registered against your principal residence.

Alternatives to Bankruptcy

A number of alternatives to bankruptcy exist for individuals who are facing financial difficulty. Listed below are various options which may be of assistance.

Contact Your Creditors
Explain to your creditors how your circumstances have changed and explain why you cannot make your agreed upon payments. Suggest an arrangement that could work for both of you. Creditors are generally prepared to work with you.

Debt Consolidation Loan
You can approach a bank or financial institution about combining or "consolidating" your debts into one loan. The financial institution pays off all your debts and you only make a monthly payment to that creditor. Quite often, the financial institution will ask for a co-signor.

Informal Proposal
In some cases our firm of insolvency consultants and bankruptcy trustees can work with you and your creditors to set up a payment plan that will allow you to pay your creditors in an orderly way and thus help preserve your credit rating. This operates similar to a debt consolidation loan except you do not borrow the money to pay off your creditors.

Debt Counsellors
There are a number of debt counsellors who will make arrangements with your creditors to pay off your indebtness in full. The counsellor will review your financial situation and arrange for a payment program to be made between you and your creditors. A fee may be charged by the counsellor in order to perform this service.

What is Personal Bankruptcy?

Under the Bankruptcy and Insolvency Act, a reasonable and honest individual is given the chance to be released of his/her debts by declaring bankruptcy. At the end of nine months, if you perform certain duties required of you by law, your debts will be discharged or wiped out subject to certain exceptions. It is intended to allow you to make a fresh start.

The bankruptcy gives you protection against phone calls from your creditors; wages will no longer be garnished; and your utilities will not be cut off. Generally, you are allowed to keep basic furniture and your personal effects when you go bankrupt, and under certain circumstances you may even be allowed to keep your car; your house/trailer, RRSPs and life insurance policy. Some debts such as student loans, fines and fraud will not be discharged.

Bankruptcy

After consulting with our professionals, you may come to the conclusion that the only option available is for the Company to make an Assignment in Bankruptcy.

Although this means the end of your business, it maybe advantageous to take steps to liquidate your business before it deteriorates to the point where there are insufficient assets to cover your debts to the secured creditor or to any government creditor that has Directors obligations (Canada Revenue Agency) or to any creditor that may hold a personal guarantee as this would leave the guarantors with personal obligations.

In a bankruptcy, all of the assets of the business are turned over to the possession and control of a Bankruptcy Trustee. The Trustee takes steps to preserve, protect, and evaluate the business and reports on the assets of the business at the first meeting of creditors.

At the first meeting of creditors, the creditors will generally appoint Inspectors (a creditor committee) to assist the Trustee in dealing with the assets and undertakings of the business. The Directors of the company are required to attend the meeting and may be called upon to explain the causes of the company’s financial difficulties or other matters relating to the assets.

Ultimately the companies’ assets are sold and converted into cash, accounts receivable are collected, and other assets dealt with. A dividend is paid to the proven creditors on a pro-rata basis and the Trustee obtains its discharge.

Let's get this party started

Hey, Stephen Boale here, partner with David Wood in Boale, Wood & Company. We are a Western Canada Insolvency Consultants and Banrkupcy Trustees. Located in sunny Vancouver, BC, Canada