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Difference between revisions of "Dealing with Debt (10:V)"

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Dealing with Debt (10:V) (view source)

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{{REVIEWED LSLAP | date= July 8, 2022}}
{{REVIEWED LSLAP | date= July 8, 2023}}
{{LSLAP Manual TOC|expanded = creditors}}
{{LSLAP Manual TOC|expanded = creditors}}


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The steps involved in this reduced payment are:  
The steps involved in this reduced payment are:  
#determine the amount(s) owed and to whom (verify with the creditors rather than relying on the debtors);  
#Determine the amount(s) owed and to whom (verify with the creditors rather than relying on the debtors);  
#determine how much money is available to pay to creditors, keeping the basic standard of living in mind;  
#Determine how much money is available to pay to creditors, keeping the basic standard of living in mind;  
#consider if the debtor has assets, bank accounts or investments at risk;  
#Consider if the debtor has assets, bank accounts or investments at risk;  
#consider the nature of the debt and if someone else would be impacted if the debtor is unable to make full payment, e.g. a joint credit card;  
#Consider the nature of the debt and if someone else would be impacted if the debtor is unable to make full payment, e.g. a joint credit card;  
#work out a payment plan for the creditors on a pro rata basis;  
#Work out a payment plan for the creditors on a pro rata basis;  
#write the creditor a short letter outlining your situation and providing proof of reduced financial capacity, e.g. EI stub;  
#Write the creditor a short letter outlining your situation and providing proof of reduced financial capacity, e.g. EI stub;  
#send or fax the above letter with supporting documentation and retain proof of the creditor receiving said letter (e.g. fax transmission report), retain a copy for your file;  
#Send or fax the above letter with supporting documentation and retain proof of the creditor receiving said letter (e.g. fax transmission report), retain a copy for your file;  
#update creditor periodically, e.g. if debtor's situation stays the same or improves and if they’re able to resume contractual payments.  
#Update creditor periodically, e.g. if debtor's situation stays the same or improves and if they’re able to resume contractual payments.  


:'''NOTE:''' Contact the Credit Counselling Society for free help with this process if needed. The creditors may feel the reduced payments are not acceptable, but would likely not pursue alternative legal action if this is all the debtor can afford at this time. Communication with the creditors is vital, especially if a consumer has no ability to make payments at this time.
:'''NOTE:''' Contact the Credit Counselling Society for free help with this process if needed. The creditors may feel the reduced payments are not acceptable, but would likely not pursue alternative legal action if this is all the debtor can afford at this time. Communication with the creditors is vital, especially if a consumer has no ability to make payments at this time.
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Creditors will often offer refinancing or debt consolidation as the solution to the debtor’s financial problem. The interest rate may be higher for the consolidation. Terms and conditions will determine total interest paid and the payment period. If making payments in the first place is the problem, consolidation loans may not be the solution. All creditors should be treated on a pro rata basis; if the consolidation only satisfies a particular creditor, the debtor should ensure they are at least able to meet the minimum payments owing to all other creditors.   
Creditors will often offer refinancing or debt consolidation as the solution to the debtor’s financial problem. The interest rate may be higher for the consolidation. Terms and conditions will determine total interest paid and the payment period. If making payments in the first place is the problem, consolidation loans may not be the solution. All creditors should be treated on a pro rata basis; if the consolidation only satisfies a particular creditor, the debtor should ensure they are at least able to meet the minimum payments owing to all other creditors.   
:'''NOTE:''' It is important for debtors to be conscious of predatory lending and the current criminal rate of interest under section 327(1) of the Criminal Code. Bill C-47, which received royal assent on June 22, 2023, proposed an amendment to the criminal interest rate from 47 percent annual percentage rate (APR) to 35 percent APR. Bill C-47 also proposed to adjust the payday loan exemption and limit the interest that can be charged on payday loans.


== E. Voluntary Debt Repayment Programs ==
== E. Voluntary Debt Repayment Programs ==
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The government is the most powerful creditor in Canada and has unique remedies available to it. For example see [[Creditors%27 Remedies against Debtors (10:III)#7. Garnishment of Statutory Benefits | Section III.B.7: Garnishment of Statutory Benefits]]. There is also a category of government entities called “tax payer support entities.” For debts owed to these agencies the six year limitation period still applies. Commercial crown corporations of self-sufficient entities do not belong to this category. Unpaid ambulance fees and Medical Services Plan premiums (which were eliminated starting January 1, 2020) are examples of tax payer support entities.
The government is the most powerful creditor in Canada and has unique remedies available to it. For example see [[Creditors%27 Remedies against Debtors (10:III)#7. Garnishment of Statutory Benefits | Section III.B.7: Garnishment of Statutory Benefits]]. There is also a category of government entities called “tax payer support entities.” For debts owed to these agencies the six year limitation period still applies. Commercial crown corporations of self-sufficient entities do not belong to this category. Unpaid ambulance fees and Medical Services Plan premiums (which were eliminated starting January 1, 2020) are examples of tax payer support entities.
:'''NOTE:''' In response to the COVID-19 pandemic, the government launched the Canada Emergency Business Account (CEBA) program which offered interest free loans of up to $60,000 to small businesses and not-for-profits. Applications for CEBA loans were open from April 9, 2020, to June 30, 2021. CEBA borrowers in good standing have until December 31, 2023, to repay the balance of their loan and receive up to 33 percent of loan forgiveness. The amount of loan forgiveness will depend on the original amount borrowed. More information on the CEBA Program can be found at https://ceba-cuec.ca/. CEBA loans were issued by financial institutions, not the Government of Canada. The government guarantees these loans; however, the financial institutions appear to be primarily responsible for attempting to collect amounts owing. Therefore, CEBA loans may not be subject to the unique creditor remedies the government possess until the government pays out the guarantee to the financial institutions. 


== H. Services a Trustee Provides Under the Bankruptcy and Insolvency Act ==
== H. Services a Trustee Provides Under the Bankruptcy and Insolvency Act ==
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A debtor should know that filing for bankruptcy will not discharge some obligations, such as:  
A debtor should know that filing for bankruptcy will not discharge some obligations, such as:  
*an amount owing on a fine, penalty or restitution order imposed by a court in respect of an offence or debt arising out of a recognizance or bail;  
*An amount owing on a fine, penalty or restitution order imposed by a court in respect of an offence or debt arising out of a recognizance or bail;  
*an award of damages by a court in civil proceedings in respect of bodily harm intentionally inflicted or sexual assault (including wrongful death resulting therefrom);   
*An award of damages by a court in civil proceedings in respect of bodily harm intentionally inflicted or sexual assault (including wrongful death resulting therefrom);   
*a court order or a separation agreement regarding alimony or maintenance;  
*A court order or a separation agreement regarding alimony or maintenance;  
*an amount obtained under false pretences while acting in a fiduciary capacity;   
*An amount obtained under false pretences while acting in a fiduciary capacity;   
*a debt resulting from obtaining property or services by false pretences or by fraudulent misrepresentation (other than a debt arising from an equity claim);  
*A debt resulting from obtaining property or services by false pretences or by fraudulent misrepresentation (other than a debt arising from an equity claim);  
*any debt or obligation for federal and provincial student loans where the date of bankruptcy occurs before the date on which the bankrupt ceased to be a full or part-time student or, as of June 18, 1998 through an amendment to the Act, within 7 years after the date on which the bankrupt ceased to be a full or part-time student (BIA, s 178(1)(g)).  
*Any debt or obligation for federal and provincial student loans where the date of bankruptcy occurs before the date on which the bankrupt ceased to be a full or part-time student or, as of June 18, 1998 through an amendment to the Act, within 7 years after the date on which the bankrupt ceased to be a full or part-time student (BIA, s 178(1)(g)).  


The full list of exceptions may be found in s 178(1) of the BIA.  Questions about bankruptcy, including specific questions regarding Canada Student Loans, may be directed to a licensed insolvency trustee or the Superintendent of Bankruptcy, at 1-877-376-9902.
The full list of exceptions may be found in s 178(1) of the BIA.  Questions about bankruptcy, including specific questions regarding Canada Student Loans, may be directed to a licensed insolvency trustee or the Superintendent of Bankruptcy, at 1-877-376-9902.
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For further information on getting repayment assistance for Federal student loans, see https://www.canada.ca/en/services/benefits/education/student-aid/grants-loans/repay/assistance/rap.html.
For further information on getting repayment assistance for Federal student loans, see https://www.canada.ca/en/services/benefits/education/student-aid/grants-loans/repay/assistance/rap.html.


:'''NOTE:''' Due to COVID-19, effective April 2021, the Government of Canada has suspended the accumulation of interest on Canada Student Loans until March 31, 2022. Subject to Parliament approval, the Government of Canada has proposed to extend this measure until March 31, 2023.
:'''NOTE:''' Effective April 1, 2023, the Government of Canada has permanently eliminated the accumulation of interest on federal student loans including loans being currently repaid. Debtors are still responsible for the interest accumulated before April 1, 2023.


=== 2. Provincial Student Loan Debt ===
=== 2. Provincial Student Loan Debt ===
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