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Difference between revisions of "Dealing with Debt (10:V)"
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:'''NOTE:''' Debtors should also be aware that if a judgement has been rendered against them it can be enforced for 10 years after the date of judgement (s 7). Refer to the ''Limitation Act'' for exceptions to this rule (s 23). | :'''NOTE:''' Debtors should also be aware that if a judgement has been rendered against them it can be enforced for 10 years after the date of judgement (s 7). Refer to the ''Limitation Act'' for exceptions to this rule (s 23). | ||
Depending on a consumer’s circumstances, they may need to contact their creditors to ask for assistance in getting through financially | Depending on a consumer’s circumstances, they may need to contact their creditors to ask for assistance in getting through financially difficult times. Most people truly want to honour their commitments; however, they may not be able to do so at this time. If someone needs help with determining what their budget is and if they have surplus income to offer their creditors a reduced payment, the Credit Counselling Society is able to help consumers at no cost: 1-888-527-8999. | ||
If the debtor has enough surplus income in their budget to repay their debt, they may wish to contact their creditors in writing and offer reduced payments until they are in a position to make contractual payments again. '''This is not a legal arrangement.''' A sample letter requesting reduced payments can be found on CCS’s website at http://www.nomoredebts.org/debt-help/dealing-with-creditors/debt-letters.html. | If the debtor has enough surplus income in their budget to repay their debt, they may wish to contact their creditors in writing and offer reduced payments until they are in a position to make contractual payments again. '''This is not a legal arrangement.''' A sample letter requesting reduced payments can be found on CCS’s website at http://www.nomoredebts.org/debt-help/dealing-with-creditors/debt-letters.html. | ||
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#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 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. | ||
== D. Debt Consolidation and Refinancing == | == D. Debt Consolidation and Refinancing == | ||
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== G. Government Debt == | == G. Government Debt == | ||
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:II)#6. Garnishment of Statutory Benefits | Section II.B.6: 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 are | 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:II)#6. Garnishment of Statutory Benefits | Section II.B.6: 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. | ||
== H. Services a Trustee Provides Under the Bankruptcy and Insolvency Act == | == H. Services a Trustee Provides Under the Bankruptcy and Insolvency Act == | ||
The first appointment with a licensed insolvency trustee in BC is always free. During this appointment, the Trustee should outline the implications and information a consumer needs to consider before taking any action. This is the time to ask questions to understand the process and long term effect on your credit. A Trustee should be willing to take the time to explain everything thoroughly as there is no backing out once someone has signed the documents to assign themselves into bankruptcy. The same limitation does not exist with consumer proposals. '''For more information on how a licensed insolvency trustee helps with debt, refer to the Office of the Superintendent of Bankruptcy video series at''' | The first appointment with a licensed insolvency trustee in BC is always free. During this appointment, the Trustee should outline the implications and information a consumer needs to consider before taking any action. This is the time to ask questions to understand the process and long-term effect on your credit. A Trustee should be willing to take the time to explain everything thoroughly as there is no backing out once someone has signed the documents to assign themselves into bankruptcy. The same limitation does not exist with consumer proposals. '''For more information on how a licensed insolvency trustee helps with debt, refer to the Office of the Superintendent of Bankruptcy video series at''' | ||
http://www.ic.gc.ca/iec/site/bsf-osb.nsf/eng/br03567.html | http://www.ic.gc.ca/iec/site/bsf-osb.nsf/eng/br03567.html | ||
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=== 1. Consumer Proposal === | === 1. Consumer Proposal === | ||
Depending on the nature and amount of the debt(s) and the consumer’s ability to pay, a consumer proposal should be considered. Creditors may recover more money in consumer proposals than in bankruptcy. However, there are windfalls that arise in bankruptcies that can result in unexpected recoveries. A consumer | Depending on the nature and amount of the debt(s) and the consumer’s ability to pay, a consumer proposal should be considered. Creditors may recover more money in consumer proposals than in bankruptcy. However, there are windfalls that arise in bankruptcies that can result in unexpected recoveries. A consumer proposal is a legal arrangement with creditors to repay a portion of the amounts owing. Assets are not usually jeopardized (as they may be in bankruptcy) and the interest stops accruing as long as payments are being made. Legal action is not effective while the consumer proposal arrangement is in place. | ||
Filing a consumer proposal is not free. If the CP is accepted by the creditors, the first $1,500 is paid to the trustee. The first $1,500 is deducted before calculating the distribution to creditors. Consumers are also expected to pay the administrator 20% of the moneys distributed to creditors under the consumer proposal. There may also be more fees [''Bankruptcy and Insolvency General Rules,'' CRC, c 368, s 129(1)]. Please consult a Trustee for more detailed information. '''For more information on consumer proposals, refer to the Office of the Superintendent of Bankruptcy in Canada's description of consumer proposals at''' | |||
https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br01976.html | |||
:'''NOTE:''' Due to COVID-19, the following relief measures are in place for consumer proposals: | |||
*From March 13 to December 31, 2020, debtors are allowed to miss up to 3 additional proposal payments before the consumer proposal will be deemed annulled | |||
*The time for holding meetings of creditors (ss 51, 66.15 and 102 of the BIA) and mediations (s 105 of the BIA) is extended by the time of the Suspension Period (April 27, 2020 to June 30, 2020, or 65 days) | |||
*The Trustee’s obligation to apply to court for a hearing following a bankrupt’s failure to comply with a mediated surplus agreement under s 170.1(3) is extended by the time of the Suspension Period | |||
=== 2. Personal Bankruptcy === | === 2. Personal Bankruptcy === | ||
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Personal Bankruptcy is governed by the BIA, and is based on the premise that the debtor is completely unable to pay their debts, even at a reduced rate, and does not have assets to liquidate (debtor is insolvent). Bankruptcy is one option to deal with a heavy debt burden. The record of a bankruptcy stays on a person’s credit record for a '''minimum''' of six years from the day the debts are discharged for a first-time bankrupt. This increases to 14 years for a second-time bankrupt. This does not necessarily mean that credit will be denied, only that the bankruptcy will be a factor that a potential creditor will consider when deciding whether or not to extend credit to that person. Certain professionals (such as lawyers, accountants, and mortgage brokers) may be required to report their bankruptcy to their professional organization. The BIA does provide that no person may be terminated just for filing bankruptcy. | Personal Bankruptcy is governed by the BIA, and is based on the premise that the debtor is completely unable to pay their debts, even at a reduced rate, and does not have assets to liquidate (debtor is insolvent). Bankruptcy is one option to deal with a heavy debt burden. The record of a bankruptcy stays on a person’s credit record for a '''minimum''' of six years from the day the debts are discharged for a first-time bankrupt. This increases to 14 years for a second-time bankrupt. This does not necessarily mean that credit will be denied, only that the bankruptcy will be a factor that a potential creditor will consider when deciding whether or not to extend credit to that person. Certain professionals (such as lawyers, accountants, and mortgage brokers) may be required to report their bankruptcy to their professional organization. The BIA does provide that no person may be terminated just for filing bankruptcy. | ||
The debtor is required by law to engage a trustee to administer their bankruptcy. Personal bankruptcy using a trustee may cost the debtor | The debtor is required by law to engage a trustee to administer their bankruptcy. Personal bankruptcy using a trustee may cost the debtor approximately $1685 (including $85 per counselling session, of which two are mandatory for a first-time bankruptcy and GST). Usually, the trustee will require a minimum payment to initiate the proceedings; however, the first appointment with a Trustee is free. The timelines for automatic discharge, in addition to being subject to fulfilment of the terms and conditions of the bankruptcy, are dependent on both bankruptcy history and the individual’s surplus income (as prescribed by the Superintendent of Bankruptcy standards – Directive 11R2). For monthly surplus income under $200, a bankrupt is not required to pay any amount to the bankrupt’s estate (Directive 11R2, 5(6)), and for monthly surplus income equal to or greater than $200, a bankrupt is required to 50% of their surplus income (Directive 11R2, 5(7)). For the 2020 version of Directive 11R2 and example calculations, visit https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br03249.html | ||
If all the conditions of bankruptcy have been met, there are no facts for which a discharge may be refused pursuant to s 173 of the BIA, and no objections have been filed by creditors or the Superintendent of Bankruptcy Canada; | If all the conditions of bankruptcy have been met, there are no facts for which a discharge may be refused pursuant to s 173 of the BIA, and no objections have been filed by creditors or the Superintendent of Bankruptcy Canada; | ||
*A first-time bankrupt with surplus income payable less than $ | *A first-time bankrupt with surplus income payable less than $200 is automatically discharged after nine months; | ||
*A first-time bankruptcy with surplus income greater than or equal to $ | *A first-time bankruptcy with surplus income greater than or equal to $200 is automatically discharged after 21 months; | ||
*A second-time bankruptcy with surplus income less than $ | *A second-time bankruptcy with surplus income less than $200 is automatically discharged after 24 months; | ||
*A second-time bankruptcy with surplus income greater or equal to than $ | *A second-time bankruptcy with surplus income greater or equal to than $200 is automatically discharged after 36 months. | ||
The period of the discharge may also be extended for certain prescribed reasons under BIA. Consult the Office of the Superintendent of Bankruptcy or trustee. | The average monthly surplus income is calculated at different times (Directive 11R2, 7(1)) depending on whether there have been any material changes in the bankrupt’s financial circumstances. Examples for calculating the average monthly surplus income can be found at https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br03249.html. The period of the discharge may also be extended for certain prescribed reasons under the BIA. Consult the Office of the Superintendent of Bankruptcy or trustee. | ||
==== a) Debts That Bankruptcy Will Not Discharge ==== | ==== a) Debts That Bankruptcy Will Not Discharge ==== | ||
A debtor should know that filing for bankruptcy will not discharge | 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); | ||
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==== b) Assets That May be Retained by the Bankrupt in B.C. ==== | ==== b) Assets That May be Retained by the Bankrupt in B.C. ==== | ||
The bankrupt may retain household furnishings and appliances valued at up to $4,000 and any other goods or property exempt from execution under provincial and federal statutes (COEA, s 71(1); Court Order Enforcement Exemption Regulation, B.C. Reg. 28/98 | The bankrupt may retain household furnishings and appliances valued at up to $4,000 and any other goods or property exempt from execution under provincial and federal statutes (COEA, s 71(1); Court Order Enforcement Exemption Regulation, B.C. Reg. 28/98; BIA, s 67(1) and relevant amendments). | ||
See [[Creditors%27 Remedies against Debtors (10:II)#3. Exemptions from Seizure | Section II.B.3: Exemptions from Seizure]] for a list of what the ''COEA'' allows a debtor to retain. | See [[Creditors%27 Remedies against Debtors (10:II)#3. Exemptions from Seizure | Section II.B.3: Exemptions from Seizure]] for a list of what the ''COEA'' allows a debtor to retain. | ||
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== I. Student Loan Debt == | == I. Student Loan Debt == | ||
The law surrounding student loans and grants is constantly changing, and varies greatly between provincial jurisdictions. Students should visit the federal and provincial student loan websites to get up to date information about repayment assistance. The information found below is up to date as of | The law surrounding student loans and grants is constantly changing, and varies greatly between provincial jurisdictions. Students should visit the federal and provincial student loan websites to get up to date information about repayment assistance. The information found below is up to date as of July of 2020. | ||
=== 1. Federal Student Loan Debt === | === 1. Federal Student Loan Debt === | ||
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For further information on getting repayment assistance for Federal student loans, see http://www.canlearn.ca/eng/loans_grants/repayment/help/index.shtml. | For further information on getting repayment assistance for Federal student loans, see http://www.canlearn.ca/eng/loans_grants/repayment/help/index.shtml. | ||
:'''NOTE:''' Due to COVID-19, effective March 30, 2020, all Canada Student Loans and Canada Apprentice Loans repayments will be suspended until September 30, 2020. No payments are required on student and apprentice loans during this time, pre-authorized debits will be stopped, and no interest will accrue on these loans. | |||
=== 2. Provincial Student Loan Debt === | === 2. Provincial Student Loan Debt === | ||
BC has a student loans service program called Student Aid BC. For further information on how to get repayment assistance for BC Provincial Student Loans, see https://studentaidbc.ca/repay/repayment-help. | BC has a student loans service program called Student Aid BC. For further information on how to get repayment assistance for BC Provincial Student Loans, see https://studentaidbc.ca/repay/repayment-help. | ||
:'''NOTE:''' Due to COVID-19, effective March 30, 2020, all British Columbia student loan borrowers will temporarily have their repayments suspended until September 30, 2020. During this time, no payment will be required, and interest that currently applies to the federal portion of student loans will not accrue. Repayment will be paused automatically, so borrowers do not need to apply to have their repayment suspended. | |||
{{REVIEWED LSLAP | date= | {{REVIEWED LSLAP | date= August 10, 2020}} | ||
{{LSLAP Manual Navbox|type=chapters8-14}} | {{LSLAP Manual Navbox|type=chapters8-14}} | ||
