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Category: Bankruptcy Trustee

  • How is a Trustee in Bankruptcy Different from a Debt Counsellor?

    If you’ve been considering debt consolidation, you may have heard the terms “trustee in bankruptcy” and “debt counsellor.” But do you know the difference?

    They’re far from the same thing. Here’s what you need to know.

    Trustee in Bankruptcy

    Also known as a Bankruptcy Trustee or Licensed Insolvency Trustee (LIT).

    • Doesn’t represent you.
    • Has to act for the creditors.
    • If you reveal information to them, like an unclaimed asset in a bankruptcy, they are obligated to tell your creditors.
    • A trustee can only offer you a consumer proposal or bankruptcy, not other debt consolidation options, like a loan or home equity products.
    • They are paid based on the amount you declare in your bankruptcy or consumer proposal.

    Debt Counsellor

    • Is paid by you to present debt management options.
    • They will look at the whole picture and present all financial options —including loans, home equity products, consumer proposals, bankruptcy, and beyond.
    • They protect your information and answer your questions confidentially.
    • If you do need to file for a consumer proposal or bankruptcy, a debt counsellor will prepare, structure, and propose the best solution for you to your trustee on your behalf.

    If you decide to file for a consumer proposal or for bankruptcy, you will need to work with a trustee as they are the only professionals in Canada who can file for either one.

    However, even if you do decide to go for one of those options, it is still to your benefit to consult a debt counsellor first, and during, the process.

    A trustee is more like a referee — someone who is the middleman between you and your creditors. They are not necessarily on your creditors’ side, but they’re not on your side, either. They are obligated to follow the rules and report anything out of bounds that they discover.

    As we mentioned above, a trustee is also paid based on the amount that you file in your bankruptcy or consumer proposal so often it is in their interest to try to make that amount higher so they are paid more.

    A debt counsellor, on the other hand, is 100% in your corner. They will represent you and only you. You can count on them for confidential advice and to be your advocate when working with a trustee.

    At DebtCare Canada, our debt counsellors offer free consultations to help decide the best debt management plan for you. We will examine every option available and if it comes to filing for a consumer proposal or for bankruptcy, we are on your side.

    Contact us today. Call 1-888-890-0888 or visit www.debtcare.ca.

  • How is a Consumer Proposal Different from a Bankruptcy?

    Consumer proposal vs. bankruptcy — what’s the difference?

    At first glance, they can appear similar. Both clear your debt, stop collection action, and can harm your credit. But when we get into the nitty-gritty, there are several big things that set them apart.

    1. Assets

    Bankruptcy: When you file for personal bankruptcy, your assets are on the line. There may be allowable exceptions, like a car beneath a certain value, but anything over that can be taken. Each province in Canada has specific exceptions.

    Consumer Proposal: When you file for a consumer proposalyour assets aren’t touched. Instead, an agreement is made with your creditors to pay an amount of money in lieu of the full payment, and if they accept your debt is cleared, collection action stops, and your assets cannot be seized. But you have to prove that it is more lucrative for your creditors to accept your consumer proposal than it would be for them if you declared bankruptcy.

    1. Cost and Payment Schedule

    Consumer Proposal: A consumer proposal payment schedule is designed for you. You make a proposal to your creditors, usually a percentage of your total unsecured debt, and then you create a schedule to pay back that percentage. These are usually fixed, monthly payments that are made over a term of 48 to 60 months (four to five years). You also must pay the Licensed Insolvency Trustee (LIT) who files your consumer proposal a portion for his fee.

    Bankruptcy: Bankruptcy payments vary as they are based on your income. The more money you make, the more you’ll have to pay. A first-time bankruptcy can be completed in as little as nine months. If you have surplus income (if your household income is over the allowed amount) it may be extended up to 21 months. You are also required to pay the LIT a portion for his fee.

    1. Credit Rating Impact

    Bankruptcy: If you claim bankruptcy in Canada, you will receive an R9 credit rating. This is the worst rating you can have. It will stay on your credit report for six to seven years after you are discharged, depending on your province. If you are discharged after nine months, then the credit rating might stay on your record for seven to eight years total.

    Consumer Proposal: With a consumer proposal, you will receive an R7 credit rating. It will remain for three years after you complete your payments. So, if you complete your payments in five years, the R7 credit rating will remain for eight years total (five years, plus three years after it’s completed).

    1. Monthly Duties

    Consumer Proposal: There are no monthly requirements with a consumer proposal, besides making your payments on time. You do not need to report any changes in your income. You have to attend two credit counselling sessions.

    Bankruptcy: You are required to complete a monthly budget for income and expenses and supply copies of your pay stubs to your Licensed Insolvency Trustee (LIT). You also have to attend two credit counselling sessions.

    1. Tax Refund

    Bankruptcy: You will lose all tax refunds or tax credits you are owed.

    Consumer Proposal: You keep all tax refunds or credits you are owed.

    1. Eligibility

    Consumer Proposal: Your total debt cannot exceed $250,000 (excluding a mortgage) and you must be able to afford to repay a portion of your debts. You are not guaranteed to be granted a proposal just by filing one. It must be accepted by the majority of your creditors. You need to prove that they would be better off with this arrangement than if you filed for bankruptcy.

    Bankruptcy: Any Canadian resident who owes more than $1,000 in debt and is insolvent is eligible to file for personal bankruptcy.

    When you’re choosing between filing for a consumer proposal or filing for bankruptcy, there is no clear winner. They both have far reaching consequences and will take years to recover from.

    You also need to consider the bigger financial picture and all your forms of debt. Both a bankruptcy and a consumer proposal can cover unsecured credit and debt, such as credit cards, unsecured bank loans, lines of credit, payday loans, and unpaid bills.

    But they won’t deal with secured debt, like your mortgage, secured car loan, or lease. They also won’t include debts like spousal or child support, court-imposed fines, and student loans that are less than seven years old. You will still have to pay those debts.

    If you’re in a position where you’re considering filing for either one, make sure you have explored all of your other options. There could be another debt management solution that works better for you, without the same repercussions. And if you do decide to file, make sure that you seek independent representation besides your LIT.

    Remember, LITs make money off of your consumer proposal or bankruptcy. You need someone who represents you — and only you — when you’re going through the process.

    At DebtCare, we provide just that. We can represent you when filing for a consumer proposal or bankruptcy, and we can also make sure you have eliminated all other debt consolidation strategies.

    Contact us today for a free consultation. Call 1-888-890-0888.

  • Who Does a Bankruptcy Trustee Represent?

    While bankruptcies and consumer proposals are two common practices for Canadians looking to deal with problematic debts, they can also be somewhat confusing or misunderstood. One of the most common misconceptions comes with regard to who a bankruptcy trustee represents. This blog aims to clear the confusion.

    In the simplest terms, a personal bankruptcy in Canada is a legal process whereby a bankruptcy trustee is appointed to administer your estate and distribute any assets to your creditors. With a consumer proposal, a financial calculation is done based on your income and assets and a proposal is put forth to your creditors based on a sum that you would pay back. In this case, a trustee administers the proposal with your creditors.

    While it may sound, in both circumstances, as though they represent you, the reality is more complex.

    A trustee is a legally appointed official, regulated by the government. They are required to represent all parties involved, namely the debtor and the various creditors. This means that, while the trustee does represent you, they are also required, by law, to represent your creditors as well. Their job is to administer your estate to ensure all parties are satisfied.

    Another issue arises with regard to payment, specifically in the case of a consumer proposal. With a consumer proposal, since a bankruptcy trustee is paid based on the size of the proposal (the total sum to be repaid), there is some motivation to obtain a higher payout from you.

    Since a bankruptcy trustee is the only person who can legally administer a bankruptcy or consumer proposal in Ontario, you can’t remove them from the equation. However, you can obtain your own representation to help you work through the process, a person who will help protect you and your assets. A financial consultant can examine your current financial circumstances, determine, in consultation with you, your financial abilities as far as repayment, and help structure the negotiation with the trustee to ensure the best possible deal. Furthermore, working with a financial consultant will give you access to the trustees they’ve worked with in the past, ones they know to be trustworthy.

    Our aim here is not to disparage bankruptcy trustees. There are many reputable, trustworthy trustees out there willing to do their best to achieve a satisfactory solution for all involved. However, it is always smart to have your own representation. Just as you would never head to trial without a lawyer, the same should be said for this financial situation.

    If you’re considering bankruptcy as a debt solution, DebtCare is the best place to start.

    Call us today for a free consultation to discuss your options: 1 (888) 890-0888.

     

     

  • Who Represents You in a Consumer Proposal?

    For many Canadians drowning in debt, a consumer proposal is a very valuable resource. The ability to reduce the amount of debt you owe, reduce interest and combine all payments into a single monthly payment you can afford, are all really significant benefits. That being said, a consumer proposal is a complex legal process, one that must be administered by a trustee in bankruptcy, so the question remains, who represents you in a consumer proposal?

    Often people are confused when it comes to this question. After all, trustees often market their services as a solution to your debt problems, and since you’ve enlisted their services, it would seem a safe assumption that they represent you. And that isn’t necessarily an incorrect assumption. A trustee does in fact represent you in a consumer proposal. The problem is, they also represent your creditors.

    When administering a consumer proposal, a trustee is required to be an impartial party, presenting the best solution for you and a fair option for your creditors. The issue with this is that trustees are paid based on a percentage of your proposal, so the bigger the proposal, the more they earn. This creates a major conflict of interest when it comes to protecting you!

    When you first meet with a trustee, they will ask you to provide information about yourself and your finances. Entering this meeting assuming the trustee is representing you and you alone can result in you providing information not necessary for the administration of the consumer proposal. This information may then be used to obtain a larger amount for your creditors, and thus a larger paycheque for your trustee.

    Going to a trustee without representation is like going to court without a lawyer. Most, we would argue, would see this as a rather dangerous idea, and thus is one we would advise against. It is the same with a consumer proposal. You want your own representation when considering a consumer proposal – representation to provide protection for you and your financial assets without having to also worry about your creditors.

    The point of this blog is not to argue that trustees cannot be trusted. Most can, but government regulation requires them to be fair to all parties, which naturally results in issues. The point is to inform you of the dangers of calling a trustee before securing your own representation.

    Our advice is to speak with a financial consultant who can protect you, one hired by you to represent you so there are no repercussions in telling them everything. They can negotiate your consumer proposal with a trustee so that the deal proposed is likely to be successful.

    At DebtCare, we have longstanding relationships with several trustees and can protect you throughout the process.

    Contact us today before contacting a trustee directly. 1-888-890-0888.

     

  • Getting Back to Basics: Ontario Bankruptcy Trustees and Their Role in Bankruptcy

    debtcare22016 is officially in full swing, and for many of us those New Year’s resolutions are still weighing heavily on our minds. If one of your resolutions for this year is to get your finances back on track, and you’re wondering about your options, we are here to help clear things up! This week we are getting back to the basics, talking about Ontario bankruptcy trustees and their role in bankruptcy. If this is a route you are considering, read on for some important information!

    When you decide to declare bankruptcy, you may be overwhelmed by the information available – a great deal of which likely leaves you with further questions. Here are some of the answers you are likely looking for.

    Firstly, what is an Ontario bankruptcy trustee and what do they do? A bankruptcy trustee is an individual appointed by the Superintendent of Bankruptcy and is a court official with the role of administering bankruptcies and consumer proposals. This individual does not represent the creditor or person who owes, they simply administer the estate according to the law. Their job is to follow that law, getting a fair deal for you AND your creditors.

    Reading carefully, you may have noticed that we said you AND your creditors. Their primary concern is not actually to get you the best deal, but rather to get one that benefits you and your creditors, and ultimately, serves their own interests.

    This is because, in bankruptcy and consumer proposal negotiations, everything is based on income so the trustee makes things very black and white. This may involve asking you for things that are not legally relevant to learn more about you. This information may then be used to benefit your creditors, even though you were not obligated to provide it – knowing what is required and what is not can help you protect yourself.

    Since a bankruptcy can’t be negotiated without an Ontario bankruptcy trustee, what options do you have? Well, you can choose to have a representative in your corner, one who knows the ins and outs of the law and how it provides you with protection. The best advice? Don’t go directly to a trustee. As mentioned, they advertise as though they are the ultimate solution for you, but their goal is not so singularly focussed.

    Once you are in a bankruptcy or proposal, there is no way out until you are discharged, and so ensuring the negotiations work in your favour is crucial. A representative can help to achieve this.

    Want to speak with someone before you go to a trustee, someone who can negotiate on your behalf, or just answer some of your many questions? DebtCare is here to help. Call us today at 1-888-890-0888.

     

  • In the News: Who is Filing for Bankruptcy? A lot of Seniors it Seems

    used for DC seniors filing bankruptcyWith Canadian consumer debt on the rise, it is no surprise that filing for bankruptcy has become a popular form of debt relief. The ability to combine all debts and make one monthly payment, as well as the ability to halt collection calls and collection action, has proven to be quite appealing for a vast number of people.

    Accordingly, a vast array of individuals from diverse demographics are choosing this option -but which group is most likely to go this route? According to a recent CBC News article, it seems a lot of seniors are filing for bankruptcy as a way to get relief from debts that have piled up.

    The article states, “According to a review of 6,000 insolvency filings handled…in 2013 and 2014, the share of debtors aged 50 and over increased to 30 per cent compared with 27 per cent in the previous two-year period,” with credit cards and payday loans representing the debts of highest concern.

    The report also found that seniors and those in pre-retirement have accumulated the highest unsecured debt load among all age groups: “On average, debtors 50 and older filing for insolvency had $68,677 in unsecured debt, while those over 60 had total unsecured debt of $69,031.”

    You can read more about this here: http://www.cbc.ca/news/business/seniors-in-ontario-make-up-30-of-bankruptcies-report-1.3060463.

    Furthermore, according the Globe and Mail, several factors have contributed to this, including the higher number of personal loans being granted to adult children. For seniors with children, a loan to a child has become quite common, and although intentions may be good, often these loans go unpaid, leaving parents in a position of financial strain.

    Additionally, seniors are the ones with the highest unpaid tax bills owed to the Canada Revenue Agency. Read more on this here:  http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/growing-number-of-seniors-account-for-ontarios-insolvency-filings-study/article24236617/.

    This rising senior debt, coupled with the fact that income is generally less in the post-retirement years, has led many seniors to turn to trustees for assistance. And this isn’t a bad idea in theory. Why start retirement owing more that you can afford to pay? The only problem is that, without understanding the process in detail, many turn directly to those trustees, rather than to a representative.

    Why is this an issue? Bankruptcy trustees are looking out for the interests of creditors, not just the person filing. However, a personal representative, one with the debtor’s interests in mind, can ensure protection throughout the process, lessening the risk.

    If you are worried about debt in your retirement years, a fresh start thanks to filing for bankruptcy may just be the answer. Just make sure that you are protected. Call DebtCare today. We represent you – not your creditors, and can work towards a fair and objective result. 1-888-890-0888.

     

  • Faceoff – Canadian Bankruptcy Trustees vs. Canadian Debt Counsellors

    debtcareWhen you are struggling to make even the minimum monthly payments to bills, or worse, having to choose which bills to pay each month, it is probably time to consider professional financial help to get things back on track. But how can you best determine which route is the right one, and who you should elect to stand in your corner? We can help. Today’s topic: the financial faceoff – Canadian bankruptcy trustees vs. Canadian debt counsellors. Both can help you get out of debt – but not necessarily in the same way.

    Trustees

    A Canadian bankruptcy trustee is a court appointed officer, appointed by the Superintendent of Bankruptcy. Their role is to administer bankruptcies and consumer proposals – but to do so on behalf of the interests of all parties. They don’t represent you as the client, they represent both you and your creditors. This means that, since they are not your representative, they can use the confidential financial information you provide to them to get the best deal for your creditors. They are paid out of the estate in the case of bankruptcy, and out of your pocket in the case of a consumer proposal, so their paycheque is then determined by how much is paid by you to your creditors.

    Debt Counsellors

    Often bankruptcy trustees like to say that you don’t need to pay a debt counsellor, and can just go right to them. This is because if you do this they can control the filing – which is especially enticing in the case of consumer proposals, where, as mentioned above, the more you pay, the more they earn.

    Instead, debt counsellors are paid by YOU, they represent YOU and only YOU. They know insolvency inside and out and you can trust that any information you provide to them is not going to be used against you – you can tell them everything without fear of unanticipated consequences. The role of a debt counsellor is to structure your financial information, assist you in finding a good trustee, and to help you manage negotiations with a trustee.

    Both bankruptcy and consumer proposals represent important and viable solutions when debt becomes unmanageable. That being said, going right to a trustee and hoping for the most favourable outcome will often leave you disappointed.  Consider speaking with a debt counsellor first and having them negotiate a consumer proposal or bankruptcy on your behalf – NEVER go to a bankruptcy trustee unrepresented.

    For more about the difference between a Canadian bankruptcy trustee and a Canadian debt counsellor, please contact DebtCare Canada today at 1-888-890-0888.

     

  • Ontario Bankruptcy Trustees – Who They Are and How They Advertise!

    debt careDebt consolidation, get out of debt, debt relief: it is hard to turn on the radio or television these days and not hear one or all of these phrases. Why? Because so many Canadians are facing financial challenges thanks to the ease with which credit is granted coupled with high (credit card) interest. The temptation to pay on credit can quickly lead to getting in over your head, and then struggling to find a solution.

    When it comes down to it, the question is, who advertises these solutions and what do they do?
    Ontario bankruptcy trustees, more aggressively now than ever before, are advertising to the public that they offer the best solution for people facing financial woes. We disagree with much of the advertising we hear from many Ontario Bankruptcy Trustees. Why? Because we exist because of them!

    Ontario bankruptcy trustees promote financial solutions. However, if you choose the solutions offered, the Ontario bankruptcy trustee does not represent you. A bankruptcy trustee in Canada is a court appointed officer who administers estates when a bankruptcy or consumer proposal is filed. They do not represent you, they do not represent your creditors. They apply rules set out in the Bankruptcy and Insolvency Act. The trustee is required to represent the best interests of all parties (and this includes their own financial interests).

    What does this mean? Well, trustees are paid a tariff out of the proceeds of your bankruptcy or consumer proposal. In the case of bankruptcy the fee is fixed, whereas with a consumer proposal the fee grows with the amount of the proposal.

    Some things to know:
    • Trustees advertise to you, despite the fact that they don’t represent you – this is because without you, they have no business.
    • In the case of bankruptcy, finding surplus income means that they can extend your bankruptcy and collect larger tariffs because the bankruptcy is being administered for a longer period of time.
    • In the case of consumer proposals, convincing you to propose a higher amount to your creditors will result in the collection of more fees – and thus is a major priority for them.

    Now, of course a few bad apples shouldn’t spoil the whole bunch, and we don’t mean to say that all trustees are shady. Many trustees in bankruptcy are reputable and do business above board – but the few that don’t can do a lot of damage. There are just too many conflicts of interest and the law needs to go further in terms of requiring trustees to state in their advertising that while they are promoting a service they don’t represent you.

    A consumer proposal or bankruptcy is often a really good financial solution for someone backed into a corner. These allow for one monthly payment, can reduce debt, stop interest, and stop collections. Just keep in mind, just as you wouldn’t go to a meeting at the CRA without your accountant, you shouldn’t go to a trustee without your own independent financial representation.

    Financial counsellors who specialize in bankruptcy and proposals can structure the numbers, review your information, make recommendations, and bring a proposal forward to a trustee on your behalf- protecting you throughout the entire process.

    DebtCare Canada represents your best interests – yours and yours alone. Call us today BEFORE contacting a trustee: 1-888-890-0888.

  • What is a Canadian Bankruptcy Trustee’s Role in a Consumer Proposal?

    Canadian bankruptcy trusteeA Canadian Bankruptcy Trustee’s role in a consumer proposal can be very confusing for consumers largely because of the advertising done by Canadian Bankruptcy Trustees. These Trustees advertise a way out of debt and offer to help you out of your financial problems, almost as though they represent you and your best interests through the process.

    Full stop. This is not the case at all.

    Trustees need you in order to stay in business. No bankruptcies and consumer proposals = no need for the Trustee. In fact, while in a bankruptcy they are bound by pre-defined tariffs, in a consumer proposal they are compensated based on the amount of the consumer proposal. Bigger proposal = more fees for them. While they advertise the benefits of a bankruptcy or proposal and are the only ones who can administer one, they in no way represent you.

    In order to be able to understand their role in the consumer proposal process, let’s look at what the duties of a Canadian Bankruptcy Trustee actually are.

    Consumer proposals and bankruptcies are both very powerful tools you can deploy to put a stop to debt that has become unmanageable. Because the process to file both is legislated under the Bankruptcy and Insolvency Act (BIA), both must be administered by a Trustee appointed by the Superintendent of Bankruptcy. This Trustee is the Bankruptcy Trustee. Their role is to ensure that a consumer proposal or bankruptcy is administered fairly and in accordance with the BIA – to the benefit of you AND your creditors.

    When you meet the Trustee in Bankruptcy you may see no harm in divulging personal information to them because you feel that you are with your representative. However, that information may be considered in whatever proposal scenario they put forward. Once you disclose information to the Bankruptcy Trustee, this information can now be relayed to your creditors.

    Going to a Trustee in Bankruptcy directly would be the same as being charged with a crime and meeting with the prosecutor without a lawyer. Prior to making contact with a Trustee you should sit down with a trusted financial advisor who has experience with insolvency to work through different financial scenarios – one of which may be a proposal. Because this individual is your representative, you are able to openly discuss all of the issues and then they can advise you on which options are relevant to bring forward.

    Earlier in the blog we mentioned that the Bankruptcy Trustee is the only professional who can administer a bankruptcy or consumer proposal, and this is true, but it is never wise to meet with one without your own representation.

    Protect yourself and your financial assets – contact DebtCare before you go to a Trustee. Call us today at 1-888-890-0888.

  • Myth vs Fact: Consumer Proposal vs Bankruptcy

    consumer proposal, consumer proposal vs bankruptcyConsumer proposals and bankruptcy are often confused with one another because they both involve a Trustee in Bankruptcy. In Canada, the government introduced legislation to protect people who have reached a breaking point with their debt. Over time that legislation has been amended and re-worked to simplify processes and to make the process fair for both creditors and those who owe money.

    The Superintendent of Bankruptcy is an entity of Industry Canada, and is the individual who administers the Bankruptcy and Insolvency Act through appointed officers. These officers are Trustees in Bankruptcy. The Trustee in Bankruptcy’s role is to administer a consumer proposal or bankruptcy on behalf of the creditors and the people who owe money.

    A bankruptcy and a consumer proposal are both powerful in that, once filed, all collection and enforcement action being made by unsecured creditors stops, interest stops, and in many cases the overall amount of debt is reduced.

    That being said, a consumer proposal bears less strings than bankruptcy and should always be considered as option number 1 – bankruptcy is generally a last resort measure.

    In a consumer proposal, a proposal is made to your creditors – basically you are offering them a sum of money to be repaid through the Trustee over a term of, typically, 5 years.

    • Your creditors have a specified amount of time to accept or reject the proposal.
    • If no one responds, the proposal is accepted.
    • If the majority creditor(s) accepts, the proposal is accepted.
    • If a proposal is accepted you make a single monthly payment to the Trustee for the term proposed. You can pay off the proposal at any time. You have no ongoing income reporting requirements to your Trustee.

    In a bankruptcy your creditors don’t get a choice to accept or reject.

    • You make a monthly payment to the Trustee in Bankruptcy over 9 or 21 months in a first time bankruptcy, depending on your income. There are maximum income thresholds set out and if your income exceeds those thresholds the term of your bankruptcy payment extends from 9 to 21 months.
    • During your bankruptcy you have to report your income and any changes to your financial circumstances to the Trustee.
    • If you come into any significant sums of money you may have to pay surplus income to the Trustee.

    A consumer proposal is removed from your credit report 3 years from the date it is paid in full. A bankruptcy remains for 6 years from the date of discharge.

    Since the Trustee doesn’t represent you, going to one directly is never recommended. Any financial information you divulge can’t be taken back. Prior to meeting a Trustee you are best served to work with a financial representative who specializes in bankruptcy and consumer proposals – one who will represent you – to review and help you structure your financial information to be presented to a Trustee. Some may even help you negotiate the terms of your proposal or bankruptcy with the Trustee.

    Both of these options are viable when it comes to debt relief – just make sure that you are not putting your financial affairs at risk by attending a Trustee before seeking real help.

    For more information or to protect yourself before going to a Trustee, please call DebtCare Canada today at 1-888-890-0888.