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PROS AND CONS OF BANKRUPTCIES CANADA: A HEALTHY FRESH START OR THE LAST RESORT?

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

Evaluating the pros and cons of bankruptcies Canada: Introduction

When you are in debt, it can feel like you are stuck in quicksand – the more you struggle, the deeper you sink. If you are considering bankruptcy, you are not alone. According to the Office of the Superintendent of Bankruptcy (OSB), almost 100,000 Canadians filed either a consumer proposal or for bankruptcy in 2021. The numbers for 2022 are rising above the 2021 level.

Before you make a decision, it is crucial to weigh the pros and cons of filing for bankruptcy in Canada. On the positive side, bankruptcy can give you a fresh start. It can discharge your debts and give you a chance to rebuild your finances. On the negative side, bankruptcy can damage your credit score more than one of the bankruptcy alternatives.

If you are struggling with debt, there are other options to consider before bankruptcy. You may be able to negotiate with your creditors and set up a payment plan. You can also improve your financial situation by cutting expenses and increasing your income. If you decide that you do need an insolvency process, a consumer proposal or a Division I Proposal may be better for you.

In this Brandon’s Blog post, I wish to aid you in gaining a better understanding of the pros and cons of bankruptcies Canada. Then you can make a much more educated choice about your financial debt issues.

What are the pros and cons of bankruptcies Canada?

When it comes to making the decision to file for bankruptcy, it is important to understand all of the implications that this will have on your life. In Canada, bankruptcy is a legal process that allows individuals to discharge all of their debts if they are unable to repay them. This process is overseen by the OSB, and there are certain requirements that must be met in order to be eligible for bankruptcy.

While bankruptcy can provide relief from debt, it is not without its drawbacks. Once you have been declared bankrupt, your credit rating will be significantly damaged, which can make it difficult to obtain new lines of credit in the future. Additionally, your assets may be seized in order to repay your creditors.

Before making the decision to file for bankruptcy, it is important to weigh the pros and cons carefully. Speak with a financial professional to get advice that is specific to your situation. Now for a more detailed discussion on the pros and cons of bankruptcies Canada.

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

The pros of bankruptcies Canada

A fresh start

If you’re sick of being in debt, bankruptcy might be a good option for you. It can be a fresh start, and it’ll get creditors off your back. You can move on with your life without all that stress.

Rebuild your credit

As stated above, bankruptcy will cause some damage to your credit. However, it can stop the continuous damage you may be facing now. You can begin rebuilding your credit rating, rather than having to face extra charges from missed payments as well as receiving those pesky telephone calls from bill collectors.

Get rid of most if not all of your debts

In most cases, all of your obligations will be cleared by your bankruptcy discharge. Normally cleared debts are your unsecured debts like credit card debt, lines of credit, personal loans, payday loans, and income tax debts. A bankruptcy filing will let you not worry about a ton of bills but will force you to focus on balancing your budget.

There are some obligations that bankruptcy cannot clear, like child or spousal support payments, or payments for fines or penalties awarded by a court. You can get your student loans discharged too as long as you’ve been out of school for 7 years or even more.

Stop debt collectors cold

Creditors and their debt collectors making their collection calls can be pretty aggressive when they’re trying to get paid. Bill collectors demand and try to scare you as to what will happen if you do not pay up. Answering your phone or checking your VM becomes terrifying. You might also have a ton of mail from them stacking up in your mailbox, inbox, and so on.

If you’re losing the battle of staying up to date with your bill payments, personal bankruptcy might be a good option for you. Declaring bankruptcy stops all collection efforts, including calls as well as letters from your creditors. This is called the “automatic stay of proceedings”. When you’ve filed an assignment in bankruptcy, the automatic stay goes on and offers you some breathing space.

Get rid of any wage garnishment

If you file for bankruptcy, you don’t need to worry about wage garnishment or legal action anymore. The stay of proceedings also prevents any further attempts at collection, including wage garnishment. Creditors and collectors also won’t be able to take you to court.

Bankruptcy is not forever

So, if you’re thinking about filing for the bankruptcy process, know that it usually takes about nine months to go through the process for a first-time bankrupt who does not have any surplus income payments to make to your Trustee. And, if the Licensed Insolvency Trustee handling your case finds that you have surplus income, you won’t be able to get a discharge for 21 months.

If this is your second bankruptcy, it will take longer. If you don’t have surplus income payments to make, it will take 24 months. If you do need to make surplus income payments, it will take 36 months.

These are the pros when considering the pros and cons of bankruptcies Canada. Now for the cons!

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

The cons of bankruptcy

There are many cons of filing bankruptcy, including:

Your credit rating

If you file for bankruptcy, it’ll rank you as an R9 on your credit report, which is pretty bad news for your credit score. The damages to your credit rating will not last forever. Your very first personal bankruptcy will be noted on your credit record for 6 years after the day of your bankruptcy discharge. A second bankruptcy will certainly harm your credit score for a lot longer.

At the outset of your bankruptcy journey, you cannot see the light at the end of the tunnel. At least you now have a roadmap to restoring your credit and have a date when your credit will be cleared of any damage. You can start to rebuild your credit even before you are discharged from bankruptcy.

Your assets may be liquidated

This doesn’t mean that you’ll lose everything. Your personal belongings – like clothes, household items, work tools, and even a car under a certain value – usually can’t be taken away from you in bankruptcy. This means that the proceeds from the sale of your other non-exempt assets will be used to repay your creditors.

RRSP contributions in the past 12 months are not exempt

Your retirement savings are protected, but any contributions you made in the past 12 months to your RRSP are not exempt.

Surplus income and the cost of bankruptcy

If you’re making more money than the surplus income threshold, you’ll also have to make surplus income payments to your Licensed Insolvency Trustee. If you don’t have any assets and don’t have to pay the surplus income requirement, you or a relative will have to pay your Trustee’s fee.

Complete financial disclosure

You will need to make full financial disclosure to your Trustee. Your Licensed Insolvency Trustee will use that information to help you complete a Statement of Affairs. This disclosure details your financial position and will even potentially highlight certain financial transactions. Essentially your Trustee and the court will know everything about your finances and your creditors will get a peek too.

When you’re going through bankruptcy, you’ll need to hand over your tax docs and pay stubs to show how much you’re earning. This is how the Trustee decides if you’ve gone over the surplus income threshold.

A lasting record

Once you file for bankruptcy, the paperwork will become part of the public record in Canada. To start your bankruptcy, your Licensed Insolvency Trustee files your bankruptcy documents with the OSB. It then becomes part of the public record.

Most people who file for bankruptcy will only have their Trustee, the OSB, the court, their creditors and the two Canadian credit bureaus know about it.

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

Bankruptcy alternatives from pros and cons of bankruptcies Canada

Now that you understand the pros and cons of Canadian bankruptcies, you must just consider this option as a last choice. If you can solve your financial problems without experiencing the unfavourable elements of personal bankruptcy, that is the most effective way to go.

During your initial no-cost consultation, the Licensed Insolvency Trustee will help you should explore all the bankruptcy alternatives. I have written before in more detail about each of the bankruptcy alternatives listed below. I have included a link to each of those more detailed blogs. The main alternatives to bankruptcy are:

Debt consolidation

If you’re aiming to leave financial debt behind, debt consolidation could be a good alternative for you. By rolling all your financial obligations into one financing with a lower rate of interest, you will save money from the lower rate of interest on the new consolidation loan and leave your debt behind much faster.

Just make sure that you understand the current interest rates you are being charged, the total of your monthly payments that you currently may or may not be able to afford, the interest rate being offered to you on a debt consolidation loan, what your new monthly payment will be and make sure that you have a realistic budget of your monthly income and monthly expenses that shows that you can afford the new payments on a monthly basis.

Credit counselling

Credit counselling is a process whereby a person in debt meets with a credit counsellor to discuss their options for dealing with their debt. The credit counsellor will assess the person’s financial situation and provide advice on how to best deal with the debt. This may include negotiating with creditors to reduce interest rates or monthly payments and setting up a debt management plan.

As I have written many times before, you should only go to a community-based non-profit credit counselling agency that does not charge any fees. If the credit counsellor you choose wants to charge you fees, get out of there. It is not the best choice for you.

Debt settlement

Debt settlement is a process in which you can negotiate with your creditors to pay less than the full amount you owe. This can be a good option if you are not able to pay your debts in full and you are willing to negotiate with your creditors.

Debt settlement works well if you only have 1 or a few creditors. If you have many creditors, debt settlement is much more difficult in making sure that everyone remains on board with the negotiated settlement and that you will have enough money to pay the lower settled amounts you promised.

Many times with a multitude of creditors, either a consumer proposal or a Division I Proposal is the most effective way to bind everyone in a debt settlement process.

Like in credit counselling, I urge you to stay away from debt settlement companies that charge fees. What they do is charge you unnecessary fees, try to sell you products you don’t need and then when they cannot sell you any more products and their debt settlement techniques do not work, they then walk you to their favourite Licensed Insolvency Trustee for an insolvency process, which might just be a bankruptcy.

I would rather see you use your accountant or lawyer if you do not feel comfortable negotiating yourself. Those professionals will have your best interests at heart in return for their fee. They also won’t try to sell you more products.

Consumer proposals

When it comes to debt of $250,000 or less (other than for secured debts registered against your home), there are a number of options available to help you get back on track. One option is a consumer proposal.

A consumer proposal is a formal debt relief and debt-settlement option available in Canada. It is a legally binding agreement between you and your creditors. Under a consumer proposal, you agree to repay a portion of your debts, and your creditors agree to forgive the rest.

A consumer proposal can be an attractive option for many reasons. First, it can help you get out of debt without having to declare bankruptcy. Second, it can help you keep your assets, such as your home or car. Third, it can give you a fresh start by wiping away most, if not all, of your unsecured debts.

If you’re considering a consumer proposal, it is necessary to obtain assistance from a qualified expert. A Licensed Insolvency Trustee, who is also a consumer proposal administrator in Canada, can walk you through the process and answer your questions. This will allow you to see if it’s the right choice for you.

Division I Proposal

If you owe more than $250,000, a Division I Proposal is a great option to settle your debts. It’s not as streamlined as a consumer proposal, but it’s still a great way to get out of debt.

Other than these technical differences, it has the same aim as a consumer proposal: to provide a debt settlement option that will bind all unsecured creditors and get the person back onto their feet free of the stress and burden of their unmanageable debts.

Either a consumer proposal or a Division I Proposal are excellent debt relief options approved by the Canadian government. One of the other benefits of either of these two debt settlement options is that the person will also receive two mandatory financial counselling sessions. Getting this education will help put the person on the right track for the rest of their life.

Understanding the advantages of bankruptcy and also the disadvantages of bankruptcy for companies

When a company faces overwhelming debt, bankruptcy may seem like the only way out. However, there is only one advantage and one disadvantage to bankruptcy for a company.

One advantage of this situation is that the Trustee may be able to sell the assets to a purchaser who will then be able to use those assets to continue the former business of the company in a profitable way. This could potentially save some jobs, at least for the key employees of the old business.

The one disadvantage is that unlike a person, when a company goes bankrupt, the corporate legal entity is now dead.

Before the Directors of a company decide to bankrupt the company, they should determine if certain divisions or parts of the business can be saved and operate profitably if the unprofitable part(s) could be eliminated. If so, a financial restructuring can be done to turn this unprofitable company into a viable and profitable one and save some jobs in the process.

pros and cons of bankruptcies canada
pros and cons of bankruptcies canada

Pros and cons of bankruptcies Canada: Summary

I hope you enjoyed this Brandon’s Blog on the pros and cons of bankruptcies Canada.

People are falling behind with stagnant wages or tiny wage increases while there is runaway inflation and they are falling deeper and deeper into debt. Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now, while explaining the pros and cons of bankruptcies Canada or any other of our recommendations.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you. There are many pros and cons of bankruptcies Canada. Whatever process we recommend for you will, we will do so in order to minimize any cons you may experience.

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your financial life, Starting Over, Starting Now.

 

 

pros and cons of bankruptcies canada
pros and cons of bankruptcies Canada pros and cons of bankruptcies canada
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CANADIAN DEBT RELIEF PROGRAM SCAM REVIEW: MASSIVE HARM CAUSED TO DEBTOR

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

Canadian debt relief program: Before you sign up for debt settlement

A Canadian debt relief program: it may seem like a good idea. Missed payments on your credit cards, loans or other unsecured debt, can lead to collection calls and worsen your situation. Choosing a debt relief program is often the last resort for Canadians to escape the grip of their creditors.

As a solution to consumer debt problems, debt relief companies offer debt settlement programs and debt relief programs. As a debt consultant, you do not need any special education or licensing to operate. Often, their actions are detrimental rather than beneficial.

This Brandon Blog is about a case I recently consulted about that is sad but true. This story is about a Toronto man who decided to use a Canadian debt relief program provided by a debt relief company to settle his debt issues. As a result of using that Canadian debt relief program, he is still unable to pay his bills, and is in a much worse financial situation now than he was before he visited the debt settlement company. To make matters worse, the debt relief consultant then got a licensed insolvency trustee to almost go along with his cockamamy scheme. Unfortunately, the Trustee woke up too late, after all the damage was done.

I will explain it all to you.

Canadian debt relief program: Research the company’s reputation

There should be a law that requires all debt relief services companies to be licensed to do debt relief work in Canada. So if they are not licensed they are not allowed to claim they are licensed. Since a debt relief company does not need to have a special license to provide a debt relief solution, it means there are few regulations set in place to control what they can do and what they can charge their customers. A debt relief program is a program set up to help people get out of debt. Debt relief programs always are not designed to help you pay off all your debt.

Debt relief programs run by debt relief services companies often aren’t designed to help you find a permanent solution to the behaviour that got you into your debt problems in the first place. The problem with a Canadian debt relief program put together by a debt settlement company is that it may very well cause the loss of your money or as is the case in the true story I am about to tell you, the loss of your home.

canadian debt relief program
canadian debt relief program

Canadian debt relief program: Are debt relief programs really worth it?

A for-profit debt settlement company charges fees, just like any other for-profit business. Before any of your money is used to settle your personal debts, you must pay most of their fees upfront. No fees are charged by the non-profit credit counsellor. Reputable credit counselling companies do not require you to pay upfront for any tangible services they offer to help you reduce your various types of debt.

You set up an account with the company, where you make monthly payments from available funds to generate the money necessary to pay their fee and then to make settlement offers. There is no guarantee that working with a private debt settlement company will work. Debt settlement companies cannot guarantee that creditors will agree to settle on the outstanding debts when they contact them.

Your creditors may not be able to reach an agreement with them, so you may have to file a consumer proposal or end up filing bankruptcy. For services that the bankruptcy trustee provides for free, debt settlement companies charge debtors upfront fees. While you are in a Canadian debt relief program offered by one of these companies, you do not have any protection from creditors.

Should debt management programs be pursued? A not-for-profit credit counselling agency can provide this service. The answer is NO if it is a for-profit debt relief company. However, the answer is YES if it is a formal consumer proposal with a licensed insolvency trustee.

Canadian debt relief program: When using a debt settlement company goes terribly wrong – a true story

When things go wrong, they go really wrong and fast. We were contacted by a lawyer representing an undischarged bankrupt. The facts as I understood them to be were:

  1. The debtor went to a debt settlement company to get financial advice and help in resolving his debt problems. The company claimed to specialize in helping Canadians deal with their debt problems through a successful Canadian debt relief program. They said they could get him out of his financial mess and save his house. They told him that they would take care of everything.
  2. He was the only owner of the marital home. A real estate agent gave an opinion letter that stated the home was only worth the total of the registered mortgages.
  3. The debtor lost his job and his wife was making the mortgage payments from her employment income. They advised the couple that the wife could get legal protection by taking the position that each of her mortgage and utility payments was a secured advance to the husband. There was no written agreement between them registered on title and she did not register a mortgage against the home. This advice was obviously very wrong.
  4. The debt settlement company could not create any plans for debt forgiveness acceptable to the creditors. It was mainly credit cards and the debtor needed a successful credit card debt relief plan.
  5. The debt settlement company marched the debtor to a licensed insolvency trustee. We could not determine from the documents provided to us if the Trustee did any verification work or merely filed the assignment in bankruptcy based on the work of the debt settlement company. The sworn statement of affairs had the same value for the home as in the real estate agent’s opinion letter. Net of mortgages, the sworn statement of affairs showed no equity in the matrimonial home.
  6. The same day that the Trustee’s section 170 report was prepared, the Trustee wrote a letter to the debtor. According to the Trustee’s letter, after 1.5 years of bankruptcy there is $200,000 equity in the home, the wife has no existing secured claim to the property and therefore, the Trustee opposes the discharge since the asset has not yet been realized. There were no references in the Trustee’s letter to any previous communications or correspondence with the debtor regarding his equity in the home. Therefore, I do not know if the letter was the first time the Trustee discussed with the bankrupt the need to realize the equity in the home.
  7. In the section 170 report, again, dated the same day as the letter, the Trustee opposed the bankrupt’s discharge due to the home equity issue.
  8. A list of licensed credit counsellors can be found on the website of the Superintendent of Bankruptcy. Upon searching that licensed credit counsellor database, we were unable to locate the name of the debt settlement company employee who assisted the debtor.
  9. The undischarged bankrupt’s wife, or any other family member of his, was not able to raise the necessary funds to purchase the Trustee’s interest in the equity of the home. The undischarged bankrupt has no means from which to attempt to do a consumer proposal or Part III Division I Proposal to do a successful proposal out of bankruptcy.
  10. The debt settlement company’s work directly led to the undischarged bankrupt losing his home as it would have to be sold either by the debtor or the Trustee.

    canadian debt relief program
    canadian debt relief program

Canadian debt relief program: My advice

I did a Teranet search of the matrimonial home. The estimated value of the home according to Teranet showed there was more like $350,000 of equity, not $200,000. There was not a lot that this undischarged bankrupt could do. My advice was:

  1. The debt consultant apparently was doing work that a Trustee must do under the Bankruptcy and Insolvency Act (Canada) (BIA) but is not licensed to do that work. The debtor should consider demanding the fee paid to the debt consultant.
  2. Find out who did the mandatory two credit counselling sessions with the debtor; a licensed credit counsellor under the Trustee’s employ or the debt consultant?
  3. Find out if there is a financial arrangement between the debt consultant and the Trustee. Such arrangements are outlawed by the Superintendent of Bankruptcy.
  4. The debt consultant was very “cute” in trying to fix the value of the home so that there was no equity in the home. What verification work did the Trustee do when accepting the value in the sworn Statement of Affairs and beginning the bankruptcy process?
  5. Unfortunately, the undischarged bankrupt is stuck with this situation. The equity in the home belongs to the Trustee. There really was not anything that I could do to change that.

The lawyer thanked us very much and said that his discharge hearing will be quite the show after she examines the witnesses!

Canadian debt relief program: Options you can trust to help you with your debt

A licensed insolvency trustee would have been a better choice for this debtor rather than this debt relief company. Most people with consumer debt problems fall into one of three categories. Using these three categories, I will show what I would have advised this debtor. It is sufficient to say that the earlier you seek the services of a licensed insolvency trustee and avoid the debt consultants and their unrealistic promises, the more options you will have.

Your finances could be better, and you would like some help.

When you realize that you can do things better and wish to avoid trouble, you fall into this category. You can get proper financial advice from a licensed insolvency trustee at this stage. It is likely that if this debtor had approached me at the first sign of trouble, he could have avoided filing for bankruptcy. Things I might have discussed with him include:

  • How to establish and follow a budget for the family.
  • Does he have an adequate credit rating or credit score to be approved for and get a debt consolidation loan so that this loan would enable him to pay off all his unsecured debt in full and have one affordable monthly payment under a debt consolidation program.
  • Having a non-profit credit counselling service assist him with budgeting, assistance with debt management and if required, arranging a debt relief settlement plan with his unsecured creditors. Creditors understand that sometimes life happens and there are situations where people require support for plans for debt forgiveness when it comes to ‘debt-causing’ scenarios such as critical illness, job loss and the death of a loved one.
  • Making monthly payments to the non-profit credit counselling service so that they can make the necessary payments to creditors, as prescribed in the Canadian debt relief program they set up for him.
  • His job includes referring the debt collectors to the non-profit credit counselling service when he receives their calls.
  • His wife should seek independent legal advice about registering a mortgage against the family home as security for all advances she is about to make to her husband for the mortgage, property tax, utility bills, and any other funds related to the home’s maintenance.
  • Is it possible to use the equity in the home to downsize?
  • How filing a consumer proposal or an assignment in bankruptcy affects his finances and his life, including how it affects the equity in his home.

My advice would have cost him nothing, and he would be in a much better financial position than he is now. Most likely, he would have avoided the need for a consumer proposal or bankruptcy altogether.

Your finances are beginning to get out of control.

He and I would have discussed all of the above, along with independent legal advice for his wife, and the realistic option of having an affordable payment plan with debt reduction, by filing a consumer proposal as a real Canadian debt relief program for debt reduction and allowing him to make one affordable monthly payment on all his outstanding unsecured debts. Consumer proposals are the only Canadian debt relief program approved by and authorized by the Federal government.

You are in serious financial trouble.

If he hadn’t come to see me before he suffered severe financial difficulties, his only realistic option would be bankruptcy. From the very beginning, he would have realized that the equity in his home was at stake and would be lost to the Trustee. It wouldn’t have been a bad shock to the debtor after filing for bankruptcy. He may even have been able to locate a relative who could have purchased the equity in his home from the Trustee prior to filing so that his life would not have been negatively affected.

canadian debt relief program
canadian debt relief program

Canadian debt relief program: Summary

I hope you found this Canadian debt relief program Brandon Blog informative. Although nothing is guaranteed, managing your debt in a way that will allow you to be able to afford it, will lead to your financial success. It will also give you the best shot at having a financially stress-free life.

Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you? Do you need to search out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

Call the Ira Smith Team today. We have decades and generations of experience assisting people looking for life-changing debt solutions through a debt settlement plan and AVOID the bankruptcy process.

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a Government of Canada-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy and balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

canadian debt relief program
canadian debt relief program

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

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CONSUMER PROPOSAL STUDENT LOANS STEP-BY-STEP DEBT RESCUE: HOW TO FIX YOUR STUDENT DEBT PROBLEMS

consumer proposal student loans

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

Consumer proposal student loans: Student Loans and Consumer Proposals

In the event of student loan debt, you may be able to eliminate certain student loans through a bankruptcy or consumer proposals. Student loans are given special treatment under the Bankruptcy and Insolvency Act (Canada) (BIA). The seven-year waiting period is a requirement for consumer proposals related to student loans (by the way, the concept is similar in personal bankruptcy).

Throughout this Brandon Blog, when I refer to student loans, I am referring to loans issued under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or any provincial act that provides loans or guarantees for student loans.

I am not talking about any loan debt not meeting this definition. A private loan or a loan from a financial institution that is not covered by the above-noted legislation would be examples, including other loans taken out for professional training.

Consumer proposal student loans: Filing a consumer proposal for student loan debt

In previous posts, I discussed consumer proposals and how they can be used as an alternative to bankruptcy and as a means to negotiate repayment terms of your entire debt with creditors. Canada’s only federally authorized debt settlement program is the consumer proposal. Only licensed insolvency trustees (formerly called bankruptcy trustee) can administer consumer proposal student loans or for any other kind of debt. By using consumer proposals, you can negotiate away the majority or all of your debt in return for making monthly payments for a fraction of that amount and over an extended period of time, not exceeding five years, without incurring any interest. The seven-year rule affects consumer proposal student loans under the student loan legislation.

When you submit a consumer proposal, one of the major benefits is a stay of proceedings, just as in bankruptcy. You will no longer be subject to collection efforts including collection calls, legal action and wage garnishments. Private or financial institution loans taken out while you were a student, not covered by student loan legislation, may be eliminated under the BIA without regard to the seven-year rule. Private student loan debt such as a line of credit or credit card debt incurred while you were a student would be examples.

consumer proposal student loans
consumer proposal student loans

Consumer proposal student loans: Think of insolvency waiting periods like a clock with a start date and an end date

In either personal bankruptcy or consumer proposals, student debt is treated differently under government student loan legislation than normal ordinary unsecured consumer debt. The 7-year waiting period is a mandatory waiting period set by the BIA. This is why it is so important.

Student loan debt relief under section 178(1)(g) of the BIA is not available to people who have filed for bankruptcy or a consumer proposal and have not yet ceased to be a full-time or part-time student or who are within 7 years of ceasing to be a full- or part-time student.

A consumer proposal or personal bankruptcy can be filed by insolvents after they stop being full-time or part-time students more than seven years after ceasing to be students. In that case, the student loans debt can either be discharged by bankruptcy or by consumer proposals.

Counting the 7 years may also not be as straightforward as it sounds. In most cases, students take out a series of loans for each year of college or university. Do the 7-year counts take place on a loan-by-loan basis individually, or is it treated collectively? If in doubt, group them together.

The person must consider all three aspects of the calculation in order to do the calculation correctly:

  • the date the personal bankruptcy or consumer proposal was filed;
  • When the insolvent person ceased to be a student;
  • After ceasing to be a full-time student or part-time student, the length of time the person must wait before a consumer proposal student loan compromises the debt or the loan is discharged through an absolute discharge from bankruptcy.

Consumer proposal student loans: Potential “Court-Ordered Discharge” under hardship provision where 5-year waiting period satisfied

Under section 178(1.1) of the BIA, there is a provision that only applies in bankruptcy. It does not apply for consumer proposal student loans. Since we are discussing student loan debt, I would be remiss if I did not mention it.

Under this section, the court can order that the 7-year waiting period does not apply to a bankrupt who has student loan debt under federal or provincial student loan legislation 5 years after ceasing to be a full-time or part-time student. It would then actually be only a five-year waiting period.

Only a five-year waiting period can be allowed by the court if these conditions are met:

  1. the bankrupt acted in good faith in connection with its student loan debt; and
  2. it is likely that the bankrupt will continue to face financial difficulties to such an extent that it is impossible for them to repay their student loan debts.

What does the compulsory waiting period entail? When should we choose between a 7-year and 5-year waiting period? The 7-year waiting period has already been discussed. In determining whether a bankrupt is entitled to the hardship reduction for the lower 5-Year waiting period, the court considers the following factors:

  1. How was the money used? For the purpose, it was borrowed for?
  2. Was the bankrupt honest in his or her attempt to complete the educational program?
  3. Has the bankrupt gained employment in an area directly related to his or her education?
  4. Did the bankrupt make reasonable efforts to make monthly payments or otherwise make student loan payments against the loan or did the bankrupt make an immediate assignment into bankruptcy?
  5. Are there any repayment assistance programs options for student loan debt relief that the bankrupt can take advantage of concerning the outstanding student loans, such as interest relief or loan forgiveness and has the bankrupt applied for such repayment assistance programs?
  6. Did the bankrupt overspend or behave irresponsibly with personal or family finances?
  7. When the loan applications were made, was the person’s disclosure about his or her circumstances fair and accurate?

The court decisions on obtaining financial hardship relief show that it is not easily obtained. A bankrupt normally have to show that they have exhausted all efforts, their financial hardship is not a result of their actions or inaction and that their financial situation cannot reasonably be expected to improve without the undue hardship relief.

consumer proposal student loans
consumer proposal student loans

Consumer proposal student loans: Paying Student Loans During Your Bankruptcy or Consumer Proposal

What if:

  • Your financial circumstances are you have too many unsecured debts and your unsecured creditors are taking legal action against you?
  • You have a history of rolling over payday loans and are deep in financial trouble.
  • You have to go see one of the licensed insolvency trustees in your area and ultimately use one of the debt-relief tactics of bankruptcy or consumer proposal.

If you stopped being a student:

  • 5 or 6 years ago but you know that you could not qualify for the financial hardship provision relief; or
  • the last time you went to school was less than 5 years ago; and
  • you need to start repaying your student loans.

To rebuild a solid foundation for a good financial future in such a situation, either bankruptcy or a consumer proposal would have to be filed. Despite the fact that you would not be able to eliminate or compromise your student loans, you would be able to escape the clutches of your otherwise crushing other unsecured debts.

In such a case, it may make sense to file for an insolvency process, even though you would be paying student loans during your bankruptcy or consumer proposal.

Consumer proposal student loans summary

I hope you found this consumer proposal student loans Brandon Blog informative. Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you in retirement? Do you need to find out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

Call the Ira Smith Team today. We have decades and generations of experience assisting people looking for life-changing debt solutions through a debt settlement plan and AVOID the bankruptcy process.

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy and balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

consumer proposal student loans
consumer proposal student loans
Categories
Brandon Blog Post

THE GREAT UNTOLD STORY ON MY CRA ACCOUNT BUSINESS UPDATED RULES THAT YOU MUST READ

my cra account business

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Stay healthy, well balanced and safe and secure everyone.

If you would prefer to listen to the audio version of this My CRA Account Business Brandon’s Blog, please scroll to the bottom and click play on the podcast.

My CRA account business introduction

On May 28, 2020, Canada Revenue Agency (CRA) made an announcement concerning the CRA and COVID-19 collections, audit, objections and appeals procedures. It looks like they are starting to slowly open up again. So, it appears that the time-out honeymoon for my CRA account business for business and personal income tax matters is over and there will now be new rules.

In this Brandon’s Blog, I will describe them for you.

Collection on brand-new financial debts

Collections activities on brand-new debts will be put on hold up until additional notification, and also versatile settlement arrangements will be readily available. If you cannot pay your taxes, child and family benefit overpayments, Canada student loans, or other federal government program overpayments completely, payment arrangements are offered.

Collection officers will certainly attend to pre-existing cases individually. CRA says it will do so in a way to prevent financial difficulty. I think the fact that either you or your company owes CRA money that you cannot pay, that in itself spells financial difficulty!

My CRA account business audits returning

The CRA is returning to a complete function of their audit group. They say that they are adjusting their methods given the health as well as economic impacts of COVID-19. They will be focusing as a priority on:

  • higher dollar audits first;
  • audits close to the conclusion;
  • those with a calculated significance to the Government of Canada, provinces and other taxation stakeholders;
  • initiatives to combat scams and other criminal activity; and
  • CRA will for now continue to recognize electronic signatures as having met the signature requirements of the Income Tax Act, as a temporary administrative measure.

The CRA statement said that they are developing new methods of interacting with taxpayers. CRA will function with taxpayers and my CRA account business to establish steps and methods to adapt to the present truth. For instance, one new way is that they are now going to supply taxpayers with the alternative to send requested details via electronic mail.

Some vital adjustments will be given using added time and in advance consultation on requests to supply the CRA with information and access. Public health regulations will certainly be followed. Added practical steps will be expanded both in terms of timing or other aspects of any CRA request.

Requirements for Information (RFI) provided before March 16 and due after that day will be reviewed. Taxpayers as well as 3rd parties, including financial institutions, will be gotten in touch with where the CRA continues to need the information in the RFI.

The CRA is looking at new measures to catch people making unsupported claims for pandemic emergency benefits.

My CRA account business objections, appeals and taxpayer relief

CRA says that Canadians’ entitlement to benefits and credits are essential to continue to be provided throughout COVID-19. There should not be any delays with the handling of these objections.

For objections related to various other tax obligation matters submitted on personal or business income tax matters, the CRA is presently holding these accounts in abeyance. No collection activity will be taken with respect to these accounts right now. For objections that are due between March 18 and June 30, 2020, CRA has extended the due date to June 30, 2020.

The Canada Revenue Agency extended some of the filing deadlines for individuals, corporations and trusts in a move to help taxpayers and tax preparers dealing with the COVID-19 pandemic. Any money owed to the Canada Revenue Agency can be deferred until September 1st, 2020, with no penalties or interest payable.

Taxpayers that are unable to file a return or make a payment by the tax-filing and payment deadlines as a result of COVID-19 can request the cancellation of penalty as well as interest charged to their account. Penalty and interest will certainly not be charged if the new due dates that the federal government has introduced to tax-filing and payments are met.

As soon as CRA service operations begin again, the Taxpayer Relief Program will review claims associated with COVID-19 on a top priority basis.

Suspending individual (T1) validation and review

Some review of income tax returns was launched prior to the COVID-19 pandemic. Taxpayers might have been contacted to provide more details in connection with amounts declared. If Canadians have gotten any CRA correspondence that provides a timeline for action or submission of information or backup documents, that is currently on hold. You don’t yet need to respond.

CRA does remind everyone that t is necessary to keep in mind that, although assessments have been delayed, it does not avoid future actions or evaluations from being finished. Taxpayers will need to keep their information and documentation, in case they are chosen for review in the future.

My CRA account business summary

I hope you found this my CRA account business information helpful. It appears that right now CRA is still in “stand down” mode. However, the recent announcement that I described shows that they are letting Canadian taxpayers know that soon, they will start getting back to business.

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Stay healthy, well balanced and safe and secure everyone.

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Brandon Blog Post

CANADA STUDENT LOAN FORGIVENESS: BANKRUPTCY TREATS STUDENT LOANS FAIRLY

UPDATE OCTOBER 30, 2019: On September 27, 2019, the Court of Queen’s Bench of Alberta issued its decision on the appeal of this case. The decision described in this Brandon’s Blog was reversed. You can read about it in our new blog:

STUDENT LOAN BANKRUPTCY DISCHARGE CANADA: REGISTRAR DECISION REVERSED

“Forgiveness does not change the past, but it does enlarge the future.” Paul Boose

Introduction

In my last Brandon’s Blog, I talked about the balance between a debtor and the creditors the Canadian insolvency system strives for. I just read today a decision of the Registrar in Bankruptcy sitting in the Court of Queen’s Bench of Alberta in Edmonton. In this case, Morrison (Re), 2019 ABQB 521, highlights this balance in this case dealing with Canada student loan forgiveness.

Can Canada student loans be forgiven in bankruptcy?

This is an application according to s. 178( 1.1) of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA). As I have previously written in several of my Brandon’s Blogs, in general, student loans cannot be discharged by a bankruptcy where the date of bankruptcy occurred within seven years after the date on which the bankrupt discontinued to be a full-time or part-time student.

Section 178(1.1) of the BIA, allows for after five years after the day on which a bankrupt with student loan debt ceases to be a full-time or part-time student, the Court may, on an application, order that the financial debt will be discharged. For such Canada student loan forgiveness, the Court has to be satisfied that:

  • the bankrupt person has actually acted in good faith about their obligations under the student loan debt; and also
  • the bankrupt has and will continue to experience economic trouble to such an extent that the bankrupt will certainly be not able to pay that financial debt.

So it is possible for student loans to be forgiven in bankruptcy. In this case, if the bankrupt’s application for student loan forgiveness succeeds, the student loan debt will not survive after her discharge. The application was opposed by both Canada Student Loans and the Ontario Student Assistance Program (the government).

Is the forgiveness all or none?

Before getting into the unusual details of this case, the Registrar’s decision dealt with one of the issues that came up over the course of the application. The issue was whether the choice to forgive student loans is all or none. That is, whether it is open to a Registrar hearing this application to find that only a part of the financial obligation needs to survive, in contrast to releasing all of it.

Based on the case law, the Registrar was satisfied that this was an all or none proposition. The Registrar stated that he was somewhat let down that it had to be that way. If the decision is that these financial debts are extinguished by the bankrupt’s discharge, the government could object to the bankrupt receiving an absolute discharge.

Like any other creditor, they could ask that a financial condition be enforced as a condition of discharge. In other words, the bankrupt would have to pay a portion of the student loan amount into the estate to be distributed by the licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee) as a condition of getting a discharge. This frequently occurs with high tax obligation debtors.

As it turns out, the government did not oppose the discharge application that was heard following this student loan application. They also did not ask that a monetary condition be applied to the terms of the conditional Order that was given.

So, it had to be all or none.

The vital facts

In 2015 Ms. Morrison was in financial hardship. At the time, she estimated her overall unsecured financial obligations were $71,501.00. Of that amount, about $50,000.00 was student loan debt. She sought the guidance of a Trustee and then assigned herself into bankruptcy. Ms. Morrison’s stated intent was to have all her unsecured debt on an equal footing to make sure that she can take care of everything via the insolvency process. She told her Trustee that she wanted her student loan debt to be included in her unsecured debt that would be eliminated by her discharge from bankruptcy. She clearly wanted Canada student loan forgiveness.

Ms. Morrison was last a full-time student in April 2008. Her last day of classes was on April 18, 2008. She had been a full-time student up until that day. So, arguably, she discontinued being either a full-time or part-time student on April 19, 2008. Unfortunately for her, she assigned herself to bankruptcy on February 27, 2015. Her personal bankruptcy in February 2015 was just a bit too early.

This somewhat defeated her stated reason for going bankrupt. So this is why she made this application to try to have her student loan debt forgiven by her discharge from bankruptcy. Depending on how you do the calculation, Ms. Morrison’s date of bankruptcy was about 60 days or so too soon.

If she had actually waited until April 19, 2015, to become bankrupt, rather than February 27, 2015, as she did, her student loan debt would be eliminated by her bankruptcy discharge.

The government tried to argue that under the student loan legislation, you calculate the time that she ceased being a full-time or part-time student begins on the 1st day of the month following the month she finished her studies. The Registrar was not having any of that.

He said that the student loan treatment he was asked to consider was based on the terms of the BIA. Therefore, he was going to use the more practical conclusion that for BIA purposes, the day you ceased being the student is the day after classes ended. I guess you could quibble that the day after you finish writing your last exam was really the date you ceased being a student, but nobody raised that issue.

The considerations

The Registrar considered cases from both Alberta and other provinces laying out the factors that relate to the discretion the Court had in such a forgiveness application. As I stated above, the Registrar had to determine if:

  • the bankrupt person has actually acted in good faith about their obligations under the student loan debt; and also
  • the bankrupt has and will continue to experience economic trouble to such an extent that the bankrupt will certainly be not able to pay that financial debt.

The Registrar laid out his understanding of the factors he needed to consider based on previous decisions. His list was:

  1. Whether the student loan funds were utilized for the purpose it was loaned for.
  2. If the person finished their education.
  3. Did the applicant obtain financial gain from education?
  4. Whether the applicant has actually made reasonable initiatives to repay the financial debts.
  5. If the applicant has made use of the option of applying for interest rate relief.
  6. The timing of the bankruptcy.
  7. Do the student loans form a significant percentage of the total debt?
  8. Whether the applicant had an adequate job and therefore income to be expected to make payments against the student debt.
  9. The applicant’s lifestyle.
  10. Did the applicant had sufficient earnings for there to be surplus income in bankruptcy under the Superintendent’s Directive.
  11. What approaches the applicant made to the government for debt relief and what the government’s response was.
  12. Whether the applicant went to at any time was unable to work due to medical issues or disability.

The Registrar’s findings

Registrar’s findings reveal the following:

  1. The student loans were used for the purpose the funds were loaned.
  2. Ms. Morrison completed her education.
  3. She acquired a financial advantage from her education as she currently works in the area she studied for, or a related one.
  4. She made some effort to settle the student loan debt. She entered into a contract with the government but her financial condition prevented her from making good on that plan. She apparently made some repayment.
  5. The bankrupt’s initiatives at getting to a practical arrangement were not trivial. However, it appears that she required the framework of an insolvency process for her to come to terms with all her debts.
  6. The applicant got interest-free standing for a period of time.
  7. The student loans developed by far and away made up the best part of the bankrupt’s general indebtedness.
  8. The applicant is (and was) for the most part a single parent of one. She committed a significant percentage of her income to her child (now a teen).
  9. She lived a modest way of life.
  10. She now has full-time employment and surplus income.

The decision

The Registrar found that the timing in connection with the seven-year cut-off was extremely close. The bankrupt’s primary interest and her shared intent at the time of meeting with the Trustee were to deal with all of her creditors on equal ground. Ms. Morrison did not look for bankruptcy to avoid her student loan debt but rather to deal with all of her financial problems.

There was obviously miscommunication between Ms. Morrison and her Trustee. The trouble was that the miscommunication aggravated her stated goal, which was the entire point of her insolvency proceeding.

When the matter was heard, it was approximately eleven years after her education was finished. The Registrar stated that in these extremely uncommon conditions he is completely satisfied that it remains in the interest of justice that an order goes pursuant to s. 178(1.1).

The government did not otherwise oppose the discharge. The Registrar made a conditional order of discharge taking all circumstances, including her surplus income, into consideration.

In this way, the Registrar balanced the right of this honest but unfortunate debtor to get her fresh start, with the rights of her creditors.

“True forgiveness is when you can say Thank You for that experience.” Oprah Winfrey

Canada student loan forgiveness summary

Are you or your company in need of debt forgiveness. Have you tried your best to balance your financial survival with those of your creditors but you just cannot keep up?

The stress you are under because of your money challenges is huge. I understand your pain. At no cost to you, I will look at your whole set of circumstances and develop a plan that is as special as your issues. I know that I can help you through this.

There is no “one solution fits all” approach with the Ira Smith Team. That is why I can develop a debt settlement plan for you as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

canada student loan forgiveness

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Brandon Blog Post

OSAP BANKRUPTCY IS NOT AS SIMPLE AS YOU MIGHT THINK

OSAP bankruptcy Introduction

I have written before on the issue of the difficulty in discharging student loans through bankruptcy. Bankruptcy will certainly not release your student loans debt until you’ve been out of full or part-time studies for 7 years. It is also question and answer #8 in our TOP 20 PERSONAL BANKRUPTCY FAQS found on our main website. In Brandon’s Blog, I want to drill down into the issue of an OSAP bankruptcy.

What is OSAP?

The Ontario Student Assistance Program (OSAP) is a financial assistance program that can assist students in spending for college or university.

OSAP provides money via:

  • Grant: cash you do not need to repay
  • Loan: a loan you are required to pay off when you’re done college or university

OSAP can assist your spending for:

  • tuition
  • books and supplies/equipment
  • student fees billed by an institution
  • living expenditures
  • childcare

Amongst the various categories of people who are not eligible for OSAP, one is those people who have filed for either personal bankruptcy or a consumer proposal. As you might imagine, the rules surrounding OSAP bankruptcy are not simple. Let’s do some drilling down now!

Students that did not get student loans before the day they declared bankruptcy or filed a consumer proposal

If the student has been discharged from bankruptcy or fully completed a consumer proposal, she or he does not require to offer any type of supporting paperwork in order for their OSAP application to be reviewed.

If the student is an undischarged bankrupt or has not completed the consumer proposal, the student must supply a letter from their licensed insolvency trustee (formerly called a bankruptcy trustee) or consumer proposal administrator. The document must show the day the student filed for either bankruptcy or the consumer proposal and that these 2 matters have actually been or will be satisfied:

  • Ontario and Canada is not a creditor in the bankruptcy or consumer proposal as an outcome of monetary help provided via OSAP; and
  • no monetary help offered to the student via OSAP during the current OSAP year will be taken in the insolvency proceedings to pay back the creditors

Discharged and the student is not presently enrolled in studies

If the student is discharged from bankruptcy or has successfully completed a consumer proposal, his/her OSAP application will not be decided upon until the student gives evidence that they have no amount owing on any student loans.

Alternatively, if applicable, the student can show that he/she received relief in their bankruptcy by way of a court order stating that section 178(1)(g) of the Bankruptcy and Insolvency Act (Canada) (BIA) no longer applies to the student loans.

In this situation, the student needs to supply:

  • evidence that an order of discharge or full completion of the consumer proposal has been achieved and that 3 years have expired since that date
  • a copy of the notice of bankruptcy/consumer proposal
  • letter from the student’s bank and/or the National Student Loans Service Centre confirming there is no outstanding balance
  • any relevant court order

Discharged and continuing a program of study

If the student is discharged from bankruptcy or has successfully completed a consumer proposal, his/her OSAP application will not be decided upon until the student gives evidence that they have no amount owing on any student loans.

Alternatively, if applicable, the student can show that he/she received relief in their bankruptcy by way of a court order stating that section 178(1)(g) of the BIA no longer applies to the student loans.

In this situation, the student needs to prove that he/she meets all of the following criteria:

  • at the time the student declared bankruptcy or filed the consumer proposal, they were enrolled in an accepted program of study at an accepted school and taking the minimum called for course load
  • the student remains in the same accepted program they were in on the date of bankruptcy/consumer proposal filing date
  • the student has not had a break in studies longer than 6 months since the date of bankruptcy/consumer proposal filing date
  • it has not been greater than 3 fiscal years since the date of bankruptcy/consumer proposal filing date

In this situation, the student needs to supply:

  • evidence that an order of discharge or full completion of the consumer proposal has been achieved and that 3 years have expired since that date
  • a copy of the notice of bankruptcy/consumer proposal
  • letter from the student’s bank and/or the National Student Loans Service Centre confirming there is no outstanding balance
  • any relevant court order
  • letter from the student’s Financial Aid Office verifying that the program of study in which the student was registered at the time of the bankruptcy/consumer proposal filing, is the same as the program the student is now applying for

Undischarged bankrupt or has not yet fully completed the consumer proposal

If the student is an undischarged bankrupt or has not successfully completed a consumer proposal, the processing of the student’s OSAP application will not be completed until the student gives evidence that they have no amount owing on any student loans.

In this situation, the student needs to prove that he/she meets all of the following criteria:

  • at the time the student declared bankruptcy or filed the consumer proposal, they were enrolled in an accepted program of study at an accepted school and taking the minimum called for course load
  • the student remains in the same accepted program the were in on the date of bankruptcy/consumer proposal filing date
  • the student has not had a break in studies longer than 6 months since the date of bankruptcy/consumer proposal filing date
  • it has not been greater than 3 fiscal years since the date of bankruptcy/consumer proposal filing date

In this situation, the student needs to supply a letter from their licensed insolvency trustee or consumer proposal administrator. The document must show the day the student filed for either bankruptcy or the consumer proposal and that these 2 matters have actually been or will be satisfied:

  • Ontario and Canada is not a creditor in the bankruptcy or consumer proposal as an outcome of monetary help provided via OSAP; and
  • no monetary help offered to the student via OSAP during the current OSAP year will be taken in the insolvency proceedings to pay back the creditors

The student will also need to supply a:

  • letter from the student’s bank and/or the National Student Loans Service Centre confirming there is no outstanding balance
  • any relevant court order
  • letter from the student’s Financial Aid Office verifying that the program of study in which the student was registered at the time of the bankruptcy/consumer proposal filing, is the same as the program the student is now applying for

Summary

I hope you now understand that the whole area of OSAP bankruptcy and student loans in either a bankruptcy or consumer proposal is not as simple as you might have originally thought. This is especially the case if the student is continuing his or her studies.

Do you have too much debt? Are you in financial distress? Do you not have adequate funds to pay your financial obligations as they come due?

If so, call the Ira Smith Team today. We have decades and generations of experience assisting people looking for financial restructuring, a debt settlement plan and to AVOID bankruptcy.

As a licensed insolvency trustee (formerly called a bankruptcy trustee), we are the only professionals accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government approved debt settlement plan to do that. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy and balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles. Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

osap bankruptcy

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Brandon Blog Post

REPAYMENT OF STUDENT LOANS CANADA: STUDENTS’ #1 WORRY-STUDENT LOANS DEBT

repayment of student loans canada

August 30, 2018 – NEW BONUS VIDEO AT THE BOTTOM OF THIS BLOG

Introduction

Although I can’t now fathom a world without the Internet, there are some reasons to wax nostalgic about the good old days. Most notably, many families lived nicely on one income and people retired from their jobs with a defined pension plan. They did not have to worry about repayment of student loans Canada. It was commonplace for students to put themselves through college working summers and weekends during the school year.

There is a new reality

Those days are gone! Two incomes are now an absolute necessity for most families and defined pensions have all but disappeared. To pay for university, even with working summers and weekends, students are saddled with enormous loans. In the 2015-16 school year, 497,000 students enrolled in the Canada Student Loans Program.

Students #1 worry

Dan Allan, Director of the Student Budget Consultation Program, states:

“While students are concerned about unemployment after school, their biggest worry is about their university debt and the cost of education being a huge hurdle going forward”

Why is there so much student loans debt?

  • Government funding dropped from over 77% in 1992 to less than 55% in 2012. To make up the difference, post-secondary institutions turned to students. Tuition fees began to rise – 115% between 1980 and 1995 (Glenn Burley, Canadian Centre for Policy Alternatives)
  • By 2016-17, the average Canadian university tuition was about 40% higher than it had been in 2006. (Fred Lum/Globe and Mail)
  • Tuition fees increased by 3.1% per cent for undergraduate programs in the 2017-18 academic years (Statistics Canada)
  • The average tuition cost for a Canadian university — before the cost of books, travel and supplies — is $6,500 per year (Statistics Canada)
  • The average amount owing for both bachelor and master’s graduates is $26,000 and $41,100 for doctorate graduates (Statistics Canada)

What happens when students can’t repay their student loans?

According to Dan Allan, the current Liberal government wrote off $200 million dollars in outstanding student loans on which it will never be able to collect. This is the third time in the past four years that the government has had to write off outstanding loans for reasons that include bankruptcy. There is a six-year legal limit on collection and debtors who can no longer be found. This results in direct student loans loan forgiveness.

How can young people get ahead when student loans are holding them back? As a society, we must increase our investment in education. Instead of the government writing off hundreds of millions of dollars in uncollectable student loan debt, wouldn’t that money be better spent on funding education?

Repayment of student loans Canada: What to do if you have too much debt

You can certainly contact Canada student loans to find out about their program for those having trouble repaying their student loan debt. If you’re a graduate with student loan debt that you can’t repay, and you were not able to work out an arrangement with Canada student loans then you are in a student loans debt crisis. If you are struggling with student loan debt, or debt for any other reason, you need professional help and you need it now. We understand your pain points and we know how to relieve you of the stress and pain.

The Ira Smith Trustee Team can help you manage your debt and set you on a path to debt free living Starting Over, Starting Now. We’re only a phone call away.

Bankruptcy

 

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Brandon Blog Post

TORONTO CREDIT COUNSELING: OUR GUIDE TO GOING INTO RETIREMENT DEBT FREE

toronto credit counselingToronto Credit Counseling: Introduction

It appears that a high percentage of families in the GTA are in need of Toronto credit counseling. This week’s blog highlights why people are now carrying debt into retirement. By having this information, we hope that you will be able to easily prepare your own comprehensive guide to going into retirement debt free.

Toronto Credit Counseling: Household debt at an all-time high

With household debt at an all-time high and continuing to break records, it’s hard to find families not dealing with debt. But, have you considered how your debt load may impact your children’s futures? As parents I’m sure you want to give your children every advantage in life. This includes a college or university education.

Unfortunately it’s impossible to give your kids a post secondary education if you have a debt load to contend with. The reality is that student debt is directly tied to parents dealing with debt. So, ultimately your children may pay the price for your debt load. Believe it or not, they may even have debt carry into retirement.

Toronto Credit Counseling: Carrying debt into retirement

New research from Strategic Insights brought this very important issue to light:

  • Total student debt rose 6.2% annually over the past 10 years to $42.9-billion
  • this compares with an average inflation rate over the same period of 1.6%
  • Average debt for a graduating student as of July, 2015 was $26,819
  • Students graduating with significant debt could buy houses and start families later in life
  • Add on as many as 35 years to pay off mortgages, lines of credit and other borrowings
  • This stretches debt into retirement
  • Student debt has soared despite a substantial increase in the amount of money parents are contributing to RESPs

Toronto Credit Counseling: Going into retirement with debt

It’s hard to imagine that student debt can still haunt retirees, but it’s happening. And more and more students are graduating with heavy debt loads. Statistics Canada reports that 50% of students graduating with a BA relied on debts to pay for their education which in turn may well affect the future debt load of retirees. Parents, you may not realize it but your children may pay the price for your debt load.

Toronto Credit Counseling: Going into retirement debt free?

If you’re struggling with debt, now is the time to deal with it, before it becomes a multi generational issue. Perhaps all you need is credit counseling to get you pointed in the right direction to become debt free.

Contact the Ira Smith Team. We can help you put debt behind you Starting Over, Starting Now. End the cycle of debt, avoid bankruptcy and help your children have a bright future, free of student debt.3bestaward

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Brandon Blog Post

How Much Interest Am I Paying Every Month? Read The Bizarre Truth Here!

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How Much Interest Am I Paying Every Month?: Introduction

From my experience, how much interest am I paying every month is a question that nobody asks themselves. We’ve become a society based on credit. We have multiple credit cards, lines of credit, mortgages, car loans, student loans…

If I asked you how much interest you were paying each month I’d be willing to bet that not a single person could give me a correct answer. A monthly statement arrives either in the mail or electronically or an automatic payment comes out of your bank account or billed to your credit card. If you’re like most people the two things you see on a statement are the amount owing and the due date.

How Much Interest Am I Paying Every Month?: Start With Credit Cards

I think you’d be totally shocked at the amount of interest you’re paying each month, especially on high interest debt like credit cards. According to Capital Direct if you carry a balance of $8,000 on your credit card:

  • Your statement will show a minimum payment of $240. That may not seem like a big deal but did you know that if you pay the monthly minimum each month at an interest rate of 18.9%, it will take you 4 years to pay off the debt?
  • During this period you will pay $3,461 in interest charges.
  • The $8,000 debt will end up costing you $11,461.

How Much Interest Am I Paying Every Month?: How You Can Find Out

If you look at your credit card statement there will be a section that looks like this:

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This is the area of your credit card statement that everyone ignores. By focusing on this area, it will allow you to calculate the amount and answer the question “how much interest do I pay every month”

How Much Interest Am I Paying Every Month?: The Bizarre Truth

According to TransUnion:

  • Credit card delinquency rates jumped 14% year-over-year from 1.81% in the first quarter of 2015 to 2.06% in the first quarter of 2016.
  • Subprime borrowing is up. Subprime borrowers pay a higher interest rate because they have a poor credit history.
  • The average monthly balance for subprime credit card borrowers rose 5.7% to $6,601 in the first quarter.

How Much Interest Am I Paying Every Month?: What to do if you have too much high interest debt

Don’t get trapped in the cycle of high interest debt. The Ira Smith Team is here to help. With immediate action and a solid financial plan you can get escape the high interest debt cycle Starting Over, Starting Now. Give us a call today. You’ll be happy you did.

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Brandon Blog Post

STUDENT DEBT COUNSELLING: ARE WE DOING ENOUGH TO REDUCE THE COST OF STUDENT LOANS?

canada student loan, student loans, student loan debt, Amazon, Amazon Prime, Amazon Prime Student, student loan repayment, discounted student loans, marie brunner, student debt, student debt counselling, the impact of student debt, Last Week Tonight With John Oliver (TV Program), John Oliver (TV Writer), HBO (TV Network), last week tonight, john oliver, hbo, student debt, student loans, for profit colleges, itt tech, student loan debt canada, student loan debt consolidation, student loan debt statistics, student loan debt crisis, student loan debt forgiveness, student loan debt reduction, student loan debt relief, student loan debt storiesAmazon Prime getting into the US student loan business but not student debt counselling

As you will see from this blog, there is a huge need for student debt counselling, as new entrants into the student loan business are enticing students with new offers. The financial services industry in the United States is changing rapidly with many non-traditional companies getting into the game. The latest is Amazon Prime. They’re now offering discounted student loans to Amazon Prime Student customers through a partnership with Wells Fargo.

Although this type of program is now only available in the U.S., and while we typically discuss things that affect Canadians, we felt that anything that could cut the cost of a student loan was worth reporting. However, keep in mind that this does nothing for student debt counselling so that students are better able to handle debt. It is merely a financial opportunity with little risk as further described below.

Our previous student debt counselling and student loans blogs and vlogs

Student loan debt is such a serious issue that we’ve written a series of blogs and vlogs on the subject.

Canadian Federation of Students study

According to the Canadian Federation of Students (CFS), the impact of Canada student loan debt is that today’s students are the most indebted generation in Canadian history. They can certainly use student debt counselling.

The average student graduates with over $28,000 of debt. Tuition fees and living costs continue to rise, and there’s no solution in sight. The CFS has been lobbying the federal government for students, to no avail. And it’s not better south of the border where tuitions and the student loan debt is proportionally greater.

Perhaps CFS should also lobby the provincial governments to include student debt counselling as a mandatory grade 12 subject in high school!

Is Student Debt Counselling Being Offered to Amazon Prime Student customers?

Through the partnership, Wells Fargo is not offering any student debt counselling, but is offering student loans Amazon Prime Student Customers (not students whose parents have a Prime membership of their own):

  • A 0.50% interest rate discount
  • This can be added on top of a 0.25% interest rate reduction for enrolling in an automatic monthly loan repayment plan
  • In addition, any interest rate discount tied to another Wells Fargo global promotion

Students can apply for a new student loan or refinance existing student loans.

Why would Amazon Prime want to get into the student loan business

Of course this partnership benefits Amazon and Wells Fargo financially. However, it does not give any education to college students through student debt counselling. Amazon Prime will no doubt have many more sign ups and Wells Fargo will have access to many more potential borrowers. But the bottom line is that the student will benefit by having access to discounted student loans. Hopefully someone in Canada will also find a way to help lighten the student loan debt load.

However, there is even a greater reason. In Canada, a bankruptcy discharge will only end student loans if you’ve ceased to be a full or part-time student for more than seven years and either declare personal bankruptcy or make a debt proposal to your creditors, most likely through a consumer proposal. The only other option is to attempt to seek from the Court relief because of undue hardship, but this is very difficult, if not impossible.

If you think it is difficult under Canadian law to end student loans, it really is impossible under the US Bankruptcy Code. The leading case in the US, which subsequent decisions have followed, is, Marie Brunner v. New York State Higher Education Services Corp. (October 14, 1987, #41, Docket 87-5013). This case set a precedent for defining the concept “undue hardship” in bankruptcy discharges of student loans.

Suffice to say that if a bankrupt in the US is seeking a discharge of all of his or her debts, including student loan debt, the mere fact that they can afford to hire and pay an attorney can be used as evidence that if they have funds to pay legal counsel, then there is no undue hardship for them to agree to a repayment plan on account of the student loan debt after they get their discharge from bankruptcy and their non-student loan debts.

Since the debt will in almost every case always be owing and payable, it is a safe bet for Amazon Prime.

Are you in need of student debt counselling or credit counselling?

No matter the cause of your serious debt issues, The Ira Smith Team is here to help. Debt is not insurmountable; there are always options. With proper counselling, immediate action and a solid plan, we can help get your life back on track Starting Over, Starting Now. Our trustees are also certified in credit counselling. Give us a call today.

Call a Trustee Now!