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Insolvency Update: May 2017
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What is the Cost of Filing a Consumer Proposal or a Bankruptcy
This is one of the most common questions Licensed Insolvency Trustees (LIT) get asked and in most cases, it is usually answered by giving a response about fees. If it were only that simple.
The cost of filing for bankruptcy is something you will need to consider when you are considering claiming bankruptcy or filing a consumer proposal. How much it will cost to do either a consumer proposal or a bankruptcy depends on several factors. During your initial consultation with the LIT, they are going to provide an assessment of the following:
- your monthly income;
- the size of the family unit and whether you are providing support for others outside the family home;
- your spouse’s income and income of other members of the family unit;
- what assets you own; whether you have been bankrupt before; and,
- other intangible factors.
These factors come into play when determining what it will cost to file. We have a detailed article on this subject on our website, including information on minimum fees, surplus income, non-exempt assets, tax refunds, windfalls, fees of the LIT, and what to do if you can't pay your debt.
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Co-Signing a Loan:
The Good, the Bad and Possibly the Ugly
Co-signing happens pretty frequently in the world of lending and loans. It’s a way for someone with better credit to help someone who struggles with their finances and credit.
This practice is most common among close friends and family members as it requires a good relationship with lots of trust. It sounds harmless. Just sign your name, and a friend or relative will get a much-needed credit card, line of credit or car loan. Like most things in life, however, being a co-signer is not that simple.
Like most financial commitments, understanding all the risks and benefits is the best way for you to make the right choice. We have a detailed article about co-signing on our website.
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Tax Liens and Real Property
Tax season is over and now you have to face the reality of how you’re going to pay for your tax debt. Whether that tax debt is from the current year or added on to a previous years debt, the stress is likely something you are dealing with on a daily basis. You are likely constantly looking over your shoulder to see if your bank account is frozen, your wages are being garnisheed or worse, a tax lien is being registered on your property.
This article provides a brief overview of the tax lien on real property. CRA uses the tax lien on property as an additional way to collect on an outstanding tax debt. This is over and above the garnishing of your bank account or your paycheque. When you owe CRA money, CRA will use all of its available options to collect, including registering a lien on your home.
If you own your home and you owe taxes, you need to act fast. You need to have a plan to deal with the debt before CRA takes the steps to register a lien on your property. That’s where we come in.
Why? CRA is obliged to collect the taxes it is owed by virtue of the Income Tax Act. If you owe taxes and are not in a position to pay them, then enforcement action is very common. When you own your own home, a property lien is an effective method to achieve this.
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How will my spouse be affected if I file a Consumer Proposal or a Bankruptcy?
This is a question that we are constantly asked. Each wants to know how it affects the amount that is owed by the filing spouse, how income is affected and taxes.
Debt
This starts with the misunderstanding that each spouse is responsible for the others debts. While this may be an issue in family relations matters, it is not an issue between spouses as it relates to each others creditors.
Your spouse, whether common law or married will not be affected by your consumer proposal or bankruptcy if he or she is not responsible for any of your debt (i.e. did not sign an agreement or contract for any of your debt).
Each spouse’s debts are their individual responsibility. Credit bureaus track what individuals owe, and their track record of repayment, by each person’s unique social insurance number. So, if one spouse misses a payment on one of their own debts, that failure to make the payment of an amount owing in a timely fashion will not impact the other spouses credit rating.
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Latest BC Insolvency Statistics
Consumer insolvencies in BC increased overall in February 2017 by 3.5 percent from January 2017. Consumer proposals increased 8.5 percent while bankruptcies decrease 3.0 percent.
The proportion of proposals in consumer insolvencies in BC accounted for 59.25 percent during February while they account for 54.63 percent of all February 2017 insolvencies across Canada.
Consumer insolvencies in BC for the 12-month period ending February, 2017, decreased by 8.5 percent compared with the 12-month period ending February 2016. Consumer bankruptcies decreased by 17.2 percent, while consumer proposals increased by 0.6 percent.
It is not unusual for insolvencies to be down at this time of year, but we expect that the March figures will be higher than the previous.
The consumer proposal filings show the increasing popularity of dealing with debt over bankruptcies and other non-legislated options. It also indicates that consumers are seeing the benefits of using a Licensed Insolvency Trustee over other service providers.
The proportion of proposals in consumer insolvencies in BC was 56.9 percent during the 12-month period ending February 2017, up from 52.4 percent during the 12-month period ending February 2016. Again, it indicates the popularity of consumer proposals as a way for consumers to deal with their debt and with dealing with a Licensed Insolvency Trustee over other unregulated providers.
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About Our Newsletter
Our newsletter is aimed to inform the reader on various matters. If you find an article that you would like to share with someone you know, please feel free to share our newsletter with anyone you want. If they wish to sign up for our newsletter, its easy. Just visit our website on the newsletter page at http://www.boalewood.ca/resources/newsletter/
This newsletter is designed to inform readers of various matters relating to insolvency. The comments provided are, of necessity, brief and should not be relied upon as legal advice. We encourage you to contact us for advice in the context of a particular situation.
Should you have any questions relating to this topic or any other insolvency matter that you may have, please contact David Wood, Lisa Breault, Stephen Boale or John McEown at:
Telephone: (604) 605-3335
Fax: (604) 605-3359
Email:
David Wood: dwood@boalewood.ca
Lisa Breault: lbreault@boalewood.ca
Stephen Boale: sboale@boalewood.ca
John McEown: jmceown@boalewood.ca
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We realize that you’re looking for people you can trust to be discreet, professional, and give you the right advice.
We provide creative and practical insolvency advice to both individuals and companies facing financial difficulty.
We offer a full range of insolvency services to individuals such as consumer proposals to your creditors, financial counseling and bankruptcies.
We also offer a complete range of business services including formal restructurings, informal workouts, proposals to creditors, receiverships and bankruptcies.
Contact us for a free initial consultation.
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