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Can creditors garnish my wages?

Yes.  However, in order for a creditor to garnish your wages, they must have judgment. The only exception to this rule is if you owe taxes.  Canada Revenue Agency does not require a Court Order to garnish your wages.  They only need to serve your employer with a Requirement to Pay.

If your wages are being garnished, the filing of a bankruptcy or consumer proposal will stop all garnishees.

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What happens if I receive a phone call after declaring bankruptcy or filing a consumer proposal?

What happens if I receive a phone call after declaring bankruptcy or filing a consumer proposal?

Even though the Trustee contacts your creditors, you still might receive a phone call from one of your creditors or maybe even a collection agent.  This is due to the fact that all of your creditors are likely large organizations and it takes time to process the paperwork.  As well, if your debt has been referred to a collection agency, sometimes your creditors do not communicate your filing with third partys.

So, all you have to do is answer the phone, advise whomever is phoning that you have filed a bankruptcy and/or consumer proposal.  The caller will usually ask you two questions.

Who is the Trustee firm dealing with your case?

What is the estate number?

Once they have this information, they are required, by law, to stop phoning.

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Who contacts my Creditors if I declare bankruptcy or file a consumer proposal?

When experiencing financial difficulty, it may seem like the creditor’s phone calls are never ending. Not having an answer and not being able to find feasible solutions may be a reason why many debtors fear the confrontation and communication with creditors.

Once you have filed a bankruptcy or proposal, the trustee will contact your creditors.  This will stop harassment and collection activities such as pay roll garnishees.

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Will going bankrupt affect my job?

Usually filing for bankruptcy does not affect your job. If you are a member of a professional association, their rules may require you to disclose your bankruptcy.  If you’re bonded in your current position, you may want to contact your personnel department to confirm if there will be any impact on your job.

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Student Loans and Bankruptcy

What happens to my student loan if I declare bankruptcy ?

If you declare bankruptcy seven or more years after the date on which you ceased to be a full or part-time student, your student loan debts will be eligible for discharge along with your other debts.  If it has been less than seven years since you ceased to be a full or part time student, the debt will not be discharged and will survive the discharge of your other debts.

If your student loan debt survived your discharge, the Bankruptcy and Insolvency Act has a “hardship provision” available for those who continue to have trouble meeting their payments.  This is a Court application that is made by the debtor.  A pre-requisite of this hearing is that it must also have been at least five years since you have been a full or part time student.

At the hardship application, the Court may discharge your student loan debt if it is satisfied that you acted with good intentions in connection with your obligation to repay your student loans, and that you have experienced, and will continue to experience, financial difficulty that prevents you from repaying the debt.  The Court will also look at how debtors used student loan money, their efforts to complete their educational program, their efforts to repay the loans and their use of available interest-relief programs.

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Bankruptcy and Common Law Partners

Does bankruptcy affect my spouse or common law partner?

Your spouse, whether common law or married, will not be affected by your bankruptcy if they are not responsible for any of your debt i.e.: they did not sign a loan agreement or contract for any of your debt.

Should your spouse or common law partner have a supplemental or spousal credit card, they may be responsible for that debt. That will depend on the wording of the cardholder agreement.

Your spouse's credit rating will not be affected by your bankruptcy and any assets in the spouse's name will not be part of the bankruptcy.

If your spouse is responsible for any of your debt or has debt of their own, they should seek the advice of a Trustee to discuss their options.

A spouse may be affected by the income disclosure requirements during bankruptcy, but the Trustee will discuss this with you before filing

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Bankruptcy Myth: You only see a trustee if you are going to go bankrupt

Do I only need to see a trustee if I'm going bankrupt ?

Trustees have a number of ways to help people who are facing financial difficulty.  Not just bankruptcy.  These can include credit counseling, refinancing, budgeting and making settlement offers or proposals.  At Boale, wood & Company, we offer a free initial consultation to discuss your options.

Trustees are the onlyprofessionals in Canada who can offer a full range of debt relief solutions, and the onlyprofessionals who can guarantee protection from your creditors.   Despite claims to the contrary, no other non-trustee firm can.

Trustees are highly trained individuals who are licensed by the Government.  The Trustees at Boale, Wood & Company Ltd. also belong to the Canadian Association of Insolvency and Restructuring Professionals.

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RESP and bankruptcy

Will I lose my RESP if I file for bankruptcy?

Yes. An RESP is an asset that can be cashed in to pay off debts to creditors.  An RESP is nothing more than cash and is not held in trust for the children.  However, you can consider a consumer proposal as an alternative to bankruptcy.  In this situation, you do not lose your RESP.

It is important to research your options in order to make the best decision for you.  We suggest that you meet with the professionals at Boale, Wood & Company Ltd. to discuss the options available.  We offer a free initial consultation - details on this page.

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Tax Returns and Bankruptcy

I haven’t filed my income tax returns for the past two years.  Do I need to do this even if I haven’t been working?

No. You do not have to file your tax returns in order to file for bankruptcy. However, under the Income Tax Act you must file your income tax returns every year, regardless of whether or not you are eligible for a refund.

It is not illegal to owe the government money for taxes, but the Income Tax Act requires you to file a return every year, even if you didn’t make any money.

We suggest you review our article on tax returns.

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The Disability Tax Credit

What is it and how is it treated in a Bankruptcy?

The Disability Tax Credit is one of the most misunderstood tax credits available.  For most people, they believe that it is a tax refund.

If you are eligible for the Disability Tax Credit, the effect is to provide you with an additional tax credit of $7,341 over and above the basic personal exemption, which is also a tax credit.

The credit is intended for those with severe and prolonged physical or mental impairments. To be eligible, the person must be “markedly restricted” in terms of speaking, hearing, walking, eliminating (bowel or bladder), feeding, dressing or performing mental functions of daily life.

A physician or licensed practitioner must complete and certify the medical section on the application form (Form T2201). In 2005, the Canada Revenue Agency broadened eligibility criteria and added a 10-year retroactive adjustment for those who can prove their impairment has lasted for years.  The adjustment is not a refund but just an additional tax credit.  It may generate a refund to the extent that you had paid tax in those prior ten years.

However, if you have no taxable income, or didn’t pay any tax during the year, the credit doesn’t help you.  And there is no carry-forward of any unused portion of the credit.

But if you have taxable income, it can create a credit that will allow you to pay less tax.  In addition to paying less tax, you may be eligible to receive additional increased benefits such as the Child Tax Benefit or GST/HST Credits.

In a bankruptcy, any tax refund that applies for the years prior to and including the year of bankruptcy would be property of the Trustee for the benefit of your creditors.  Any refunds generated for future years would be property of the debtor.

In order to qualify for the credit, refer to the Canada Revenue Agency Website for a discussion on eligibility at http://www.cra-arc.gc.ca/E/pub/tg/rc4064/rc4064-11e.pdf

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