FAQ

Bankruptcy - Relationship With Creditors

Will Bankruptcy stop my creditors from calling me?

There is nothing in the Bankruptcy and Insolvency Act to stop your creditors from calling you.

Practically, since collectors are paid commissions on what they collect and since they have no power to collect after you file bankruptcy, most collectors will stop calling you.

If you do get a call, it is important that you make sure that the Trustee has been advised of that creditor. Remember you have nine months to list your creditors and if you forget a creditor that creditor will be entitled to receive the same distribution that your other creditors receive.

I owe money to family and friends. Can I pay them since they are not really creditors?

No, they are creditors and they should not be paid ahead of the other creditors. All payments to unsecured creditors should be made through the Trustee. You need only pay your ongoing living expenses.

How will my bankruptcy/proposal affect my spouse/partner?

When a spouse or partner co-signs for your debt they will be responsible for payment of the debt that they co-signed. Your assignment/proposal does not release them from the debt that they cosigned.

Some credit card agreements provide that the person receiving the complementary credit card agrees to assume full responsibility for current and future debt. If your spouse or partner has not used the complimentary credit card, the card should be cut up and returned to the credit card company.

Any negotiation to remove your spouse or partner from your credit card or loan document should be agreed in writing from the financial institution. Without written confirmation of the change in responsibility it may not be binding on the financial institution.

The problems that you are having with your creditors should not be reflected on you spouse/partner’s credit reports. Only the parties that signed the original debt contract are responsible for paying that debt. The fact that you are married or living with someone does not make that person responsible for your debt.

My credit report indicates that my account was written off by my creditor two years ago. Does that release me from that debt?

No. They have advised the other members of the credit bureaus that they have ceased collection action. You should contact a lawyer to confirm if enough time has passed so that they are now barred from collection of the debt under the statute of limitations. You should not contact the creditor directly before you have legal advice because you could inadvertently extend the time for expiration under the statute of limitations.

I owe much more on the vehicle that I drive than it is worth. Is it possible for me to discuss the loan and renegotiate its terms if I file an assignment into bankruptcy?

Your history on the vehicle loan is important. If you have a history of late payments and NSF cheques it is unlikely that the secured creditor will want to continue financing with you.

If you have a good history, the only creditor who will typically refuse to continue financing with a bankrupt is The Royal Bank of Canada. Otherwise you should be able to talk to the secured creditor and make arrangements to continue the loan, to vary the term of the loans, or to reduce the amount of the loan. If you are unable to make terms that make sense for your situation, you can return the vehicle to the secured creditor.

One of my creditors has a small claims judgement against me. Is it a secured claim if I file bankruptcy?

No, judgments are unsecured debts

I have a R9 rating at the credit bureau. One of the collection agents has offered to settle the debt and place a “good” note on my credit file. Is it worthwhile to make the payment and try to build up my credit rating?

Remember the credit bureau will show all your credit history so your past “sins” will be there for everyone to see. The offer to place a good note on your credit report may be a way for the collection agent to make his collection target this month.

What effect does bankruptcy have on second mortgages?

A second mortgage is a secured debt that Bankruptcy does not effect. If you cannot pay the payments the second mortgage holder could start foreclosure action against your real estate. Unless you have personally guaranteed the second mortgage, they would have no other recourse against you.

Creditors that I had when I filed bankruptcy have filed judgements against me. How can I have these judgements reversed?

Creditors who have a judgement against you have no special position in bankruptcy. They cannot act against you on the judgement and if they attempt to do so they will have to give you notice.

If this happens you should remind the creditor of your bankruptcy. If they refuse to listen and still threaten to take action on their judgements, you should talk to a solicitor so that the court can be made aware of your bankruptcy.

The judgements do not get reversed when you file your assignment. They only lose their effect in that your creditors can not take any action against you unless they can prove that your debt to them is affected by Section 178.

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Is it true that Canada Revenue Agency can proceed against me after I have been released from bankruptcy?

No, the bankruptcy would have discharged the debt if Canada Revenue Agency did not file a Writ against your property before you filed your bankruptcy and your equity was below your province's exemption for a personal residence

I had to file bankruptcy because of a loss of income due to illness. I owe friends and family money for payments they made for me while I was ill. How does this money get repaid to them in my bankruptcy?

Each of your family and friends must file proof of your indebtedness with your Trustee. The Trustee will distribute funds available to creditors prior to his discharge based on claims filed against your bankrupt estate. Your debt to them is no different that the debt to the other creditors. You can not agree to pay them and then claim protection from your other creditors by filing Bankruptcy.

Do I Have To List All My Debts when I claim bankruptcy?

Yes. You cannot select which creditors are bound by the Bankruptcy. You will be swearing an oath that you have disclosed all your debts. Amounts owing to friends and relatives have to be listed. Failure to list these creditors could result in perjury charges. Honestly missed creditors must be paid the same percentage distribution that other creditors receive.

What do I do if a creditor sues me?

As long as the debt is released from bankruptcy, the creditor starting the action is wasting his time and money because the Bankruptcy and Insolvency Act protects you with a stay of proceedings which stops just what these creditors are trying to do. It is a good idea to make sure that your Trustee has been advised of these creditors and that they have received notice of your bankruptcy.

What if I continue to get calls from my creditors?

Tell them that you have filed for bankruptcy and let them know who your Trustee is so that they can confirm the bankruptcy. If the calls continue, it may be worthwhile getting a different phone number or an unlisted number.

What if I “find” another creditor?

Provide their name and address to your Trustee so that your bankruptcy documents can be sent to the missed creditor. The Trustee can include such debts as long as you make him aware of the debts before the date of your bankruptcy discharge. If you miss the creditor totally, you will have to pay the missed creditor the same distribution that the other creditors in your bankruptcy receive.

What if a collection agency says they have not received notice of your bankruptcy?

We do not send bankruptcy packages to collection agencies. The Trustee’s job is to advise your creditors not their collection agents. The agent is trying to collect your account because his client has not advised him of your bankruptcy.

Make sure that the collector’s client has been listed. Advise the collector who the Trustee is and invite the collector to confirm your bankruptcy status with your Trustee. The collector has no ability to collect the account if it has been listed in your bankrptcy.

Collectors get paid based on what they collect. Once the collector is aware of your bankruptcy, he will likely move onto other accounts.

When will the creditors stop sending bills?

In a perfect world the creditors would stop mailing statements to you when they receive your bankruptcy papers. In the real world, it is not unusual for creditors to continue mailing statements to you months after you have filed your bankruptcy. Check your copy of the sworn bankruptcy documents that you filed to make sure the creditor is listed. If it is throw the mail in the garbage or return it to creditor with note that you filed bankruptcy and indicating whom your trustee is. If you missed the creditor, advise your Trustee so that notices can be sent to the missed creditor.

What if creditors threaten legal action against me?

Phone the creditor and tell them that you have filed for bankruptcy. Your creditors cannot proceed with legal action against you once you file for bankruptcy without approval of the Court.