New Additions To The Bankruptcy Law In Canada

During the month of September in 2009 the Canadian federal government adjusted the bankruptcy law in Canada and made bankruptcy much more expensive for Canadians. A test for income determined the amount payable in bankruptcy stages and was a requirement to determine the length of time personal bankruptcy will last.

Under old rules anyone claiming bankruptcy was required to prove income to trustees every month, by submitting pay stub copies. If income exceeded set amounts, the bankruptcy claimant needed to pay penalties of half the amount they exceeded limits with.

Those rules do still exist with additions. If bankruptcy income exceeds $200 over limits every month, the period of bankruptcy gets extended for one more year, and the surplus income payments continue for an extra year.

If an individual who is single without dependents and unusual expenses and they are permitted to earn a total net amount $1,870 every month and $2,470 is earned on the monthly basis, it comprises of an amount that is has exceeded the limit by $600. A penalty of surplus income of $300 is charged per month.

If there is a surplus of $200 per month, bankruptcy lasts for a further twenty-one months, whereas bankruptcy without surplus income amounts that can last for just nine months. A penalty of $300 is payable for twenty-one months in total that equals to double the rate of the old rules. A bankruptcy trustee that is knowledgeable needs to be consulted prior to bankruptcy being filed, in order to a detailed estimate of through potential income surplus.

Another method that can be used in filing for a state of bankruptcy is a consumer proposal instead which serves as an alternative for bankruptcy filing. The settlements are negotiated upon between debtors and creditors. The consumer proposal consists of a level of monthly payments that are made by debtors for a five year period that gets distributed to all creditors. Creditors can reject or accept he consumer proposal in a period of forty five days. They are prevented from taking any further legal action on proposal acceptance. The debtor is the returned to an insolvency state if the creditor rejects the proposal.

This proposal can made by debtors with debts that do not exceeds $250,000. If debts exceed the $250,000 mark, the proposal has to be filed under Division one of the act of bankruptcy law in Canada . A Proposal Administrator will be required. This new law is totally applicable to all clients since then.

New Dimensions To Bankruptcy Law In Canada

During September in 2009 the federal government of Canada made changes to the bankruptcy law in Canada and bankruptcy became much more expensive in Canada, A test of income evaluation determined the amount that was payable in bankruptcy stages and also constituted a requirement to determine the length of time personal bankruptcy will last.

A requirement under old rules for claimants of bankruptcy was that they had to prove income to trustees each month by handing in pay subs. In a case where income exceeded amounts that were set up, the exceeded amount needed penalty paid up.

These rules still continue to exist but with added conditions. If the income exceeds the $200 mark bankruptcy is extended for a further year with a continuance of penalty payments.

If bankruptcy is declared by a single person with no dependents and without unusual expenses and they are allowed an earning of a net amount tolling to $1870 each month and they exceed the earning to $2470 monthly, this amounts to a surplus of $600 The penalty that has to be paid is amount of $300 with every salary. A surplus amounting to $200 or above will result in an extension of the period of bankruptcy for another twenty one months.

The $300 penalty is due for 21 months in contrast to if there was no surplus the bankruptcy period will last for a total of nine months. A bankruptcy trustee has to be consulted before there is a filing of bankruptcy to analyze estimates of income surplus possibilities.

A consumer proposal serves as an alternative method to filing for bankruptcy. The settlement has to be negotiated between the debtor and the creditor. This consumer proposal consists of a monthly amounts made by debtors to creditors for a total of five years. These payments are distributed to creditors. Creditors have a choice to either accept or to reject the consumer proposal. They have 45 days to make the choice of the acceptance or rejection. After accepting it they are no longer allowed to take further legal action against the debtor. If they reject the consumer proposal, the debtor has to remain in the insolvent state and has to declare bankruptcy. The consumer proposal is only possible in a case where the $250000 limit is not exceeded.

If it is exceeded the filing for a consumer proposal has to be done through a bankruptcy law in Canada act with a proposal administrator that is assigned to the case.

The Bankruptcy Law In Canada

The Canadian federal government made adjustments to the bankruptcy law in Canada in 2009 in September. Bankruptcy for Canadian just became much more expensive. There is an income test determination of payable amounts for bankruptcy and this is a requirement that determine how long the bankruptcy will last for.

The old rules required that those claiming bankruptcy prove their income to trustees each month through submission of their pay stubs. If the income exceeded amounts that were set, the claimant of bankruptcy has to pay penalties of fifty percent of the income amount that was exceeded.

The rules apply with more conditions attached to them. In instances where income is exceeded by the $200 limit bankruptcy is extended for an extra full year and penalty payments continue.

If a bankruptcy claimant who is single, has no dependents or any unusual expenses is allowed to earn $1870 per month and there is an earning of $2470 the limit has exceeded with an amount of $600.The penalty that is payable of this id 300$ per month.

A surplus of $200 will result in an extension of a further 21 months. With the surplus income bankruptcy extend to nine months in total. There is a penalty of $300 that is payable for a total of twenty one months. This is equal to a double the amount of the rate according to the old rules. A trustee for bankruptcy must be consulted before bankruptcy is filed to order to get a detailed estimate of possible income surpluses.

A consumer proposal can be filed which is a bankruptcy alternative. Consumer proposals are a negotiated settlement that is agreed on between creditors and debtors. This proposal consists of monthly payments by debtors for a total of five years to be distributed to creditors. Creditors have a total of forty-five days in which to reject or accept the proposal of the consumer. After the proposal has been accepted debtors allocate payments to proposal administrators every month or as per contract stipulations. Creditors are prevented from further collection or legal action. In case the proposal is not accepted, the debtor is then returned to an insolvent state and has no other alternative but declaring personal bankruptcy.

This proposal is only possible if debts do not exceed the $250000 limit. If the debt does exceed this limit the consumer proposal has to be filed under a bankruptcy law in Canada act. There will be a requirement of a proposal administrator.

We know that purchases are based on emotion, so it makes sense that sometimes people will buy vehicles based on their feelings about a certain type of car or a new car versus an older car, rather than by logic and what one could and one could not afford. Sometimes people lose their jobs, and can no longer make the car payment. They once could afford, but now they cannot. This situation can happen for a number of different reasons, but when you have a vehicle you cannot afford, you have to get out of it, and here’s how to do it.

How do I know if I can afford the vehicle that I have now?

Some people are in denial with their vehicles. They buy new cars because they think they need something reliable, but in reality they’re making ridiculous car payments upwards of $500 when their income just cannot support that. Dave Ramsey offers a great rule of thumb that everyone should follow. If your vehicles are worth more than half of your annual income, your cars are too expensive.

If you’re 1% or 2% over, it’s no big deal, but there are people that have $30,000 worth of cars and make that same amount each year, and that’s ridiculous! Cars are a liability, they go down in value. New cars are the worst offenders; they can easily decrease in price by 20% each year for the first few years. This depends on the make and model, but vehicles generally take the largest beating in value when they are new. This is why I recommend that one should never buy a vehicle that’s newer than two-years old.

What do I need to do to get rid of my vehicle and out from under this debt?

If you have discovered that you are in a vehicle that you simply cannot afford, you need to sell it. It’s as simple as that. Head on over to Kelly Blue Book, and look up what your vehicle is worth. Look up the private-party value, and that’s how much your vehicle is worth. Don’t sell your car to a dealer, because they will give you a wholesale price, and usually you can get 20% or 30% more by selling it yourself.

Once you know what your vehicle is worth, You’ll want to list your car in the classified section of the newspaper. You can also create signs and put them on cork boards around town. Don’t overpay and get your vehicle listed in some listing of used cars. The classified ads usually are more than efficient, and they’re really not that expensive.

Once you find a buyer, you’ll need to get payment from them. Make sure that the check clears before giving them the keys and the title, but once you have the money free and clear, give them the vehicle, as well as the title, and you’re golden. You’ll take the proceeds from sale, and give them to your lender to pay off your debt. Usually you are required to pay off the debt when you sell the vehicle according to the contract you signed with the bank or finance company.

What do I do if I owe more on my car than what it’s worth?

A lot of people that buy new vehicles are finding that they owe more on their cars, trucks, vans, or whatever than what they are worth. This means that even if they had found a buyer, they would not have enough money to pay their loan off, so they can’t sell it. The reason this happens is because the rate at which new vehicles depreciate is often greater than the rate at which people pay off the vehicles, giving them negative amounts of equity.

In this situation, you’ll need to head down to your local bank, or credit union, and get a small personal loan for the difference between what the vehicle will go for and how much you owe on it. Put that money with the money you earn from the sale, and use that to repay your debt. Some banks may say no to you, and you have to accept that it will happen. Chances are that there is a bank or credit union out there that will loan you the money, and you just have to be determined, and you should be able to find a loan. If you can’t find one at all, you might consider checking out Prosper.com.

When you get your small loan to pay off your vehicle, you’ll still be in debt, but the debt that you will have after selling the vehicle is a lot less than what you had if you kept the vehicle. It makes sense that it’s better to be in $3000 of debt with no car, than $20,000 in debt in a $17,000 car that’s going down in value dramatically.

If I sell my vehicle, what am I going to drive?

When you sell your vehicle, you’ll still need something to drive. You will have to pick-up an inexpensive vehicle to drive around until you can become more financially stable again and afford to pay for a decent newer vehicle. Look for a $1000 or $2000 car that’s older, but mechanically sound. Look for a vehicle that has a low number of miles. The appearance of the vehicle does not matter, just get something that will move you from point A to point B.

Should I really sell my car?

If you are driving a vehicle that you can’t afford, you’re going to get behind on the payments sooner or later. The bank will come reposes the vehicle from you, sell it an auction for less than wholesale prices, and come after you for the difference. It’s much better to get rid of your over-priced car yourself than let the bank do it for you, because then you get to determine how much your vehicle sells for, and will be able to get a retail amount for it rather than sub-wholesale prices.

What if I win a lottery or receive an inheritance while in bankruptcy?

It is important to remember that you have duties in a bankruptcy. Two of the duties are to report your income each month to the bankruptcy trustee and another duty is to give any windfalls (lottery, inheritance) to the bankruptcy trustee. As long as the savings are not the result of a windfall, and as long as the savings are from your part of your earnings, then you can keep them.

Any “windfall” must be given to the Trustee to distribute to your creditors. If there is any money left over after your creditors are paid their claims in full, interest on your indebtedness to them at five percent per year and all trustee costs are paid , the balance will be returned to you.

What happens to my R.R.S.P. and/or pension plan?

Pensions are protected under Federal legislation as are. RRSP’s that are not pension roll-overs, or are held by life insurance companies. All other RRSP’s must be paid over to the Trustee to distribute to your creditors. If you have a non-life insurance funded RRSP, you should discuss your rights with your agent and with your family solicitor.

Can I keep an asset that I have pledged as security to a secured creditor?

Bankruptcy has no effect on the rights of secured creditors. Therefore, if you own an asset that is subject to a security interest, you may be allowed to retain the asset provided that:

• The Trustee has determined that the security held by the secured creditor is valid and enforceable.
• The Trustee has determined that there is no equity in the asset or that the asset is exempt from seizure under provincial and federal laws.
• The Trustee has provided the secured creditor with a Release of Interest.
• The secured creditor has agreed to allow you to retain possession and use of the asset and
• You can afford to make monthly payments to the secured creditor.

You can elect to surrender secured assets and cease making payments to secured creditors, and allow the secured creditor to recover the assets pledged to them as security. In these circumstances you will not be responsible for any resulting shortfall that may arise from the sale of the asset held as security by the secured creditor.

Remember that if you give your exempt assets to secured creditors as security for their loans and advances, these creditors can seize and sell the assets unless arrangements can be made by you to pay them.

If you make an agreement to keep the assets after filing bankruptcy and fail to make the payments in the future, the secured creditors may be in a position to seize the assets and garnishee your income.