Legislated debt-reduction programs

January 23, 2015 by · Comments Off on Legislated debt-reduction programs
Filed under: Bankruptcy, Debt Management, debt relief 

The Three Programs

1. Bankruptcy

Bankruptcy is a legal process carried out through a trustee in bankruptcy designed to relieve honest but unfortunate debtors of their debt burden. When individuals are in bankruptcy, creditors cannot initiate any collection actions against them.

At the end of the process, a first-time individual bankrupt is usually discharged from debts after nine months.

2. Consumer Proposal

A consumer proposal can be submitted to creditors only if an individual’s total debt does not exceed $250,000, not including debts secured by their principal residence.

A consumer proposal is a formal process that is carried out through a trustee in bankruptcy. The trustee puts together an offer to pay creditors a percentage of what is owed to them over a specific period of time, or extend the time the debtor has to pay off the debt, or a combination of both. Payments are made through the trustee, and the trustee uses that money to pay each of the creditors. The debt must be paid off within five years.

3. Division I Proposal

Also known as a “commercial proposal,” this is a formal procedure available to businesses or  individuals — there is no limit with respect to how much money is owed. This process is carried out through a trustee in bankruptcy who will put together an offer to pay creditors a percentage of what is owed to them over a specific period of time, extend the time the debtor has to pay off the debt or a combination of both. Payments are made through the trustee, and the trustee uses that money to pay each of the creditors.

The Program Administrators

Trustee in Bankruptcy

A trustee in bankruptcy is a person licensed by the Office of the Superintendent of Bankruptcy (OSB) to administer bankruptcy and proposal estates. An officer of the Court, the trustee has an obligation to look after the rights of the creditors and to investigate the affairs of the debtor, as required. The trustee also ensures that the rights of the debtor are not abused.

The trustee’s primary duties are to

  • review the situation and counsel the debtor on available alternatives;
  • prepare official documentation that is both filed with the OSB and used to notify creditors;
  • ensure the validity of creditors’ claims;
  • ensure that debtors are provided with mandatory counselling and access to mediation services if there is a dispute regarding any income they are required to contribute;
  • sell the debtor’s assets, except those exempt from seizure by provincial and federal laws, and hold the proceeds in trust for distribution to creditors;
  • administer the bankrupt estate from beginning to end;
  • assess the debtor’s conduct both before and during a bankruptcy, as well as the cause(s) of the bankruptcy; and
  • make an application for a debtor’s discharge (in the case of individual debtors).


A debtor is a business or person that is unable to meet debt obligations. A bankrupt is a business or person that has declared bankruptcy.

Both the debtor and bankrupt’s primary duties are to

  • attend the first meeting of creditors (if a meeting is requested by the creditors);
  • attend two counselling sessions (for bankruptcy and consumer proposals);
  • advise the trustee in writing of any address changes; and
  • generally assist the trustee in administering the estate or proposal.

In addition, the bankrupt’s must

  • disclose all of his or her assets (property) and liabilities (debts) to the trustee;
  • advise the trustee of any property disposed of in the past year;
  • surrender all credit cards to the trustee; and
  • attend an examination at the OSB, if required.

At the end of the process, the bankrupt is released from his or her obligation to repay the debts.

Under the Bankruptcy and Insolvency Act, some debts are not discharged by bankruptcy. These include

  • alimony payments and child support;
  • student loans (if it is less than seven years since the debtor ceased to be a full- or part-time student);
  • fines or penalties imposed by the Court; and
  • debts arising from fraud.


Important: To participate in insolvency proceedings and share in the distribution of dividends, if any, creditors with unsecured claims must file a Proof of Claim with the trustee.

There are three main types of creditors:

  • Unsecured creditor— A creditor who comes forward but hasn’t taken measures to guarantee that he or she will be repaid.
  • Secured creditor— A person holding an instrument, such as a mortgage or a lien on or against the whole or part of the property of a debtor, as security for a debt due him or her from the debtor. This type of creditor is usually not affected by bankruptcy or proposals.
  • Preferred Creditor— A creditor who has been given priority under the Bankruptcy and Insolvency Actover other creditors in the distribution of dividends. Preferred claims include unpaid wages, commissions or other remuneration of any employee of a debtor and, under certain conditions, any debt or obligation of support to a spouse, common-law partner or child living separate from a debtor.

Creditors can become fully involved in the process by participating in meetings of creditors or by being named an inspector. (Inspectors are appointed by creditors to represent them before the trustee during the administration of proposals and bankruptcies. They are expected to assist the trustee and are required to supervise certain aspects of the trustee’s administration.) Creditors are duty bound to inform the trustee if they have information about possible irregularities on the part of the debtor.

Creditors will be provided with, among others, the following two documents:

  • Statement of Affairs— The bankrupt’s financial statement or balance sheet of assets and liabilities showing the estimated value of assets and the names and addresses of creditors and the amounts owed. This is usually presented at the beginning of the process.
  • Statement of Receipts and Disbursements— A statement detailing the receipt and disbursement of funds, interest received, fees charged by the trustee, all dividends distributed to creditors and particulars of property that is not sold. This is usually presented at the end of the process.

Office of the Superintendent of Bankruptcy

The Office of the Superintendent of Bankruptcy supervises the administration of the Bankruptcy and Insolvency Act. Its main duties are to

  • supervise the administration of estates in bankruptcy, consumer proposals and Division I proposals;
  • maintain a publicly accessible record of bankruptcy and insolvency proceedings;
  • record and investigate complaints regarding possible wrongdoing by someone involved in the insolvency process;
  • license private-sector trustees to administer estates; and
  • set and enforce professional standards for the administration of estates.

The OSB has 15 offices across Canada.

Understanding your credit rating

The most common ratings are “R” ratings. These are known as North American Standard Account Ratings and are the most frequently used. The “R” indicates that the item being described involves revolving credit. If you always pay on time, it will be coded an R1. If an amount was written off because you never paid it back, it is coded R9. The R ratings are a coding system that translates “on time”, “one month late”, “two months late”, etc., into two-digit codes.

R0 Too new to rate; approved but not used.
R1 Pays (or paid) within 30-days of payment due date or not over one payment past due.
R2 Pays (or paid) in more than 30-days from payment due date, but not more than 60-days, or not more than two payments past due.
R3 Pays (or paid) in more than 60-days from payment due date, but not more than 90-days, or not more than three payments past due.
R4 Pays (or paid) in more than 90-days from payment due date, but not more than 120-days, or four payments past due Pays (or paid) in more than 90-days from payment due date, but not more than 120-days, or four payments past due.
R5 Account is at least 120-days overdue, but is not yet rated “9.”
R6 This rating does not exist.
R7 Making regular payments through a special arrangement to settle your debts.
R8 Repossession (voluntary or involuntary return of merchandise).
R9 Bad debt; placed for collection; moved without giving a new address or bankruptcy.
Other rating indicators that might be found on a report are “I” for instalment credit or “O” for open credit line.



Understanding the roles of the trustee, the credit counsellor, and the debt negotiator

February 27, 2013 by · Leave a Comment
Filed under: Bankruptcy, Debt Management, debt relief, Videos 

I work as a debt counsellor, which means that I help people who are dealing with debt. One of the biggest services I provide is information. The following videos details the roles of the three main debt managers in Canada: The trustee, the credit counsellor, and the debt negotiator.

Please note that one is not “better” than the other. They are different. Which means that each provides a good service to someone. As a debt counsellor, I can help you identify which solution would work best for you.

In declaring bankruptcy, you are robbing banks — of fake money

January 19, 2013 by · Leave a Comment
Filed under: Bank's Profits, Bankruptcy, debt relief, taxes, Videos 

Good god if a twelve year old gets it, surely the rest of us can!

When you take a loan from a bank, the banks literally invent that money. When you pay interest on that loan, banks are getting what I call sweat money (money that you have worked for) in return for their invented money.

When you can’t repay your loans, there are the loan collectors who are very good at making you feel like shit about not being able to pay back imaginary money — which, typically by the time they are knocking at your doors, is mostly interest that you are repaying. You’ve probably already paid an amount equal to the principal.

The government, probably because they know it’s a scam, has created an out, commonly known as Bankruptcy. Many people associate bankruptcy with embarrassment and shame, even though it’s quite accepted as a corporate strategy.

We’ve got to get over that. Bankruptcy is a legitimate way of making debt go away. Yes, there are costs, both monetary and lifestyle. But nothing that compares to hanging on to the debt till your dying days. With Bankruptcy, there is a definitive end to the pain. With debt repayment in full, especially when you don’t have the means to repay for whatever reason, you can live under duress for a long long time.

There are also in between ways to resolve your debt. Banks won’t tell you about these options. If you get a good consultant (such as myself) or a good Credit Counselling rep or a good Trustee, you can get all the facts.

Do yourself a favour. Get informed. It can, literally, save your life.

Fourth quarter bank profits for Canada’s Big Five see record profits

January 11, 2013 by · Leave a Comment
Filed under: Bankruptcy 

While the rest of Canada talks about tightening up purse strings and hunkering down, guess who’s rolling in the dough? Canada’s five big banks. Here are their PROFITS for the fourth quarter in 2012 as announced in early December.

  • Royal Bank: $1.91 billion
  • TD: $1.6 billion
  • Canadian Imperial Bank of Commerce: $852 million
  • Bank of Montreal: $1.08 billion
  • Scotiabank: $1.5 billion

These are profits for a quarter, in other words, for a three month period. Pretty astounding eh? Please keep these numbers in mind when you feel that the rest of your life will be bogged down by a debt in the tens or even hundreds of thousand. There are solutions.

Personal debt and government cutbacks

November 16, 2012 by · Leave a Comment
Filed under: Bank's Profits, Bankruptcy, Debt Management, debt relief, taxes 

First, let me emphasize that I am not an accountant or a financial analyst of any sort. I’m merely an individual who has gone through bankruptcy herself, and recognizes the value of the range of strategies that are individually available when it comes to debt.

Then, let me say that it makes a lot of sense to me that in times of financially difficult times (ie recessions and depressions), that government increases its spending, thereby stimulating growth in the economy. When governments spend (infrastructure development, social supports including mental health support), people have jobs. When people have jobs, they spend money. When they spend money, the economy is stimulated, more taxes are paid (and collected) and so on.

In times of financial distress, the job of government is to spend, not cut. See this short clip of Daniel Altman, a Chief Economist with Big Think, or the video by John Green that I recently blogged about.

I’ll grant that it’s not that easy. There are experts on both sides of the debate.

But this is what I see:

Governments are cutting jobs. The Canadian government recently “boasted” cuts of 11,000 through early retirement and collapsing vacant jobs. That means we are LESS millions of dollars in the economy. Mortgages haven’t collapsed, nor have university tuitions, nor has the “basket of goods” used to estimate poverty. Gas prices continue to rise. Conequently, there is increased debt.

It can be said that these debts are mini-stimuli for the economy, but personally I don’t believe that that is a burden that should fall to the individual.

I think we need NEW leadership. When governments DON’T spend during economic downturns, the financial simuli comes from increased individual debt that SOLELY benefits the banks.

Until that time comes, Canadians need to get informed of what their REAL options are when it comes to resolving their debt.

Contact me. I can give you an unbiased birds-eye view of your options.

Olga Vantandenburg makes a cameo appearance on AMLD

November 7, 2012 by · Leave a Comment
Filed under: Bankruptcy 

If you like this character, there are more cartoons on her website, Olga Vantandenburg. The Sooke News Mirror features her every week. Are they smart or what!?!

Free Presentation Reminder

September 19, 2012 by · Leave a Comment
Filed under: Bankruptcy, Debt Management, Information Seminar 

This Friday (Sept 21st), I will be hosting a free information session on Dealing with Debt. The event will be held at the Oak Bay Library, and goes from 6:00pm to 8:00pm. Parking is widely available.

The reason for this information session is very simple: To pass along the information that I wish I would have had when I was financially stressed. I’ve had parents contact me on behalf of their kids, and kids contact me on behalf of their parents.

Financial stress is very isolating. And typically when you finally consult a professional, you know so little of the industry that you will be inclined to follow whatever recommendation(s) they make.

People generally need to be more informed of their choices, and of the range of options within the industry.

At this upcoming seminar, I will talk about the full range of options (the seven that I know of) and how each option impacts you. I’ll also be touching on industry scams and tricks. You’ll also get to see me naked (metaphorically). I’ll tell you my story.

Ultimately, I want education vis-a-vis factual information to be your driver, not fear.

This is a trial seminar. If demand becomes apparent, I’ll do another one. If not, I’ll put together some online presentation that people can download at their own leisure.

This website is both a passion and a hobby for me. I’m still looking for a day job. Grin.

Hope to see you at this seminar. It might be the only one of its kind.

Are we numb to banks’ profits?

August 28, 2012 by · Leave a Comment
Filed under: Bank's Profits, Bankruptcy, debt relief, Videos 

Is it just me? The “news item” is that banks are increasing their dividends (what they pay out to their investors), but the real story behind that headline is that bank profits are exploding through the roof. But it’s kind of hard to write a news article about that. When bank quarterly profits climb into the billions and then continually exceed the last quarter’s record, it really becomes incomprehensible. And when it’s incomprehensible, when it’s so out of our mental grasp, it’s really hard to care.

Mostly, the banks say that their profits are because the economy is good and very few people are defaulting on their loans. Meanwhile, Canadians are seeing the highest household debt ever.

Makes you scratch your head, don’t it?

Understanding the Bank of Canada

August 25, 2012 by · Leave a Comment
Filed under: Bankruptcy 

The Government of  Canada (aka Harper’s Government ™) owns and operates the Bank of Canada. The Bank of Canada prints the money. Yet, the Government of Canada continues to borrow money from private banks, and pays the same commercial interest that you and I pay.

Weird, eh? when they can be borrowing for free, and passing those savings on to us, it’s owners, through programs and services.

Thank you Brian Mulroney.

BMO profit rises 27%

Wow. Hidden in the back links of the CBC Business section is this wee little headline that screams, “BMO profit rises 27%.” Read more

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