Please see our page on What a debt counsellor does for you.

In brief, a debt counsellor:

• give you the information you need and guides you through whatever solution you choose
• helps you gather and present the information you need
• helps you hang on to the assets that you are legally allowed to protect

A GOOD debt counsellor will work with you throughout your process to ensure that your obligations are met. Failing to meet your obligations can result in a cancelling of the process (if you’re working with a consumer proposal, or have selected credit counselling) or a prolong the process (if you’re in bankruptcy). And where both trustees and not-for-profit credit counsellors generate income by how much they can wring from your wallet, a good debt counsellor will help you choose the solution that benefits you best.

An EXCELLENT debt counsellor will also

• know the Bankruptcy and Insolvency Act
• help you understand and interpret your obligations
• help you present yourself to the trustee
• be there for you through your rough patches, and listen without judgement
• prepare you for, and get you over, any hurdles that might get tossed your way (such as a meeting with the creditors, or an interview with the Office of the Superintendent)
• offer the support and wise counsel that will get you through this hump in life
• get you up-and-running when you get to the other side.

While we recommend our services, we ultimate hope you seek someone to fulfil this role for you, and travel your journey by your side. Which is why we will refer you to our competition. You need not travel this hard journey alone.

At a minimum, bankruptcy will typically cost you $1,800, payable to the trustee. The maximum a trustee can collect from you is $10,000. The trustee usually has a set rate, but this can be flexible depending on the trustee. Then, depending on your (and if applicable your spouse’s) income, you will pay a portion on a monthly basis if you have “surplus income” (if you make more than the pre-defined allowable amount).

A consumer proposal will typically cost you more than bankruptcy and less than paying your original debts in full. To submit a consumer proposal, you must be offering to pay more than you would pay in bankruptcy, you must meet the creditors minimum expectation for their minimum “cents on the dollar” return, and you must be able to afford this payment.

For those who cannot pay, the Office of the Superintendent has what is called the Bankruptcy Assistance Program, a directive which came into force in 2009. Individuals must meet the following criteria:

• intend to file for personal bankruptcy
• have more personal debts than commercial debts
• have made at least two attempts at finding a trustee
• not be involved in commercial activities
• not be incarcerated

Other criteria may apply.

In the rare case you cannot afford anything, doing nothing is actually an option.  

If you are unemployed and have no assets, or if you are retired and on a small pension, and you simply cannot find the money to repay your debts, you could simply open a new bank account at a new bank and then stop paying your debts. Your creditors will call you. They may even take you to court.

Creditors have legal means to collect what they are owed, but if you have no assets and earn little, there is nothing they can do. Except of course to continue with the harrassing phone calls and letters. And even those end. Doing nothing leaves you exposed until the statute of limitations for debts have expire. In BC (Section 3 (5)), it’s six (6) years. But if you have no property to seize and no wages to garnishee, there is probably not a whole lot they can do. The harassing phone calls can be stressful, but they may be less stressful than fretting about debts you simply cannot pay.

If you do have assets and/or are employed, you might want to consider your other options.

The most extreme last ditch effort of any creditor (someone to whom you own money) is to go after your asset. This means your wages and your properties. In BC, there’s the 30% rule, meaning a creditor can apply to get 30% of your income (which goes up to 50% if you’re in arrears for child or spousal support). A creditor must go through the courts to garnish your wages. More information is available here. Legal advice is recommended if you’re at this stage.

The duration of your bankruptcy depends on your status. If it’s your first claim, it’s 9 months UNLESS you have surplus income (or you didn’t behave during your bankruptcy period, or the Office of the Superintendent believes you have brought this on yourself), and then it’s 21 months. If it’s your second claim it’s 24 months (regular) or 36 months if you have surplus income.

There are informal and formal options. Informally, you can modify your budget and you can approach your lenders and see if you can renegotiate the terms of your loan. Formally, you can submit a proposal, which also has to go through a trustee.

Keep in mind that a trustee only earns an income if you opt to go through them. Typically, they earn more when you file a “Consumer Proposal” and less when you file for bankruptcy. In rare cases, they might recommend debt consolidation or credit counselling — because there’s nothing in it for them if you choose other alternatives.

This depends. A consumer proposal stays on your credit report as a R7 or R9 rating for three years AFTER you have made your last payment. If it takes you five years to complete the payments, your credit rating will have it on file for a total of eight years; if you borrow from a family member and pay off your payment immediately, it will be on file for three years. A first bankruptcy stays on file as a R9 for six year from the date of your discharge. A second bankruptcy stay son file for 14 years.

An “R” rating shows up on a credit check and shows the potential lender your history with debt.

• R1 – You pay that creditor’s loan on time.
• R2 – Your payments are 30 days late.
• R3 – Your payments are 60 days late.
• R4 – Your payments are 90 days late.
• R5 – Your payments are 120 days late.
• R6 – Typically not used.
• R7 – You are in a consumer proposal, consolidation order, or debt management plan (offered through a non-profit credit counselor).
• R8 – It is used to show that a secured creditor has taken steps to realize on their secrity (e.g. repossessed your car). It rarely appears on a credit bureau report as after they take your car they generally commence legal or collection action which is rated R9.
• R9 – A bad debt placed for collection or considered uncollectible, or you are bankrupt.

You are required to report monthly to your trustee, and to attend to counselling sessions. If you fail to do these, your bankruptcy period may be extended.

No. The trustee is the only one who can submit your claim to the Office of the Superintendent of Bankruptcy Canada. There are people who can help you prepare for working with the trustee. Services from the trustee are available for free, as are services from non-profit counselling centres approved by the Superintendent.

The trustee reports to the Office of the Superintendent of Bankruptcy Canada.

Trustee’s fees are governed by the Bankruptcy and Insolvency Act. They are paid (about 20%) from the collected funds, and account to all interested parties. The more they collect, the more they earn. When a bankruptcy does not have enough in assets and/or earnings to cover a trustee’s basic costs, the trustee asks the debtor for payments over the period of bankruptcy to cover basic costs. The trustee can also refuse services.

In British Columbia, bankruptcy exemptions include the first $12,000 of equity in your home (if you live in Victoria or Vancouver, or $9,000 if you live elsewhere in BC), one vehicle up to a value of $5,000, household goods up to a value of $4,000, and trade tools up to a value of $10,000. All clothing and medical aids are exempt.

The calculations are complicated, and include your assets, income and situation. To get a sense of what REPAYMENT options would be best for you, visit this Debt Options Calculator here. In some cases, bankruptcy might be your best options.