frequently asked questions
Here are answers to some of the most common questions asked by people in your situation. Don’t see your question listed? Please contact us for advice.
How We Get Paid?
Every Canadian has the right to recover from overwhelming debt. This right is part of our laws, which also define how Licensed Insolvency Trustees get paid. At Bromwich+Smith, we provide free consultation and never ask for an up-front payment. All our fees are paid as part of the settlement of our clients’ debt.
In a bankruptcy, we are paid a portion of the funds received in the file, which is defined by the government. While the calculation is complicated, we typically receive about $1,700 in a basic bankruptcy. Regulations allow trustees to ask for more, which some do. At Bromwich+Smith, we are so committed to fair treatment of Canadians suffering from overwhelming debt that we lobbied the federal government to allow us to return excess bankruptcy payments.
In a consumer proposal, we negotiate a 5-year monthly payment schedule that allows our client to pay off a portion of the debt with no additional interest and makes sure the creditors recover some of what’s owed. The client makes monthly payments to us, which we send to the creditors. Regulations allow us to keep the first $1,500 of those payments, and then 20% of anything above that, as our fee, plus applicable taxes and costs as allowed by the government. In short, our fees and costs are based on the government formula and are included in the proposal payments. The creditors are aware of this legal requirement, and they understand the impact on the payments they receive.
Explore your options with the Licensed Insolvency Trustees who are committed to rebuilding your worth.
Will a consumer proposal or bankruptcy affect my credit score?
Consumer proposals will assign you what’s called an R7 rating, which will remain on your credit report for three (3) years after you complete your proposal. Read more about consumer proposals
A Bankruptcy will assign you an R9 rating, which will be reported for six (6) years after you complete your bankruptcy (fourteen (14) years if you have been bankrupt before). Read more about bankruptcy
Creditors use these ratings to determine risk and to set your cost of borrowing. However, even while in a restructuring program, you can start to rebuild your credit right away, and Bromwich+Smith has the tools and resources to help you do so.
How much does a consumer proposal cost?
With a Consumer Proposal, you pay no professional fees. All costs of Bromwich+Smith are paid by the proposal funds, subject to a government mandated tariff. The amount you will offer in a proposal is tailor made and based upon your income, expenses, assets and who your creditors are.
How much does a bankruptcy cost?
A first bankruptcy will cost approximately $1,600. A second will cost approximately $1,900. The portion of what you originally owe (and will pay back) is determined by the value of any non-exempt assets, surplus income remaining after exemptions for maintaining a reasonable standard of living, and other sources of income like tax and GST refunds.
Is a consumer proposal the same as a consolidation loan?
Consumer proposals are different from consolidation loans.
A consolidated loan does not have a negative impact on your credit rating, while a consumer proposal will. However, a consolidation loan will result in you paying back significantly more than the amount you are owing today because of the application of interest, whereas a Consumer Proposal typically allows you to pay back only a percentage of what you owe today, with no interest. Further, a consolidation loan will require that you pledge assets and/or obtain co-signers for the loan, while no such requirements are needed for a Consumer Proposal
Will a consumer proposal or bankruptcy affect my spouse, partner, or family members?
Unless someone else has co-signed, guaranteed, or otherwise jointly holds credit cards on the same account as you, your debts are only yours. You are legally responsible for them. Whether you choose a consumer proposal or bankruptcy, it won’t affect anyone else’s credit rating, nor will anyone else have to pay for the debt or change their creditor relationships. Read more about it in the bankruptcy protection blog.
What happens to co-signers or joint account holders?
When someone co-signs for a debt, they agree to make the payments on the loan or account when you’re unable to. If a friend or loved one co-signs one of your loans, or if you jointly hold credit cards, the creditor will turn to that person and demand they continue making payments as agreed, or that they pay off the entire balance owed.
Will my employer or friends find out that I am insolvent?
The only way your employer will know is if your wages are being garnished and we needed to send them a letter to stop wage garnishment. As for your friends, they’ll only know if you choose to tell them.
Keep in mind that it is illegal for a creditor to contact your employer, spouse, or friends regarding your debt, and any such instances are a serious breach of consumer protection laws. The only exception to this rule is if the contact is to confirm your mailing address, or if the person in question is a guarantor or co-signer to your debt.
Can I sell or transfer property before filing for bankruptcy or a proposal?
Please don’t do this. One of the most important principles of bankruptcy and insolvency legislation is the control and distribution of your assets for the fair treatment of your creditors.
Doing this adds unnecessary stress and time to the process. If you give away your assets or sell them for less than fair market value, your creditors can reclaim them through a court order. Speak with one of our debt relief specialists today and see how we can help protect your property through the filing of a consumer proposal or bankruptcy.
What happens if my income increases during a consumer proposal or bankruptcy?
Once your consumer proposal is accepted by your creditors, your payments remain the same and your creditors cannot demand more. Your original settlement amount is protected.
As for a bankruptcy, if your income increases beyond the reasonable standard of living threshold set by the Office of the Superintendent of Bankruptcy, you will be required to submit 50% of everything above the threshold for the duration of your bankruptcy.
Will I be able to qualify for credit again if I file a consumer proposal or bankruptcy?
You can and will qualify for best rates and terms even after filing into a consumer proposal or bankruptcy. The key is to rebuild your credit during your consumer proposal and immediately after discharge from your bankruptcy. Click here to learn more about your credit after bankruptcy or a consumer proposal
Are there any legal repercussions for filing a consumer proposal or bankruptcy?
As Canadians, not only do we have an exit strategy from the overwhelming burden of debt build into our legislation, all Canadian’s assets are legally protected. A bankruptcy is not a criminal charge against you, you do not go to jail for declaring personal or business bankruptcy and it will not affect your legal standing as a citizen. There is an impact to your credit report, it will hinder your ability to be the director of a company and it can impact your emotional and mental well-being.
How can I negotiate a credit card debt settlement on my own?
Creditors are in business and in all businesses, it’s better to keep an existing client than to find a new one. Creditors want to maintain a relationship with borrowers and are most likely to work with borrowers who are proactive. Learn more about it in our 5 tips on dealing with creditors blog.
Can I qualify for a vehicle purchase if I file for a consumer proposal?
It’s tough to function in society these days without a vehicle. One reason Canadians do not reach out for debt help early enough is the myth that they will lose their vehicle or not be able to buy or finance another vehicle which is a necessity. The good news is, you actually can purchase a vehicle if you file a consumer proposal and sometimes, it actually makes it easier to qualify. Read more about it in our Buying a Car during a Consumer Proposal blog.
I have so much debt but don’t want to file bankruptcy? Is there an alternative?
Bankruptcy truly is the last resort and, although it’s not quite like the game Monopoly – where if you go bankrupt the game is over – it still has a negative impact on your credit report and your ability to function in a credit based society. Avoiding bankruptcy is the ideal and there is an excellent alternative to bankruptcy, that most Canadians are not aware of or do not fully understand. That alternative is Consumer Proposal. A consumer proposal is less damaging to your credit report, allows you to build credit during the proposal period, keep all your assets and stick to a budget that gives you some breathing room. Read more about it in our filling bankruptcy blog.
Do I have to shut down my business if I file for a consumer proposal or bankruptcy?
As a business owner, there are three key questions you need to answer; 1. Can my business weather the storm? 2. Can my business pivot? 3. What if I need to close my business? The worst-case scenario is that you will be forced to close your business and if that is the case, you want to know your options, rights and ability to build a business again. For more information https://www.bromwichandsmith.com/blogs/small-business-covid-19
Is there anyway to make CRA debt go away?
Canada Revenue Agency (CRA), may be willing to work proactively with Canadians directly, but they are certainly not there to provide CRA debt forgiveness. For those who are not able to pay their taxes, CRA does offer tax payer relief provisions. If the burden of CRA debt is just too much and the provisions that CRA offers is not enough, you can restructure your debts and start fresh. Read More about CRA Tax Debt Relief
How can I stop collection calls?
Feeling overwhelmed by debt is tough enough on its own, compound that with debt collectors calling you, sending you demand letters or worse sending a debt collection agency after you and this can really put someone over the edge. How do you deal with debt collectors when you’re not in a position to pay? Lenders or debt collectors have certain rights or options to collect on the debt. Depending on the type of debt, they can sue the debtor, seize the security and do both in some instances. For more details on lender rights and how you can stop collection calls click on our Dealing with Debt Collectors blog.
How can I stop garnishments on my pay cheque?
When you owe money you are the debtor and the company you owe that money to is the creditor. Weather you live in British Columbia or Ontario or anywhere in between, one of the actions the creditor can take to recover money owing, is to garnish the debtor’s paycheck or bank account. This is an extreme measure and creditors will take many other actions first, such as phone calls, letters of demand and sending the account to a collection agency. You can stop wage garnishment! Read more about how to stop wage garnishment.
I am going through a divorce and need to split my debt. How can we do this?
Divorce is one of the major life events that often buries Canadians in debt so overwhelming and puts people in a position whereby it is nearly impossible to pay their bills as they come due. There are many intricacies of divorce and finance that need to be considered and navigated. A Certified Divorce Financial Analyst can help with the equitable split of all assets. Keep in mind equitable is not necessarily equal and not always 50/50. Lately, couples are splitting more debt than assets. Learn more about it in our debt and divorce blog.
What happens to my vehicle?
Consumer proposals do not affect vehicle ownership. You will keep your vehicles and continue to make payments, if any. Read more in this blog: Buying a Car during a Consumer Proposal
In most provinces, bankruptcies allow you to keep a generous amount of equity in your vehicle. If it is worth more than the exemption amount, however, your vehicle will be sold and you will receive the cash equivalent of the allowed exemption.