The living costs in Toronto are high, the number of Canadians experiencing everyday financial stress is high, and higher interest rates are pushing more and more Canadians to seek serious forms of debt relief. It’s normal to have some debt, but if you’re regularly missing payments, don’t know the extent of your financial situation, or are using lines of credit to pay off bills, then it’s time to confront the reality of your financial situation.
Many people worry that taking a measured approach like bankruptcy or filing a for a consumer proposal with a Licensed Insolvency Trustee (formerly known as a bankruptcy trustee) means they’ll “lose everything,” but this isn’t the case. Some of your assets are protected when you take mediated steps to get out of serious debt. With the guidance of a bankruptcy trustee at David Sklar & Associates, you can consider what the best path is for you, your debt, and your assets.
How Do Consumer Proposals Affect Your Assets?
When you file a consumer proposal with a bankruptcy trustee, you are essentially making an agreement with your creditors that boils down to paying back a portion of the debt at a fixed, regular rate. You do need to have a steady source of income to choose this path of debt relief, but for many, a consumer proposal is a more desirable option to getting out of debt than filing for bankruptcy.
In a consumer proposal, the debtor is normally able to keep all of their assets including their homes and cars, they just have to continue making secure loan payments for those assets (i.e., to your mortgage lender or auto lender). If you have an investment like an RRSP or a TFSA, you get to keep that. Any amounts in your RRSP of TFSA stay as they are, which isn’t always the case when it comes to bankruptcy.
That’s why for many, a consumer proposal is a better way to protect your assets from creditors than filing for bankruptcy. If you are individual whose debts do not exceed $250,000 (not including the mortgage of your principal residence), then call us to learn about consumer proposal options — it could be the best way for you to get out of debt.
When you file for personal bankruptcy, the rules are a little bit different when it comes to your assets. RRSP accounts are largely exempt from seizure by creditors excluding any contributions you made in the 12-month period immediately prior to filing.
TFSAs and RESPs are not exempt from seizure by creditors and if during bankruptcy you suddenly earn or receive any assets that are over the amount declared during bankruptcy, then the amount that needs to be repaid may increase as well as the length of time in bankruptcy.
That’s what a bankruptcy trustee can do for you, they can educate you on the differences between bankruptcy and consumer proposals and guide you towards the best form of debt relief. With the rise of interest rates, more and more Canadians are seeking debt relief, and there are people to help. Don’t delay the path to financial stability, partner with a bankruptcy trustee today.