When you talk to a trustee at your initial debt assessment, one of the questions we will ask is "who do you owe money to?" This question, if answered properly, can provide the trustee with a lot of information necessary to determining what your next steps should be.
- We will add up how much you owe in total. Initially this allows us to determine if you owe enough money to use a trustee’s services. That sounds funny but if your debt is less than $1,000 we are unable to help you. If your debts are more than $250,000 you are not eligible for a consumer proposal, but could file what is called a Division I proposal.
- We will assess how much you can afford to pay against your debt. Based on how much you owe, and what you can afford to repay, we can determine which debt program best suits your situation. For example, if you owe a small amount in credit card debt, a credit counsellor may be able to help you create a budget to pay off that debt. If so, we can refer you to a reputable counsellor. We will help you find the best, cheapest option to repay your debt.
- We will review what type of debts you owe. We break your debt into unsecured and secured debt as we are unable to help you with your secured debt. The most common types of secured debts are mortgages on a house or a vehicle loan that has a lien against the vehicle. If you are keeping the house or the vehicle then you need to continue those payments. Secured debts can't be settled under the Bankruptcy and Insolvency Act. If you are not keeping one of those items we can help set up a plan of action that allows you to return the item to the secured creditor. Any shortfall can be dealt with in your bankruptcy or proposal.
- We will ask who your creditors are. If you are filing a consumer proposal, some creditors like a larger return than others. Some creditors are more difficult to work with. Knowing who your creditors are and the amounts owed to them allows us to determine more quickly if more options to help with your financial situation are open to you.
- We can identify key debt issues. For example, if Canada Revenue Agency or other government agencies are going to be involved in the plan to resolve your debt that can affect your choices. Reasons why you owe the government are also important but the type and amount owed to them is a great start for us to know if there are special processes we need to follow. If you have student loans, we will want to how long you have been out of school so we can determine if your student loans will be dischargeable in a bankruptcy or proposal.
- We will consider other circumstances. If for example you have garnishments happening or about to happen as a result of your debts, knowing this will help us put some urgency in the process.
It is important that when you are asked to whom you owe money that you include everyone. You may not think it is important but not disclosing all of your debts can cause problems. Knowing all the information allows a trustee to be sure we have discussed the right information with you, and helped you pick the right plan to resolve your debt crisis. And it ensures there are no surprises once you have filed for a consumer proposal or a bankruptcy.