consumer proposal,  personal bankruptcy,  personal finance

Lost Everything In The Stock Market And In Debt

Hello all, my hands are shaking this while I am typing this. I am in a bit of a situation, I have almost $75,000 of debt including LOC and credit cards.

I have invested $55,000 in stock market which is sitting at $3500 from last 3 years. This was such a big mistake. I took out money from LOC to invest in stocks and it’s all gone now.

My net income is only $3200 monthly and my monthly expenses is more than that. I am paying minimum payments on all the LOC and credit cards every month.

I am the breadwinner of the family and we have an 18 month old infant at home as well.

I know I have messed up big time, and there is no excuse for that. But I don’t know what to do other than looking at my debt every single night and crying.

Please let me know my options. 🙏🏻

 

Victor Fong, Licensed Insolvency Trustee replies:

You can either file for bankruptcy or a consumer proposal. Here are the potential consequences of each option.

Bankruptcy

Filing bankruptcy doesn’t get rid of the debt. The debt only goes away once you obtain your discharge.

You’d get your discharge if you were an “an honest but unfortunate debtor” who complies with your bankruptcy obligations.

Said obligations would include attending credit counselling and paying the Licensed Insolvency Trustee’s fees among other things.

The Bankruptcy and Insolvency Act states that one of the reasons why a discharge could be opposed by the LIT, a creditor or the Office of the Superintendent of Bankruptcy (which is the government regulator which oversees the insolvency process in Canada) is as follows:

“The bankrupt has brought on, or contributed to, the bankruptcy by rash and hazardous speculations, by unjustifiable extravagance in living, by gambling or by culpable neglect of the bankrupt’s business affairs”

If your discharge is opposed, you’ll have to attend Bankruptcy Court and explain your conduct to a bankruptcy judge. Ideally, you’d hire a bankruptcy lawyer to represent you as the LIT is not your legal representative in this situation; he’s the representative of your creditors.

The judge will likely make your discharge conditional upon you repaying some money back to your creditors. This can range anywhere from 5% – 50% of the amount you borrowed, depending on your individual circumstance. You’d be paying this money over to your LIT who’d hold the money in trust for your creditors.

If the Court finds that your conduct was especially egregious, the Court will refuse your discharge. However, that doesn’t seem to be the case here.

Typically, both Equifax and TransUnion remove a bankruptcy from your credit report 6 years after the date you’re discharged.

TransUnion removes a bankruptcy from your credit report 7 years after you’re discharged in the following provinces:

Newfoundland and Labrador

Ontario

Prince Edward Island

Quebec

If this is your second bankruptcy it will appear on your credit report for 14 years.

Consumer Proposal

As an alternative to bankruptcy, you can meet with an LIT to discuss filing a consumer proposal.

A CP is a legal settlement facilitated by an LIT and is governed by the Bankruptcy and Insolvency Act.

It’s the LIT’s job to review your financial situation and calculate the amount of settlement you can afford to pay that your creditors would find acceptable.

If your CP is accepted by your creditors, it’s a full and final settlement and they won’t have any recourse against you so long as you pay it.

The settlement can be paid interest free over up to 60 months with monthly payments.

A record of your CP stays on your credit file for 3 years after you pay it off or 6 years after the date you file your CP, whichever happens sooner.

Victor is the President of Fong and Partners Inc. He is a Licensed Insolvency Trustee and Chartered Professional Accountant. With many years of experience in the insolvency field, Victor has been involved in both corporate and consumer insolvency engagements. Previously with a large national firm, Victor founded Fong and Partners Inc. so that he could dedicate his professional life to help people from all walks of life to deal with their debt.