Tag Archives: debt

death

What happens to debt upon the death of a debtor?

A Quora user asks: What happens to debt upon the death of a debtor?

Victor Fong, Licensed Insolvency Trustee in Toronto, Canada answers:

I’m going to answer from a Canadian perspective. However, I think the answer would apply in most common-law countries.

If there are assets in the deceased person’s estate upon his death, the Executor is required to liquidate the assets and use the proceeds to pay off the debt.

If there are insufficient assets to pay off all the debts, then the estate is insolvent and can file for bankruptcy. The Executor would retain a Licensed Insolvency Trustee who would agree to administer the bankruptcy of the deceased’s estate. The Executor would also retain a bankruptcy lawyer who would apply to bankruptcy court for an Order permitting the Executor to assign the deceased’s estate into bankruptcy.

Upon the bankruptcy being filed, the Executor will need to assist the Licensed Insolvency Trustee in identifying and liquidating any assets the debtor may have had. If there are no assets, then the Executor will need to make arrangements to pay the Trustee his fees.

debt bankruptcy

Too much debt to file bankruptcy?

Debt is too much? A question asked by a user on Quora:

When declaring bankruptcy can’t be avoided, does it matter how much debt one racks up?

Victor Fong, Licensed Insolvency Trustee in Toronto, Canada answers as follows:

The amount of debt accumulated prior to filing bankruptcy is an important factor in determining what would happen in your bankruptcy. There are additional factors as well:

  • How quickly the debt was accumulated prior to bankruptcy.
  • Why was the debt accumulated – i.e., what were the funds used for? Cash advances at the casino? An exorbitant shopping spree? To finance medical bills? To pay for groceries?

For example, using debt to purchase groceries for your family after you’ve been laid off from work would be considered a reasonable explanation for why the debt was accumulated. However, accumulating debt to go off on a gambling or spending spree would not be considered reasonable.

So depending on your answers to the above questions, your bankruptcy proceedings may be straightforward and painless, or problematic and prolonged.

Straightforward and Painless

In Canada if you’re filing bankruptcy for the first time, you can discharged from your bankruptcy in as little as 9 to 21 months. You file, attend two counselling sessions, how the trustee your monthly income and expenditures, pay the trustee his fees (or your surplus income obligation if your average monthly income during those first 9 months exceeds a monthly threshold ).

Problematic and Prolonged

Your discharge from bankruptcy could potentially be opposed by your trustee, one of your creditors, or by the Office of the Superintendent of Bankruptcy. If your discharge is opposed, you will be required to apply for your discharge from bankruptcy with the bankruptcy court. You would be advised by your trustee to retain a lawyer specializing in bankruptcy law to represent you. Upon reviewing evidence of your conduct before and during your bankruptcy, the court will make one of the following orders with respect to your discharge:

  • If your conduct was especially egregious, your discharge shall be refused. This means that you will still owe all your debts and your creditors can recommence legal proceedings against you to collect on their debts.
  • Your discharge will be conditional upon you making a monetary payment to your bankruptcy estate for the benefit of your creditors.
  • Your get an absolute discharge. This basically means you are discharged from your debts with no strings attached.
debt settlement fix credit

Is debt settlement a good way for consumers to fix their credit issues?

Question from a Quora user: Will a debt settlement fix credit? Is debt settlement a good way for consumers to fix their credit issues?

Victor Fong, Licensed Insolvency Trustee in Toronto, Canada replies:

The reason for the existence of credit ratings and credit scores is to protect lenders from potentially feckless borrowers who approach them for loans. Therefore, if someone’s credit rating has already been affected by, for example, late or non payment of debts, then a settlement won’t do anything to “fix it”.

The only way to fix a credit report issue is to deal with the outstanding debts by: (1) paying it off; (2) through a settlement; (3) or with the assistance of a Licensed Insolvency Trustee who can assist you with a legal settlement called a consumer proposal. Once you’ve dealt with your debts through one of these options, then you will need to rebuild your credit from scratch.

Rebuilding credit can be initiated by obtaining a secured credit card and using it on a regular basis.

relationship and debt problems

Being in a relationship with someone who has a debt problem

A Quora user asks:

Do you think it is wrong, a bad idea, or unrealistic for me to want to avoid getting serious with guys who have considerable debts from college?

I worked hard to get through college with no debts, and I’m worried about perhaps ruining my future if I end up getting married to a guy who has considerable debts which could make life tough. I want a relationship to lead to marriage, so realism is important. Thanks. What are your thoughts?

Victor Fong, Licensed Insolvency Trustee replies:

Hi – that’s a great question. I’m a bankruptcy trustee in Canada and I wrote an article about this on my blog [1] , which I will reproduce here:

——————————————————————————————————————————————

Throughout my career as a bankruptcy trustee, I have seen the following scenario play out time and time again:

  • Girl meets boy and falls in love. He’s not perfect – he could be irresponsible at times – but he makes her laugh and makes her feel good. Besides, she’s confident that she can make him change his ways.
  • Boy wants to buy a new home or car, but has pretty shoddy credit and/or low income. However, that doesn’t matter, his girl loves him so much that she’ll co-sign the loan for him.
  • Eventually, and for one reason or another, the boy stops making his loan payments and takes off. He doesn’t return his girlfriend’s calls and she gets stuck with all his debt. There’s no way she can pay this debt herself so she filed for personal bankruptcy.
  • The roles assigned to the “boy” and “girl” in this scenario are deliberate: from my experience, it is almost always the man who suddenly absconds and the woman who gets the short end. I know this may be politically incorrect, but it is factually accurate from my experience.

So ladies, how do you avoid this scenario (or avoid it the next time)? Consider taking these steps:

In the short term, keep your financial affairs separate from your boyfriend or spouse. Do not co-sign any loans, keep your bank accounts separate and keep your assets separate.

If you are serious about establishing a long-term relationship with your partner (like marriage for instance), ask if he is willing to consent to a background check. A comprehensive background check will screen the following:

  1. Address histories
  2. Civil and bankruptcy records
  3. Credit reports
  4. Criminal records
  5. Driving histories
  6. Education and employment histories
  7. Liens and judgment histories
  8. Media coverage

If he has nothing to hide and really loves you, he should have no problem in consenting to this. If he is hesitant and cannot give you a REALLY good explanation, then you should have second thoughts about entering into a long term relationship with him. I have personally used Kroll to perform background checks on prospective employees.

If you have significant assets and income (or expect it in the future), discuss with him the issue of entering into a pre-nuptial agreement.
Feelings of romantic love will inevitably subside and reality will set in. And if it turns out that your partner is a “real” deadbeat, you will at least have taken preventive measures to make sure that only your heart gets broken, and not your wallet.

Footnotes
[1] Love and money don’t mix – Fong Financial Literacy Canada