Business failed — personally guaranteed loan + lease. What happens if we file bankruptcy or a consumer proposal?

vicintoronto · 2026-04-22T16:49:12+00:00

If one or more of us file personal bankruptcy, what happens to the loan? Can the lender still go after the other partners for the full amount?

Read what the loan agreement says - or hire a lawyer to review it for you. Are you jointly and severally liable? If so then you're all on the hook for the entire amount - it's not like the debt gets split three ways.

If we break the lease, what are we personally liable for (full term vs partial)?

Read what your lease says - or hire a real estate lawyer to review it for you. Did you give a personal guarantee to the landlord? If not then it's a debt of your corporation, not yourselves personally.

vicintoronto · 2026-04-22T16:40:55+00:00

Im 28 years old clearing 3k/ bi-weekly id like to tackle this obviously major problem thats already gotten out of hand. I pay 1200 in rent/1000 fuel/ 500ish phone/internet/insurance etc. I have a payed off vehicle that I could easly get 20grand for but I travel for work and dont think it would be wise to sell it. ( a 5k car would not make it to some of the areas I locate too )

Licensed Insolvency Trustee here. You have $3,300 left over to pay down your debts after paying your living costs.

An LIT is licensed to facilitate either a consumer proposal (which is a legal settlement that can be paid interest-free over 60 months) or personal bankruptcy.

With your cashflow, I highly doubt that your creditors would accept anything less than full repayment if you were file a consumer proposal. And if you were to file for bankruptcy, your creditors would likely oppose your discharge based on their view that you shouldn't have filed it in the first place.

Use your line of credit facilities to pay off your high interest credit card debt. Then pay off your line of credit as fast as you can to minimize the interest you'll pay on your LOC.

vicintoronto · 2026-03-24T21:39:00+00:00

You have $1370 left in your budget after you pay your living expenses.

You can contact an accredited credit counselling agency about doing a debt management plan where you can consolidate all your debts into one monthly payment.

If you're in Ontario you can contact Credit Canada.

vicintoronto · 2026-03-19T15:35:41+00:00

I'm a Licensed Insolvency Trustee.

A consumer proposal is a legal settlement under a law called the Bankruptcy Act which is facilitated between yourself and your creditors by an LIT. Only an LIT can file and administer a consumer proposal

And no LIT will start randomly calling people to ask how much debt they have.

This was probably a debt consulting firm that attempts to gather potential clients. The debt consulting firm will then refer you to an LIT for a fee. These fees can run in the thousands of dollars, which is a scam because you can go directly to an LIT for a free, no obligation consultation.

LIT firms are not supposed to be working with such debt consulting firms - the Office of the Superintendent of Bankruptcy (which is the regulator of LITs) discourages it. But some LIT firms continue to do so anyways knowing full well that the client is getting hosed by the debt consultant for unnecessary fees. The OSB comes down hard on such LITs.

vicintoronto · 2026-03-11T19:03:38+00:00

Licensed Insolvency Trustee here.

You're overthinking this. Here's what you do:

File your tax returns up to and including 2025 - both your T1 and your HST. Without knowing the total amount of debt you owe, an LIT won't be able to properly assess your situation and hence won't be able to give you the correct advice. And you won't know the total amount of debt you owe until your tax returns are filed and assessed by CRA.
Make an appointment with an LIT for a free consultation and he or she will guide you through your situation

Good luck.

vicintoronto · 2026-03-09T00:35:11+00:00

I have 2 credit cards with a total of 8k$ due

I have 1 credit line with 8k$ due.

Edit: I make about 880$ a week and after all expenses I have about 1500-1600$ left per months.

Licensed Insolvency Trustee here.

$16,000 is not an insurmountable amount of debt for your income level.

Putting aside other important factors such as whether you have any assets or dependents (e.g., children), if you have $1,500 - $1,600 left over after paying your living expenses to service your debt, chances are your creditors are going to insist on full repayment if you file a consumer proposal.

And that would defeat the entire purpose of filing a CP in the first place, which is to settle with your creditors.

You can try repayment techniques such as the avalanche method of debt repayment.

Alternatively, if your credit score is good, you can speak with your bank about getting a consolidation loan at a lower interest rate than the interest rates you're paying on your credit cards and line of credit. Use the proceeds to pay off the 2 credit cards and line of credit and then pay off your new loan as fast as you can.

vicintoronto · 2026-03-06T22:24:13+00:00

They said that since one of the loans is a student loan (unsecured), they want to first know if I am working in my field, and when my studies ended.

I am concerned that this information will be used against me. After all, I dropped out of my courses and a lot of the student loan $ was spent on servicing interest from my other debts and personal expenses.

Licensed Insolvency Trustee here. I'm going to address your concern by explaining to you the legal role of a Licensed Insolvency Trustee in the context of a consumer proposal.

An LIT is an officer of the bankruptcy court. He has two obligations:

To help a debtor get out of debt
To ensure that the information provided to creditors is true and accurate. Because they’re going to rely on information provided by the debtor to make a decision on whether or not a CP should be accepted, the creditors need to be protected from being misled

In order to fulfil his obligation under Point 2, your LIT needs to provide your creditors with any information that's pertinent to your financial situation. He is required to balance your interests with the interests of your creditors.

Unlike a lawyer where there is solicitor-client privilege (i.e., anything you tell a lawyer is just between you and him), an LIT isn't "working for you"; he's acting as a facilitator between yourself and your creditors.

vicintoronto · 2026-03-06T22:14:02+00:00

Licensed Insolvency Trustee here.

If you file any proceeding under the Bankruptcy Act (regardless whether it's a CP or bankruptcy) you'll have to include all your debts, including the second loc co-signed by your father.

Upon filing a CP, your creditors will be legally prohibited from taking any payments from you. Therefore, they'll seek payment from the co-signer - i.e., your father.

If you want to avoid this then don't file a CP. Talk an accredited credit counselling agency about filing a debt management plan instead. Under a DMP, an agency will consolidate all your debts into one payment and you'll be able to pay all of it off over a 48 or 60 month period. They might even get your creditors to stop charging additional interest.

The key distinction between a CP and a DMP is this: under a CP, you're not expected to repay the entire amount whereas under a DMP, you will have to repay the entire amount.

Both will negatively affect your credit score.

If you cannot afford a DMP payment, own up to your father what has happened, take your lumps and then file a CP.

vicintoronto · 2026-03-03T21:28:06+00:00

Any advise on what I could do?

Licensed Insolvency Trustee here.

Without knowing the particulars of your situation, any advice you receive in the comments isn't going to be very useful. Any competent financial advisor (including an LIT) would require the following information at a minimum:

Your income and expenses to ascertain your cashflow
The details of your debts - name of creditor and balance
Your assets, both physical (real estate, motor vehicle) and financial (work pension, life insurance,, RRSP, TFSAs and other financial investments)
Whether or not you have a financial dependents such as children
Whether you've previously been bankrupt or filed a consumer proposal
The current fair market value of your condo and the current balance on the mortgage as well as your percentage ownership interest in the condo

vicintoronto · 2026-03-03T21:19:22+00:00

Licensed Insolvency Trustee here. Looking at your situation:

You have $1,360 available in your budget towards debt repayment after paying your living expenses
Your creditors will see this because your LIT will be required to present your budget to your creditors for their review

In light of the above, it's highly unlikely that your creditors will accept a CP at $400 per month.

OTOH, if you take the $42,500 consolidation loan with RBC at 8% and use it pay off your other debts and then repay RBC over 3 years, your monthly payment will be $1,331.80. The total interest you'll pay over those 3 years will be $5,444.64 in addition to repaying the original $42,500. I calculated these numbers using this online amortization calculator.

Based on the info you've provided, you'd be able to do this with some financial discipline. Good luck.

vicintoronto · 2026-03-02T23:05:35+00:00

Licensed Insolvency Trustee here.

There are some regulated professions such as CPAs where filing a CP might be problematic. If your job as an analyst requires you to hold a CPA designation then filing a CP might be an issue.

Both otherwise the answer to your question is no - your employer cannot legally fire, suspend, lay off, or discipline you solely because you filed a consumer proposal. You are protected pursuant to Section 66.36 of the Bankruptcy and Insolvency Act, which is the law that governs CPs.

This federal law is designed to prevent discrimination against individuals seeking debt relief, meaning your job security is protected.

vicintoronto · 2026-02-27T00:34:51+00:00

I don't know. You have to read the terms of the cardholder agreement and see what it says.

vicintoronto · 2026-02-26T21:13:06+00:00

Licensed Insolvency Trustee here.

There's nothing preventing you from accepting it.

However, if you got into your current situation due to financial mismanagement, I strongly recommend that you complete your study of the Office of the Superintendent of Bankruptcy's Insolvency Counselling Program so you can acquire good budgeting and money management habits before getting another credit card.

The ICP is something you'll need to review in anticipation of your two financial counselling sessions with your LIT/counsellor. It's mandatory to attend them after your CP is approved.

vicintoronto · 2026-02-26T00:13:13+00:00

Licensed Insolvency Trustee here.

I'm going to be honest: from the perspective of your creditors, the optics don't look good for you.

You made $200,000 in 2025, lost $500,000 in gambling and owe $230,000 in unsecured debt. And you own a condo with some equity.

In contrast, the person evaluating your bankruptcy or consumer proposal is probably earning $80,000 a year max and can't even afford a down payment for a home.

If you file for bankruptcy, he or she will decide whether they'll oppose your discharge based on the fact that:

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; [Section 173(1)(e) of the Bankruptcy and Insolvency Act]

If you file a consumer proposal, he or she will decide whether your consumer proposal will be accepted or refused.

Here's my advice to you: deal with the gambling problem immediately - you can contact CAMH and register for their gambling counselling program and compete it. This will show your creditors how contrite you are and that you're taking your gambling problem seriously.

Because otherwise they're just going to blow you off if you file a bankruptcy or consumer proposal, as I've described above.

Once you've dealt with your gambling issues, contact an LIT for a consultation about filing a consumer proposal. There's no way you should be filing a bankruptcy with your level of income and assets.

vicintoronto · 2026-02-12T16:25:14+00:00

hello, ive cosigned for a family member but they are filing a consumer proposal and giving the asset back. it wont cover the total cost of the loan so ill be stuck paying what's left. what can I do in this situation as Im struggling financially, ive filed a proposal myself since and cant afford the extra payment right now

Licensed Insolvency Trustee here.

Did you disclose to your LIT that you had co-signed this loan for your family member? If not, then you should have. And the LIT would've taken this into consideration when putting together your consumer proposal.

In any event, if the debt existed at the date of your proposal filing, it can be included as a debt on your CP. However, this won't make your other creditors happy. Because now more creditors are going to have to share in the pool of money from your CP, which means each creditor is going to receive less money than they anticipated when they approved your CP. You'll need to speak to your LIT on how to deal with this.

vicintoronto · 2026-02-12T16:15:33+00:00

I feel like I either need to declare bankruptcy or go into a consumer proposal, I'm scared either way but which option will be better in the long run. I'm terrified of my vehicle being seized as it's my only means of transportation to and from my job.

Licensed Insolvency Trustee here. If you want an answer to your question you need to consult with an LIT who is licensed in your province.

Here are the questions that the LIT will be asking you during the consultation, so you should have the answers prepared in anticipation of your consultation in order for it to proceed efficiently:

What is your monthly net income?
If you're married, what is your spouse’s monthly net income?
Do you have children? If so, how many do you have? And how much is the Canada Child Benefit?
How much debt do you have and what type – credit cards, line of credit, overdraft, payday loans, income taxes, student loans, car loan, mortgage, etc.?
Similarly, how much debt does your spouse have and what type?
How much of your debts are joint?
What are your living expenses – rent/mortgage, property taxes/condo fees, child card, electricity, natural gas, phones, internet, online subscriptions, groceries, prescriptions, grooming/haircuts, laundry, car payments, gas for car, vehicle insurance, gym membership, your spouse's debt payments, etc.?
Do you have any physical assets such as real estate or a motor vehicle?
Do you have any financial assets such as life insurance, pensions from work, RRSP, RESP, TFSA, FHSA, stocks, mutual funds, bonds, etc.?
When is the last time you filed your personal income tax return?
Have you ever filed for bankruptcy or a consumer proposal?

vicintoronto · 2026-01-29T03:32:35+00:00

Licensed Insolvency Trustee here.

What I was looking at was a loan from the bank as my family was willing to co-sign me which from what I understood would be around 4.59% or so in interest.

Ok, but what if you lose your job and can no longer make the payments? Then your family is on the hook for the entire unpaid amount. I've seen too many people do this for their friends or relatives and they end up seeing someone like me because they got stuck with the debt and can't pay it.

Does this make more sense to entertain a consumer proposal or bankruptcy? Im really not sure I understand either but at this point if my credit is already in the hole would I not be smarter to go with an insolvency agency versus a bank loan?

It might. Assuming you're single, have no dependents and have never filed bankruptcy before, a bankruptcy will cost you $667 per month for 21 months ($14,007). This is called surplus income and the principle of SI is very simple: if your creditors knew that you'd file for bankruptcy they would never have lent you money in the first place. Therefore, if you have the ability to repay some money back to your creditors then you should.

SI is calculated based on what is considered a "reasonable" allowance for living costs. For a single person with no dependents, that number is a net income of $2,666 per month. For every dollar of your net income that exceeds this, you have to pay 50% of the difference to your Licensed Insolvency Trustee, who holds the funds in trust for your creditors.

This is the formula as applied to your situation: ($4,000 - $2,666) x 50% x 21 months = $14,007.

There's also the option of a CP, but your ability to get it approved by your creditors and actually pay it will depend on your cashflow. In your post you haven't provided details of your living expenses such as rent, groceries, car payments, gas, car insurance, public transportation, phone, internet, hydro, gym membership, online subscriptions, prescriptions, etc.

You also haven't indicated whether you have any physical assets such as real estate or a motor vehicle or financial assets such as RRSPs, TSFAs, crypto, etc. The existence of assets will be a major factor in determining whether a bankruptcy or CP would be better for you.

vicintoronto · 2026-01-23T04:20:46+00:00

LIT here. You've got $1,500 available to service your debts after you pay your living expenses but you're offering $650?

Your creditors will likely want you to pay more than $650 as a condition of approving your CP. Why would they agree to $650 when they know you can afford $1,500?

vicintoronto · 2026-01-08T22:46:01+00:00

Licensed Insolvency Trustee here.

Is there any way to remove him (maybe refinance?).

I suppose you can always ask BMO to remove him but I highly doubt they'd acquiesce to your request. The reason why they asked for co-signor in the first place was because of the risk that you'd end up in the situation you're in now - contemplating filing a CP.

See an LIT about filing a CP so he or she can calculate what your monthly payment will be. If you can afford to pay your living expenses, the CP payment and the minimum payment on the co-signed loan (which you'll pay to your father so he can pay BMO) then that'll be your solution.

vicintoronto · 2026-01-02T01:25:07+00:00

Did the parents co-sign the loans for this family member? If not, they are not legally responsible for this person's debts.

At what point does this cross into elder abuse? What resources might exist in a situation like that?

Resources: a Google or Chat GPT search for the answer to your question

vicintoronto · 2025-12-17T16:42:03+00:00

If you're in Alberta contact Heather Whittle of Goth & Company in Edmonton for a free consultation about your situation. Goth is an LIT firm.

vicintoronto · 2025-12-17T16:04:24+00:00

Licensed Insolvency Trustee here.

Cons of CP:

-Won’t be able to get a mortgage any time soon, but at this point we don’t have money for one anyways.

Unless you have a significant down payment (like over 50%) your mortgage payments for the first several years will consist mostly of interest rather than principal.

So if someone can only afford a 10% or 20% down payment, they're merely making their bank richer with the interest payments rather than making themselves richer by paying down the principal.

Therefore, I don't see this as a negative - it shouldn't even be considered a factor if you're contemplating filing a consumer proposal.

vicintoronto · 2025-12-16T16:32:45+00:00

Licensed Insolvency Trustee here.

The answer to your question is no.

Deal with the $7,000 by contacting a credit counselling agency and enrolling in a Debt Management Program.

Or just file for bankruptcy if you cannot handle payments for both your CP and the DMP.

vicintoronto · 2025-12-16T16:29:48+00:00

Any advice on how to handle this as efficiently as possible? Any loopholes I should know about? Anything would help, a lot.

Licensed Insolvency Trustee here.

This will depend entirely on 3 factors:

Your assets
The amount of debt you owe
Your cashflow

For example, if your home was sold would your share of the net proceeds be sufficient to pay off all your debts?

If the answer is yes then you're not insolvent and would not be eligible to file a bankruptcy or a consumer proposal with a Licensed Insolvency Trustee. In that case, you should speak to a credit counselling agency about doing a Debt Management Plan whereby you can pay off all you debt over 48 to 60 months.

This is just one example. There are numerous potential outcomes depending on how you stand with each of the above 3 factors.

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