Bankruptcy in Sarnia: How does a creditor opposition work?

by Joel Sandwith on October 27, 2010

Filing a personal bankruptcy is one of the toughest decisions a person can ever make.  For most people, however, it ends up being a helpful way to get a fresh start from their debts.  Having said that, bankruptcy is not for everyone, alternatives should always be considered, and there are some risks to filing bankruptcy.

One of the risks is that once you file bankruptcy, your creditors have the right to file an opposition to your discharge from the bankruptcy.  To put this in simple terms, a creditor may apply to the Court to request that some of the money you owed to them be paid back, and this may extend the time you are in bankruptcy.

How does this happen?  Well, the first thing you should know is that creditor opposition is very rare.  This occurs in less than one out of every hundred bankruptcies in my experience.  Usually, the creditor involved believes that there is some exceptional circumstance and that they deserve to be repaid, at least a part of the debt. 

The creditor has to show that something you have done has cost them money– for example, borrowing money from them within three months of filing bankruptcy, or giving away property to a relative to protect it from the creditors. It doesn’t have to be something fraudulent- they are legally allowed to use the argument that you let your assets become worth less than 50 cents of each dollar of debt.  They can even file an opposition if they simply feel that you should have filed a consumer proposal, in other words, if they feel that you CAN pay them something.  As one of the senior trustees in our firm, Doug Hoyes, has pointed out – they many not even have a good reason to oppose, and so while they may not be successful in their opposition, it can still be very distruptive to have to go through the process.

The opposing creditor will apply to the Court for a hearing, and notify you, and your trustee.  The Judge or Registrar will hear their argument, but will hear you as well, and make a decision about what, if anything you have to repay.  You have the right to hire a lawyer if you like as well.

How to avoid this problem?  First consult with a licensed Trustee in bankruptcy, who can evaluate your situation and explain how an opposition works.  Make sure to disclose everything to your trustee, so that if there is something that could trigger an opposition you can be informed about it.

Second, consider filing a consumer proposal instead.  If you file a consumer proposal, and your creditors accept it, they cannot file an opposition.  In a consumer proposal, you may be able to significantly reduce your debts with a simple monthly repayment plan.  There are many advantages to a consumer proposal, including keeping assets, but avoiding potential opposition is a very strong reason to consider this alternative to bankruptcy

If you are struggling with debt, please feel free to give us a call, we can be reached toll free at 310-PLAN.  Let’s get started on a plan to deal with your debts.

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