Here are some frequently asked questions about what happens during a proposal. Keep in mind that these answers are specific to the consumer proposal process although many answers would apply in a bankruptcy as well.
If you haven’t yet gathered enough information yet to make an informed decision about how to get moving forward we encourage to reach out to us for an initial chat about your situation. You can contact us at 587-269-3009 or here.
Prior to the proposal it is important to change your bank if you owe money to the bank that you currently have your chequing or savings account with. At the date of the proposal the bank that you owe money to will check to see if there are any funds in your bank account that they could apply to your outstanding debts. If there are, they will take this money and apply it to your outstanding debts. When you change your bank don’t forget to change your direct withdrawals and deposits.
Sometimes people ask, can I take money out of my bank account on the date of the proposal and then just put it back in later? You can do that but our experience is that that while technically your bank cannot legally take any funds from you after you have filed a proposal it doesn’t stop them from trying sometimes. If they do take funds from your bank account you would be without these funds, and without credit, until you are able to work it out with the bank. This creates a lot of avoidable stress so we do recommend that instead you change your bank to avoid this hassle.
In order for a bank to have the title to your property transferred into their name there is a legal process to do so which involves suing you for the title to your land as a result of the default on your mortgage.
This process will happen even if you are in a consumer proposal because this process is required for the bank to have the property transferred to their name, so they can sell it and pay down the mortgage that is outstanding.
This process involves a lot of paperwork that will be served upon you as the process runs its course. Every lender will vary as to when they will start the process however once they do start the process, the document that commences the foreclosure process is a Statement of Claim. This document must be served on you personally - this means someone will come to your door to hand you the papers directly.
This document will say “you are being sued” which can be unsettling. This is part of the foreclosure process but this does not necessarily mean that you will have to pay the outstanding amount of the mortgage. What will determine your obligation is whether you have reaffirmed the debt - please read this section for more information.
You can consent to future documents being delivered to you by email which helps everyone involved and reduces the costs of the foreclosure.
If you want to dispute the claims made in the Statement of Claim, or want time to try to redeem the mortgage -pay the full outstanding balance and bring it back up to date - you must contact a lawyer noted in the Statement of Claim to discuss these options. You have twenty days from the date of the paperwork to have these discussions - review the last paragraph of the Statement of Claim for more details on this.
If you do not dispute anything then no Court appearance on your part is required, unless you choose to go. If you continue to reside in the property and require time to get out of the property it may be advisable to attend court and request the time needed, for you to get moved out, from the Court.
You may be served with a few other Affidavits and Orders through the process. They will all have the same style of cause as the Statement of Claim (see attached). The style of cause is the top portion of the document stating the Court File Number (sometimes referred to as the Action Number) names of the parties, etc. If the information is different, it could be a different law suit and should be investigated further.
Affidavits of Default, Notice of Applications and Orders will be documents that you will receive after the Statement of Claim. Always review the Orders and the Affidavits as they will keep you up to date on what the lawyer is requesting in his next Court appearance.
The final order from the court will be either an Order for Foreclosure or Order for Sale to Plaintiff. That is when the property will be transferred into the bank’s name. Once the property is sold a further Order may be sent that appears to be a Judgment against you. This will usually represent the shortfall funds (difference between what was owing on the mortgage and what the bank received by way of net proceeds). If you have entered into a proposal and did not make any Mortgage payments or reaffirm the mortgage after the date of your proposal, this amount will be included in your proposal and the bank will prove their claim to the Trustee. If any payment was made against the mortgage after your proposal date, either by yourself or someone else, accidentally or intentionally, the Judgment amount is not included in the proposal.