Are We in a Housing Bubble Right Now?

If you are considering filing bankruptcy in British Columbia, then take a look at some questions that a lot of our clients have asked us. Take a look at these answers to get a general view of the bankruptcy laws in the province.

What is bankruptcy?

Anyone who finds themselves under a hopeless debt burden can get a new financial start through the legal process known as bankruptcy. The minimum requirements for bankruptcy include a debt of at least $1,000, an inability to pay debts on time, debts that are worth more than your assets, and not being in bankrupt already.

What is a bankruptcy Trustee?

A bankruptcy Trustee is different from other debt professionals in that they have access to the total range of options for debt relief, and they can keep your creditors from trying to collect from you. Once you have filed the bankruptcy paperwork, your creditors have to stop taking action to collect, according to provincial law.

Who finds out that I have declared bankruptcy?

Legally, only your creditors have to know, and if your assets are minimal, your creditors only get a letter telling them. Bankruptcy filings are public record, so anyone could look it up, but unless you are a public figure, it is unlikely that anyone else would know.

How does bankruptcy happen?

Most people who enter bankruptcy do so to make an assignment in bankruptcy, or enter the state voluntarily. A much less common way is for creditors to go to a bankruptcy judge and ask for a declaration of involuntary bankruptcy. In both situations, the judge names a Trustee to administer the bankruptcy.

In most cases, you fill out an application form and send it with documentation to the assigned Trustee. Before the final declaration, the Trustee will sit down with you and make sure that bankruptcy is your best choice. After that, the Trustee assembles the documents for you to sign. After the signed paperwork goes on file with the Superintendent of Bankruptcy, your status becomes official.

Can I keep any of my assets?

In British Columbia, you can retain as much as $31,000 in equity in certain assets. There are several exemptions for the types of property you can keep, on this list.

Will the Trustee seize my car or house?

This depends on the equity that you have. In the case of a house, your equity is the amount you have left in the house after calculating property taxes, penalties and the balance due on any mortgage(s). If your equity falls within the legally allowable limit, then the Trustee usually releases the house to the creditor. AT that point, you can make arrangements with the creditor to keep the house and resume your mortgage payments. If your equity is greater than the exemption limits, it is often possible to arrange with the Trustee to buy it back in order to hold onto your house. The same applies to a car or other significant asset.

What assets will I have to give up?

Any assets or equity that goes over the permitted exemption goes to the Trustee for disbursement to creditors. This includes any inheritances that may come in during the bankruptcy – and even such income sources as a winning lottery ticket. Any cash that you have at the time of the bankruptcy generally go to the Trustee as well.

How does my bankruptcy influence my spouse’s assets and liabilities?

Provincial law considers husbands and wives to be separate individuals in the area of bankruptcy. So if your spouse does not also file bankruptcy, any separately held assets and liabilities are not influenced. However, in the case of joint assets, such as a car or house, the Trustee has to liquidate the half interest that the bankrupt spouse opens. If both spouses have signed for obligation on a debt, if one goes into bankruptcy, the other now has sole liability for the entire amount. When it comes to assets and wages, though, your spouse suffers no effects from the bankruptcy.

What is the difference between a credit counselor and a trustee?

The primary difference involves legal abilities of a bankruptcy trustee – full protection from creditors and access to the entire spectrum of solutions for debt relief. Because the government regulates trustee fees, the trustee has a broader range of powers than a credit counselor.

What happens to my salary or wages while I am bankrupt?

Each month, you have to report you r income to the Trustee. Once you have started your bankruptcy, though, your salaries, wages and/or commissions are not affected by bankruptcy. The Superintendent of Bankruptcy establishes standards for income that permit you to have a reasonable living standard, based on the size of your family. If your income exceeds that set standard, the surplus has to go to the Trustee.

Can bankruptcy erase all of my debts?

The majority of your debts go away when your bankruptcy is discharged, often with nine months. However, there are several exceptions. If you used misrepresentation or fraud to obtain a loan; if you owe child support, alimony or other maintenance payments; if you owe student loans and finished college less than seven years ago; if a civil court has imposed damages for sexual assault, wrongful death or intentional bodily harm; and if you have any secured debt without equity, such as a car lease, then those debts remain in place.

Does bankruptcy eliminate maintenance or alimony payments?

You have to keep making your maintenance or alimony payments after declaring bankruptcy. If you had maintenance or alimony arrears at the time of filing, your exemption limits for bankruptcy drop from $5,000 to $2,000, as of 2017.

Is there a cost to filing bankruptcy?

In the majority of cases, BC law keeps the cost of bankruptcy under $200 per month during the nine-month term. However, the exact amount varies depending on your finances. The Trustee will give you your individual amount after going over your situation. This fee includes filing, disbursements, counseling costs and taxes.

What is counseling – and is it mandatory?

Counseling is a requirement for having your bankruptcy discharged after nine months. You can go through your counseling by yourself, or in a group with other bankrupt people, and the Trustee. You have to go through two counseling sessions.

What goes on during bankruptcy?

You have to respond in a timely manner to all of your Trustee’s requests for information while bankrupt. You have to keep your contact information updated, and you have to provide updates when your material situation changes. You will need to submit monthly reports of your expenses and your earnings, using the forms that your Trustee provides. You may have to meet with your creditors a month or two into your bankruptcy, generally at your Trustee’s office.

When does bankruptcy end?

Most people find themselves out of bankruptcy after nine months. Click here to learn the rules for discharging bankruptcy in BC.

Are there any alternatives to bankruptcy?

A consumer proposal is an agreement that you make with your creditors to settle your debts either by reducing the amount owed or extend the time available to pay it off. For the creditors to agree, this will have to leave them better off than bankruptcy would. You can file one of these if your debts are less than $250,000 beyond your primary residence mortgage, and the proposal cannot last longer than five years. If the creditors reject the proposal, you don’t automatically enter bankruptcy but do have to enter counseling about options. You can also make a proposal if your debts are over $250,000, but if the creditors do not agree, bankruptcy takes effect immediately. You can also get in touch with your creditors directly, go through credit counseling or secure a debt consolidation loan.

To learn more about your personal situation, you should visit with a bankruptcy trustee. A bankruptcy debt settlement can influence your situation for far longer than a consumer proposal, so if you can make good on your proposal and you have enough equity, then you can merge with much less of an impact on your credit, emerging from a completed proposal in just a matter of months.

Given the chaos that ensued after the housing bubble in Canada burst in 2007 and 2008, there is legitimate concern any time that prices start to inch upward once again. Recent increases in housing prices in Canada have started to appear, but they mean different things depending on where you are, so paying attention to the right metrics is important.

Take Vancouver, for example. The median price for a detached home has jumped about 16 percent from July 2014 to July 2015, but there is no sign of a bubble forming. Analysts look for such signs as overbuilding and overvaluation for specific properties. It looks, at least for now, that the rise of prices in Vancouver is legitimate and likely to persist for the predictable future.

Regina, on the other hand, presents more of a conundrum. There is a glut of condo construction in the city, and so the fact that a gap in demand is yawning open means that the existing prices could drop swiftly and without much warning. However, for people considering Alberta, particularly Calgary, the market also remains strong as well.

There have been concerns that the Alberta real estate market would turn out to be particularly vulnerable because of the recent drop in the price of oil. Even though oil has dipped below $44 per barrel, though, home prices are holding steady in Calgary and throughout Alberta. Some attribute this to the lack of available rental properties in the middle of the market. However, new construction is still taking place at a measured rate. If it were not, then there could be some concern that the lack of new available housing is simply holding things steady. However, in May, developers started working on 34,102 new residential units. That represents a slight increase from April but still is lower than the 2014 monthly average of 41,000. In Calgary alone, May saw the start of 12,504 new residential units. While that trend is also slightly downward, that does not mean that a bubble is starting to form.

One reason why new housing starts are down is that there are more resale dwellings up for sale. If this number gets too high, of course, that could represent the sort of sell-off that could precipitate a bubble. There are fewer people moving into Alberta, as there are not as many oil and gas jobs available.

According to such experts as Richard Cho, principal market analyst for CMHC, and Todd Hirsch, the chief economist with ATB Financial, these changes are more a sign that the housing market is moving toward stability than a sign that the slowdown could produce a bubble. Obviously, if oil slipped down under $30 per barrel or companies in Alberta started announcing massive layoffs, things could change significantly. That would jeopardize many people’s ability to pay their mortgage, and they would initially try to sell their homes in order to avoid having to go into foreclosure. The lower prices that people might accept in that situation would accelerate, but no signs are showing that level of activity in the housing market.

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