Whenever I met with to discuss filing a consumer proposal one of the questions I ask is “do you bank where you owe”. If the answer is yes, I strongly advise you to open a new bank account before filing a consumer proposal, at a bank where you have never dealt with or had a credit card. You should also arrange to have any regular deposits, such as your pay, changed to the new account before the bankruptcy starts. Move your money to the new account promptly, before your consumer proposal starts. You also need to move any pre-authorized payments that are going to continue such as insurance or utilities.
Yes, this is a lot of work, but consider that the bank can take money from your account if you don’t. You need to make sure that they can’t put through charges to your bank account after your consumer proposal starts.
If you bank at a bank, and have a credit card with them, it is very easy for the credit card company to take the payment from your account if you don’t make the payment on time. Even another bank where you owe money can debit your account, if you have given them permission to do so.
Opening a new account may be a hassle, because you have many items automated for your convenience. It will take time to contact everyone to switch over all the items in your account, but the change will let you keep better control of your money.
What if all I have at the bank is my mortgage or car payment, but I am keeping my house or car?
You still need to open a new bank account. Everyone you owe money to will get notice of your consumer proposal, even if you are keeping your house. It’s the law. The bank’s computer will still put a hold on your bank account.
Can I open a new bank account if I am thinking of filing or a consumer proposal?
According to the Bank Act, you have a right to open an account at any bank in Canada, whether or not you are in a consumer proposal, unless the bank has other reasons (not your consumer proposal) to refuse you an account.
- You can keep your bank account while in a consumer proposal. If your account is in good standing, and if you have not used your bank account to engage in illegal activity, you can keep your bank account.
- You also have a right not to have creditors harass you or take money from you after you start a consumer proposal. When you do this, all creditors are “stayed”, meaning that they no longer have permission to debit your account.
Yes, I understand you really like your bank and have been there for years, but if someone at the bank forgets to tell the computer not to take money from your bank account, a consumer proposal will not stop them, since the computer could debit your account without your knowledge. We do notify your creditors promptly about your consumer proposal, but it will take time for the notifications to reach the right people and for their changes to take effect in the banking computer systems. Once such a non-permitted transaction is discovered, we can apply to court to get the money back, but that may take days or even weeks. In the meantime, your rent cheque has bounced and you can’t buy groceries.
Summary: Get a new bank account to protect yourself