What Is A Writ and How Is It Affected by the Debt Relief Process?
Filing for bankruptcy or a consumer proposal has the effect of eliminating all of your unsecured debts, so you can make a fresh financial start. However, before you file, an unsecured creditor may go to court to file a writ or lien against your home or property, in an effort to recoup some or all of what you owe them. Now, you might be wondering, what does this mean and can it be removed by filing for bankruptcy or consumer proposal? Keep reading to find out.
What Is A Writ?
An unsecured creditor (who, as opposed to a secured creditor, stands to lose all of what you owe them if you cannot pay) may go to court to seek a writ of seizure and sale against you. This writ is the start of a legal process that allows your home or other property to be seized and sold by the sheriff’s office to recoup some or all of the money you owe to the creditor—even if you own the property jointlywith someone else. Because a writ is a legal proceeding, it is not automatically erased simply by filingfor bankruptcy or a consumer proposal.
How Does It Compare to a Lien on a Property?
A lien is a claim registered on a piece of property (usually a home). It’s more serious and difficult to deal with than a writ, as it cannot be removed until it is paid by the debtor or the property is sold with the proceeds used to pay it off. The Canada Revenue Agency (CRA) is the most common body to register a lien on a debtor’s property in order to collect an amount owed in taxes.
Can You Remove a Writ or a Lien?
A writ can be removed once you are discharged from bankruptcy or finished paying off your consumer proposal. You can either have the creditor’s lawyer (or another lawyer) file a request to remove the writ or do it yourself by downloading, filling out, and filing a form with the sheriff’s office. If you do file the form yourself, be aware that it can take 30 days or longer to complete the removal of the writ.
A lien cannot be removed by completing a bankruptcy, so you must either repay it or sell the property and pay the lien with the proceeds of the sale. If you opt for a consumer proposal, you can ask the CRA, as one of your creditors, to compromise the value of the lien, based on the equity in your property but it may not agree.
Obviously, it is in your best interests to prevent a lien from being placed on your property in the first place, either by ensuring payment of your taxes or by promptly filing for debt relief before the CRA can initiate the lien process.
What Are the Costs?
A lawyer may charge upwards of $700 to effect removal of a writ on your property. However, if you handle it yourself by completing and submitting the form to the sheriff’s office, there is no cost, though it will take longer, as noted above.
What Happens to a Writ or Lien During Bankruptcy?
As soon as you file for bankruptcy, all legal proceedings against you are stayed, meaning, they cannot move forward, and no new legal action can be taken against you during the period of your bankruptcy.
What About a Consumer Proposal?
The same applies to debtors who are currently in the process of completing a consumer proposal – all legal proceedings are stayed at the date of filing and no new actions can be brought by creditors. That means no more collections calls, no more wage garnishment, no new writs can be filed, etc. Furthermore, a previously filed writ cannot be enforced.
Should You File For Consumer Proposal or Bankruptcy to Remove a Writ?
Bankruptcy is a last resort and should be treated as such, because many of your assets will be seized by the Licensed Insolvency Trustee in order to pay off your creditors, and your credit rating will fall to the lowest level. If you are able to make payments on some, but not all, of your debts, then a consumer proposal may be the better option for you, as it allows you to keep all of your assets. It also affects your credit rating, but slightly less.
If you’re planning to file for bankruptcy or a consumer proposal and you know there is a writ registered on your home or property, don’t despair. Once you complete your debt relief process, you can have the writ removed and begin to rebuild your finances. If you’re ready to start, contact one of our Licensed Insolvency Trustees today and get the help you need.
Baker Tilly Ottawa Ltd. is a Licensed Insolvency Trustee based in Ottawa. We service Ottawa and most of eastern Ontario. We have helped thousands of individuals and couples successfully resolve their debt challenges since 2002. Its passion – its mission – is your health and well-being!
Visit our Consumer Proposal page for answers to other frequently asked questions.