If you have reached this page – you’re probably having financial difficulties and may be wondering if you should file a consumer proposal or a bankruptcy. … and what the differences are between the two.
In this video, in under four minutes we’ll explain that for you.
First things first – for both of these debt solutions you require the support of a Licensed Insolvency Trustee ( an LIT for short) – they are the only debt professionals in Canada that can administer these processes.
Let’s get started with who is eligible: With a personal bankruptcy anyone who owes $1000 or more and who cannot pay is eligible. (yes it’s that simple!)
For a consumer proposal your unsecured debts (excluding your mortgage) must not exceed $250,000 and you must be capable of make monthly payments to pay off a portion of your debt.
What will it cost? In a bankruptcy payments are based upon your income, non-discretionary expenses and household size.
The minimum payment is $200 per month and most people receive a discharge in nine months. The amount may be more depending on your income. So a bankruptcy will cost approximately $1800.
The amount you pay in a consumer proposal will depend upon the amount of your debt and the assets you have. It will also depend on the amount your creditors have agreed to be paid. The administration costs of the proposal are included in your monthly payment.
How long will it take? Your bankruptcy can be completed in a minimum of 9 months. A consumer proposal can last for five years but can be paid off earlier with no penalty.
What will I lose? When you file a bankruptcy, some assets may have to be surrendered, but you will certainly be able to keep what are deemed necessities of life.
Provinces vary in their rules about what you keep and what you forfeit in a personal bankruptcy. In a Consumer proposal you do not have to surrender any assets.
What about my tax refund? In a bankruptcy your refund is turned over to your creditors. In a consumer proposal you get to keep your refund.
How do they affect my credit rating? Your rating will show as ‘R9’ when you file a bankruptcy for between 7 and 14 years. This is the lowest credit rating. In a consumer proposal your credit rating is set at ‘R9’ but will revert to ‘R7’ as soon as the proposal is complete.
Do I have to report? Filing bankruptcy requires you to report your income and expenses including pay stubs and certain receipts. In a consumer proposal no reporting is required.
Do they stop collections and wage garnishment? Yes both do once set in place.
So that is consumer proposal versus bankruptcy in a nutshell. Am sure you still have a number of questions relating to your own specific circumstances.
If you are still actively seeking help, it would serve you well to talk to a government Licensed Insolvency Trustee (formerly know as Bankruptcy Trustee) – they are the most qualified debt professionals in Canada.
Call one our LITs to-day and find out what your options really are.