C.E. Craig & Associates | Consumer Proposal VS. Personal Bankruptcy

C.E. Craig & Associates Inc.

Consumer Proposal vs Personal Bankruptcy

Personal Bankruptcy and filing a Consumer Proposal are common debt relief solutions in Canada. Unfortunately, people can often have difficulty deciding which option is right for them. Many debtors feel that a consumer proposal is a less severe option than a bankruptcy. But, each alternative has its pro’s and its con’s and often it comes down to personal choice. For both options, you will need the assistance of a Licensed Insolvency Trustee. But they do have some differences.

What similarities are there between a Bankruptcy and a Consumer Proposal?

Both a Bankruptcy and a Consumer Proposal:

Are governed by the Bankruptcy and Insolvency Act (BIA) in Canada and must be implemented with the assistance of a Licensed Insolvency Trustee who will act as an Administrator under the proposal or Trustee in the bankruptcy.
Take advantage of the Stay of Proceedings under the BIA – this means that all collection and garnishments cease upon filing.
Result in interest charges no longer being incurred (does not apply to secured loans or non-dischargeable debts)
Requires you to make full disclosure to your LIT of you family income and expenses, and the value of assets you own, as of the date of filing.
Does not affect the rights of secured creditors.
Automatically includes All creditors anywhere in the world – there is no “picking and choosing.”
Are Legally binding on all creditors.
Require each debtor to attend two counselling sessions.

How is a Consumer Proposal Different from a bankruptcy?

A Bankruptcy will:

Be for a legislated period of time and cannot be shortened or changed (generally). The length of time you are in bankrupt will increase if you have Surplus Income (see below) or if you have been bankrupt before.
Cost more if you make more – over the period of time you are bankrupt, you must report each month what your family earns – this results in a payment obligation to the LIT based on your monthly earnings – see Surplus Income Calculation. The more you earn over the entire bankruptcy period, the higher your surplus income payable will be.
Result in assets you acquire during the bankruptcy period possibly being seized by the LIT. If you are in bankruptcy and acquire assets (like an inheritance or lottery winnings) 100% of these assets can be seized by the LIT for your creditors.
Possibly negatively affect your standing with professional associations, your ability to be bonded, and possibly your security clearance if you are in the military. Always check with your professional body before file a bankruptcy
Result in your income tax refunds in the year of bankruptcy, or any prior years, being paid directly to the LIT for the benefit of your creditors.
Results is an R9 report on your credit score (seen as the worst) for 6 years once your bankruptcy is completed (for a first-time bankruptcy)

A Consumer Proposal:

Is a negotiated settlement with your creditors. Your consumer proposal will always offer “a better return” to your creditors than they would get in a bankruptcy.
The maximum period for a proposal is 5 years – but you can always pay it off more quickly if you desire, or offer a shorter pay period. In this way, a proposal can be a bit more flexible based on your earning abilities.
Once approved, your payments will never increase. Even if your income goes up, or you receive an inheritance or win the lottery – you only have to pay the agreed amount under the proposal. Once paid, the balance of the debt is discharged.
Will not require monthly reporting to your LIT. With a Consumer Proposal you do not have to report your family earnings to the LIT monthly. The offer to creditors will only look at your current earnings, not your future earnings (or future assets like inheritance or increases in your property values)
Will often not have negative affects on your professional licensing bodies – however, you should always check with your professional or licensing body before filing for either alternative.
Will result Income tax refunds in the pre-filing period being paid to you directly – not your LIT.
Results in an R7 on your credit report for 3 years after the proposal is fully completed.

Make an Informed Choice by Talking to a Professional

Whether you are considering a bankruptcy or a Consumer Proposal, understanding the consequences of each option is the first step to making an informed choice. Our debt eliminations team is available to give you impartial advice on your choices. Let us help you find the debt solutions that will work best for you and your life.

Reach out to a debt solutions manager today:

CALL TODAY

FREE CONSULTATION

OUR TEAM

COLLEEN CRAIG

Colleen founded C.E. Craig & Associates Inc. in 2003 after 10 years in the insolvency industry. As a federally licensed Trustee in Bankruptcy she deals with the day-to-day issues that creditors and debtors encounter when they are faced with Insolvency situations. As a Chartered Accountant, Colleen brings a pragmatic approach to dealing with the complex matters and finding the right solution for all parties.

JANET WHITE

Janet has been with C.E. Craig & Associates Inc. since 2003, when the company opened. She helped build the practice from the ground up, giving her a thorough understanding of the ins and outs of insolvency legislation and procedures.

LESLEY BENTLEY

We were pleased to welcome Lesley Bentley into our firm in 2013. She has been an Estate Administrator for over 30 years offering advice to individuals struggling with personal financial issues.

BADGER

No formal insolvency training, but also non judgmental, loyal, and cute.

Reach out to a debt solutions manager today:

CALL TODAY

FREE CONSULTATION

CHECK OUT OUR BLOG

RSS image

December 12.2020

Your Big Blog Post Title Will Be Here

An excerpt of your post content will show up in this section so blog visitors can have an idea on what this post is about before they click it to see the post content. You can create your posts from your blog funnel dashboard.

0 Views

Write a Comment

RSS image

December 12.2020

Your Big Blog Post Title Will Be Here

An excerpt of your post content will show up in this section so blog visitors can have an idea on what this post is about before they click it to see the post content. You can create your posts from your blog funnel dashboard.

0 Views

Write a Comment

RSS image

December 12.2020

Your Big Blog Post Title Will Be Here

An excerpt of your post content will show up in this section so blog visitors can have an idea on what this post is about before they click it to see the post content. You can create your posts from your blog funnel dashboard.

0 Views

Write a Comment

RSS image

December 12.2020

Your Big Blog Post Title Will Be Here

An excerpt of your post content will show up in this section so blog visitors can have an idea on what this post is about before they click it to see the post content. You can create your posts from your blog funnel dashboard.

0 Views

Write a Comment