Bankruptcy

Consumer Proposal

1) Length of Time Involved

A first time bankruptcy is at minimum at 9 month process. If you complete the required obligations within this time period and do not have Surplus Income a first time bankrupt can receive an Automatic Discharge 9 months plus one day after the bankruptcy is signed.

A proposal can be for whatever length of time is proposed. It can be for a lump sum payment that can be completed in a few months time or it can be for a monthly payment over a more extended period of time. The most common length of time for a proposal is three years. The maximum amount of time you can take to complete a proposal is five years. There is no minimum time limit for a proposal and you can complete it early without any type of penalty.

2) Obligations to complete process

To be discharged from a bankruptcy a bankrupt must:

1)      Make the payments required under the Voluntary Payment Agreement.

2)      Attend two financial counselling sessions

3)      Complete and submit the Monthly Income and Expense Statements.

4)      Provide required tax information to the Trustee.

5)      Comply with any other duties under the Bankruptcy and Insolvency Act that may be relevant.

To receive a Full Performance for a Consumer Proposal a debtor must:

1)      Pay the required proposal payments in full.

2)      Attend two financial counselling sessions.

3)      Complete any other special terms that may be contained in the proposal.

3) Cost

The cost of a bankruptcy depends on a number of factors. Some of these factors include:

1)      Whether there is surplus income under the Superintendent’s Guidelines. Surplus income requirements continue throughout the course of the bankruptcy. If your income increases during your bankruptcy this can increase your required payments or the length of time you must make payments.

2)      Whether there are any non-exempt, non-encumbered assets available for the benefit of the creditors.

3)      Whether there are any tax (or other) refunds available.

The cost of a proposal is very straightforward. When you file a proposal you are offering an amount to your creditors as payment for your debts. This amount includes the cost to register the proposal with Industry Canada, the fees to administer the proposal, the cost of the counselling sessions, and the taxes. This amount will not change if your income increases. Once the proposal is accepted by the creditors and approved by the Court the amount is set and you know exactly what amount you are required to pay to complete it.

Stay of Proceedings

A stay of proceedings comes into effect as soon as a bankruptcy is filed. This means that your creditors can not take action to try to collect on the debts, garnishee wages or call you.

A stay of proceedings comes into effect as soon as a proposal is filed. This means that your creditors can not take action to try to collect on the debts, garnishee wages or call you.

Treatment of Assets

Non-exempt, non-encumbered assets will vest in the trustee for the benefit of creditors.

Your assets are not automatically part of a proposal. You control whether or not assets will be sold for the benefit of creditors. If it is not written into the proposal that an asset will be part of the proposal it remains in your possession and control.

Impact on Credit Bureau

Report

A record of a first time bankruptcy is kept on your credit report for 6 years from the date of your discharge with Equifax. It is kept on your report with Trans Union for 14 years from the date of the discharge. Record of any subsequent bankruptcy is kept for 14 years with both bureaus.

Accounts that are included in a bankruptcy are rated as either a R9 or an I9. This is the same rating that is given to an account that has gone to collections. 

A record of a Consumer Proposal is kept on your Credit Report for 3 years from the date you Fully Perform Your Proposal.

Accounts that are included in a Proposal are rated as either a R7 or I7. This is the same as the rating given to accounts dealt with by an Orderly Payment of Debts or other Credit Counselling Agencies.