What is a Consumer Proposal?
Consumer Proposal is a formal arrangement to pay creditors under the Bankruptcy and Insolvency Act without going bankrupt. Most consumer proposals provide for partial repayment of the debt over a period of time, not exceeding 5 years.
Who is Eligible to file a Consumer Proposal?
A consumer proposal may be filed by an individual who is unable to pay their debts in full and who owes no more than $250,000, excluding any mortgages on their residence.
What happens to assets under a Consumer Proposal?
Assets remain the property of the debtor and do not become the property of the Trustee.
Will a Consumer Proposal stop collection action?
Most collection action, including garnishments and other legal action, is stopped upon the filing of a consumer proposal.
What if the creditors do not accept the consumer proposal?
If the creditors do not accept the consumer proposal as filed, or as may be amended, the debtor returns to the position prior to the filing of the consumer proposal.
What if the Consumer Proposal is not completed?
If the payments under an accepted consumer proposal become 3 months in arrears, the consumer proposal will be annulled automatically and creditors will be able to resume collection action for the amount due to them. A second consumer proposal may not be filed with respect to the same debts if the first consumer proposal is annulled.
What effect will making a Consumer Proposal have on credit rating?
Most credit bureaus keep information on their records for three years following the last payment on the proposal.
Will there be a meeting of creditors or a requirement to appear in Court?
In most proposals there is no meeting of creditors and there is no requirement to go to Court. However if creditors request a meeting the debtor must attend.
How are co-signers and guarantors affected?
Co-signers and guarantors will be responsible for the balance not paid and likely will be asked to make full payment upon the filing of the proposal.
How are debts not discharged by bankruptcy affected by consumer proposal?
Debts not discharged by bankruptcy may not be settled by making a proposal.
What is bankruptcy?
Is a legal process that allows a debtor to be relieved of most, if not all, debts.
Who can declare bankruptcy?
Someone who owes more than $1,000 and is unable to pay his or her debts in the normal course can file bankruptcy.
Will I lose all my assets if I declare bankruptcy?
The following assets are exempt from seizure by the Trustee:
• Household furnishings to a value of $11,300
• Personal effects to a value of $5,650
• Tools of trade to a value of $11,300
• Motor vehicles to a value of $5,650
• Farmer's business assets to a value of $28,300
• Certain life insurance policies
• Most pensions and certain RRSP's
However bankruptcy does not prevent a secured creditor from realizing on assets which have been pledged as security.
What are the main duties if I declare bankruptcy?
• Disclose all assets and debts to the Trustee;
• Assist the Trustee in dealing with your property;
• Attend a meeting of creditors, if required;
• Keep the Trustee advised of any changes in address, phone number, employment and income;
• Provide information for tax return preparation;
• Surrender most credit cards; and
• Attend two (2) financial counseling sessions
Will I have to meet with my creditors?
In most personal bankruptcies meetings with creditors are not held. If the creditors require a meeting you must attend.
What if my debts have been guaranteed or co-signed?
A guarantor, co-signer, or supplementary credit-card holder will likely be responsible for the debt.
What is counseling?
In the 2 mandatory financial counselling sessions the counsellor will assist you to understand the causes of your financial difficulty and will offer suggestions concerning budgeting and obtaining and properly using credit in the future.
What effect will bankruptcy have on my credit rating?
Most people already have a poor credit rating before they come to see us. Most credit bureaus keep information about bankruptcy on their records for about seven (7) years for first time bankrupts.
What are the tax consequences of declaring bankruptcy?
Special tax returns must be filed in the year of bankruptcy. The first year of your Income Tax refund should be sent to your creditors through your Trustee.
How long will I be bankrupt?
Most first time bankrupts obtain an automatic discharge (release) after nine months provided the discharge is not opposed.
Can I have a bank account?
Yes, however if you owe money to your current bank you may be required to open an account at a new financial institution.
Can I have a credit card while I'm in bankruptcy?
You may only use a supplementary card if the primary card holder gives you permission in writing.
Will bankruptcy release me from all debts?
Not all debts are released by bankruptcy. The most common debts that survive bankruptcy are:
• Fines or penalties imposed by a Court;
• Restitution orders;
• Alimony and support;
• Awards for damages for intentionally inflicted bodily harm, sexual assault or wrongful death;
• Certain fraudulent debts; and
• Student loans where the bankrupt left school less than 7 years and 1 month from the date of bankruptcy;
What if I win a lottery or become entitled to an inheritance while I am in bankruptcy?
Lottery or contest winnings, proceeds of an inheritance or other after-acquired property to which a bankrupt becomes entitled before the date of discharge must be turned over to the Trustee for payment to the creditors (up to the amount owing to the creditors).
