Personal or Consumer Proposal

Under the Bankruptcy and Insolvency Act, you may make a proposal or compromise to your creditors. This usually is a cents on the dollar compromise. Your offer maybe to compromise the total amount you owe your creditors or extend the time you have to pay your debts in full. Instead of monthly payments to your creditors, you could also offer to cash in certain assets to pay a portion or all of the debts. A Trustee in Bankruptcy will assist you in making a fair offer to your creditors. The filing of the proposal stops unwanted calls from creditors, stops your wages from being garnished, and allows you time to make arrangements to pay your creditors what you can afford.

In order to qualify for a consumer proposal you must owe less than $75,000 not counting mortgages registered against your principal residence.

Alternatives to Bankruptcy

A number of alternatives to bankruptcy exist for individuals who are facing financial difficulty. Listed below are various options which may be of assistance.

Contact Your Creditors
Explain to your creditors how your circumstances have changed and explain why you cannot make your agreed upon payments. Suggest an arrangement that could work for both of you. Creditors are generally prepared to work with you.

Debt Consolidation Loan
You can approach a bank or financial institution about combining or "consolidating" your debts into one loan. The financial institution pays off all your debts and you only make a monthly payment to that creditor. Quite often, the financial institution will ask for a co-signor.

Informal Proposal
In some cases our firm of insolvency consultants and bankruptcy trustees can work with you and your creditors to set up a payment plan that will allow you to pay your creditors in an orderly way and thus help preserve your credit rating. This operates similar to a debt consolidation loan except you do not borrow the money to pay off your creditors.

Debt Counsellors
There are a number of debt counsellors who will make arrangements with your creditors to pay off your indebtness in full. The counsellor will review your financial situation and arrange for a payment program to be made between you and your creditors. A fee may be charged by the counsellor in order to perform this service.

What is Personal Bankruptcy?

Under the Bankruptcy and Insolvency Act, a reasonable and honest individual is given the chance to be released of his/her debts by declaring bankruptcy. At the end of nine months, if you perform certain duties required of you by law, your debts will be discharged or wiped out subject to certain exceptions. It is intended to allow you to make a fresh start.

The bankruptcy gives you protection against phone calls from your creditors; wages will no longer be garnished; and your utilities will not be cut off. Generally, you are allowed to keep basic furniture and your personal effects when you go bankrupt, and under certain circumstances you may even be allowed to keep your car; your house/trailer, RRSPs and life insurance policy. Some debts such as student loans, fines and fraud will not be discharged.

Insolvency Consultant and Bankruptcy Trustee: How will my credit rating be affected?

Insolvency Consultant and Bankruptcy Trustee: How will my credit rating be affected?

How will my credit rating be affected?

The fact that you have been bankrupt will remain on your credit report for 6 years after your discharge or 3 years after completion of a consumer proposal.

Will my creditors stop calling me?

Yes. Our office will deal with your creditors. By law, actions against you cease when bankruptcy is filed. This includes garnishees, judgements and other legal actions. This does not apply to secured creditors such as banks holding, for example, a lien on a car.

How long will I be in bankruptcy?

The bankruptcy process is normally 9 months long for a first time bankrupt. When the bankruptcy is over, your debts are discharged by law (you no longer have to pay back your debts). There are some exceptions to the rule, our bankrupcy trustees will explain these to you when we meet.

If you have been bankrupt before, or you do not perform your duties in the bankruptcy or if someone opposes your discharge, then instead of your discharge being given automatically at the end of nine months, the bankruptcy court will decide what type of discharge you will receive.

Who can file for bankruptcy?

In order to declare bankruptcy an individual must:

• owe at least $1,000
• be unable to pay their bills as they generally become due
• be insolvent

What is Bankruptcy?

Bankruptcy is a legal process, regulated by the Federal Government, that stops any legal action by creditors and allows a person to be discharged from most, if not all, of their debts. The main purpose of the bankruptcy process is to allow individuals to make a fresh start.

Proposal to Creditors

It is not always possible to implement an informal workout. There are formal options available under the provisions of the Bankruptcy and Insolvency Act which may assist you in saving your business.

An insolvent business can file a Notice of Intention to Make a Proposal. The filing of that notice will give your company an absolute Stay of Proceedings against all claims by creditors against your company, including:

• Your bank
• Canada Revenue Agency
• Your landlord
• Utility suppliers
• Any other creditor

The Stay of Proceedings will give you a minimum of 30 days to come up with a plan to deal with your creditors. The time period can be extended by applying to Court for a further 45-day extension to a maximum of 6 months. The purpose of the Stay is to give your company the "breathing’ room that it needs to develop a plan to save your business without the threat of garnishees or legal actions.

A Proposal can take any number of forms; however, a number of factors are required before any restructuring can be implemented:

• Recognition of the problem at an early date before the financial problems are insurmountable.
• The business must be viable and the debt manageable.
• Management must be committed to seeing the restructuring through to completion.
• Sufficient working capital must be available to continue operations during the restructuring process.
• A detailed, definitive, and realistic plan must be developed.
• The plan must be sold to the creditors by the proponent.

As long as the Proposal is approved by a majority of the creditors representing 2/3 of the value of the claims, the Proposal is binding on all the creditors, including those who vote against it.
The process of implementing a successful Proposal is obviously more complex than we have described and involves a detailed review and assessment of your company’s financial position.