Comparing a Bankruptcy to a Consumer Proposal
Bankruptcy? Consumer Proposal? The choice of which insolvency process to go with can be a difficult one. But once you review our chart (below) you’ll be able to quickly see the differences between the two:
|No limit on the size of debt load||Must be less than $250,000 in debt (excluding mortgage on personal residence)|
|Available to individuals or companies||Available only to individuals|
|Once electronically filed with the Federal Government, protection is in place immediately. Creditors notified within 5 business days||Once electronically filed with the Federal Government, protection is in place immediately. Creditors notified within 5 business days.|
|Once filed, creditors cannot stop the process. No voting required. A creditor can request an examination of the Bankrupt under certain circumstances.||Once filed, unsecured creditors have 45 days to vote for or against the proposal or put forward a counter-offer. If approved by the majority of creditors the Proposal gains court approval 15 days later.|
|Meeting of Creditors very rare. Only called in extraneous circumstances||Meeting of Creditors called if 25% in value (or more) of creditors request one. A meeting of creditors will be held within 21 days after being called.|
|Payments based on (a) household income and (b) value of realizable assets||Settlement offer must be more generous than the creditors would receive in a bankruptcy|
|Surplus income tracked throughout the bankruptcy (if excess Surplus Income, then 50% must be contributed to the estate during bankruptcy)||Surplus income only calculated at the time paperwork is signed (Once proposal is filed, surplus income is no longer an issue)|
|2 mandatory counseling sessions must be attended during the Bankruptcy (the first within 60 days, the second within 210 days)||2 mandatory counseling sessions must be attended during the Consumer Proposal (the first within 60 days, the second within 210 days)|
|Monthly income statements required||Not Applicable|
|Tax refunds for calendar year turned over to creditors||Tax refunds go to the debtor|
|GST refunds turned over to creditors||Not applicable|
|Second-time bankrupts, and those with surplus income, have a lengthier bankruptcy period||Proposal can be 1-5 years. Paying down the proposal earlier is recommended and welcomed.|
|Bankruptcy payments are required to be completed in full before a discharge is issued by the Trustee||If three payments are missed then the Consumer Proposal is considered “annulled” , the protection is immediately lifted and the creditors have the legal right to pursue the amounts owing to them.|
|Bankruptcy payments can be paid down earlier but normally no early discharge as a result. Credit rating rises to R1 approximately six years following completion.||Paying down Proposal earlier is the ideal solution – no penalties, no interest and once completed the debtor’s credit rating can begin to improve. Credit rating rises to R1 three years following completion.|
While this chart highlights some of the similarities and differences between a Bankruptcy filing and a Consumer Proposal filing, this is only a starting point. For anyone dealing with crushing debt, harassing phone calls and letters from collection agencies or a wage garnishment, meeting with one of our Licensed Insolvency Trustees is the best way to ensure you have all the facts so you can make an informed decision about how best to deal with your debts.
Please call us today toll-free at (844) 507-7526, or fill in this form to request a free consultation, so we can get you the help you need to clear up that debt once and for all. With over 50 offices across Ontario we are sure to have an office close to where you live or work.
We look forward to assisting you.