I’ve had a number of situations over the few years where it made sense for undischarged bankrupts to annul their bankruptcy through filing a consumer proposal. Although many people feel that once bankrupt, they have to remain bankrupt, a consumer proposal (assuming it is approved by the creditors), is one way to annul a bankruptcy.
It’s important to know that if you are bankrupt, and want to annul the bankruptcy by filing a consumer proposal, that only debts which originated prior to the bankruptcy can be included in the consumer proposal. In other words, you can not add debts which happened after the bankruptcy was filed even though the consumer proposal was not in place yet. It’s also important to know that even if the bankruptcy was filed with a different trustee, we can still help a bankrupt file a consumer proposal which will annul their previous bankruptcy.
Reasons why to annul a bankruptcy with a consumer proposal
Here are some examples of where it may make sense to annul a bankruptcy by filing a consumer proposal:
- A bankrupt received a large inheritance and for her to gain access to these funds quickly she filed a consumer proposal. It made no sense for her to have a bankruptcy on her record if her debts were to be paid in full.
- A bankrupt found a good paying job, and once the surplus income calculation was done, the bankrupt was required to pay almost $1,000 per month for 21 months. As a result, the bankrupt decided to propose $500 over 60 months, which from a cash flow basis, made things much easier than continuing to make the bankruptcy payments.
- A bankrupt had investments which she thought were registered retirement savings plans (RRSP), protected and exempt from seizure. The RRSP company told us they were unregistered and therefore would be surrendered to the trustee. In order to preserve these funds for her retirement, the bankrupt decided to file a consumer proposal.
As these examples show, it’s important to remember that you should come and talk to us if you are looking at ways to explore annulling an undischarged bankruptcy.