Don Allen - Bankruptcy Trustee & Receiver
Trustee & Receiver
705-733-1511 1-888-504-1511
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Consumer Proposal vs. Personal Bankruptcy

Bankruptcy and Consumer Proposal are the top two debt management options available in Ontario. While both will resolve your debts and provide legal protection from creditors, there are differences between them, the main ones being summarized below.

 

Topics

Consumer Proposal

Personal Bankruptcy

Who can claim

Your total debt cannot exceed $250,000 (excluding a mortgage) and you must have the ability to repay a portion of your debts. Proposal won’t automatically pass - it must be accepted by your creditors.

Any person, who owes more than $1,000 in debt, is eligible to file a personal bankruptcy. Ideal if you need immediate financial relief.

Costs

Once you and your creditors agree to a proposal amount, your monthly payment is fixed and it will remain the same until your proposal is completed – up to 5 years – can be accelerated. Must be greater than creditors receive in bankruptcy.

Monthly payments vary based on your income. The more you earn, the more you will be required to pay. Possible surplus income payments and pay for certain assets if you want to keep them.

Assets

You will not lose any assets and you are not required to turn over assets your trustee.

You are required to turn over to your trustee certain assets for the benefit of the creditors.

Credit Rating

You will receive an R7 credit rating, which indicates that you have made a settlement with your creditors. This is not a good credit rating, but it is better than a bankruptcy R9. Will be reflected on credit bureau for 3 years after completion. Can start to rebuild credit during proposal period.

You will receive an R9 credit rating, which is the worst rating you can have. Depending on your circumstances, it will remain on your credit report for 7 to 14 years. Will be reflected on credit bureau for 6 years after completion or more if 2nd or more time bankrupt.

Monthly Reporting

You have no monthly reporting.

You are required to complete a monthly budget for all income and expenses, as well as supply copies of your pay stubs to your trustee.

Taxes

You are still entitled to all tax refund(s) and/or credits which you are owed.

You will lose all tax refund(s) and/or credits which you are owed.

Discharge

Discharged upon completion of proposal terms.

First time bankrupt discharged by 9 or 21 months, depending on surplus income.
Second time bankrupt discharged by 24 or 36 months, depending on surplus income.

Credit

You can apply for credit not having to disclose you are in a Consumer Proposal.

You must tell the lender about your Bankruptcy if borrowing more than $1,000.

The following are similar to both consumer proposals and personal bankruptcy:

  • You have to deal directly with secured creditors to settle debts (eg. financed cars or home)
  • Anyone who has co-signed any debt with the debtor is still 100% liable for debts co-signed
  • Stop all collection calls, etc.
  • Payments can be amended if there is a change in financial situation (proposal needs creditor approval)
  • Two mandatory counselling sessions
  • Certain debts not discharged, such as court fines, support arrears, fraud debt, student loans if bankrupt is still a student, or has been out of school for less than 7 years

While consumer proposals and bankruptcy are the top two debt management options, they are not your only options. You can also resolve your debts with effective personal budgeting, debt consolidation loans or with a debt management plan.

Call us at 888-504-1511 or email us to let us help you get control of these problems in a FREE consultation in person or over the phone. We review your options and find out which option above is best for you. We will guide you on your Road to Recovery.

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1.888.504.1511

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