Consumer proposal vs bankruptcy faqs
We’ve prepared this online video to answer the consumer proposal vs. bankruptcy FAQs that we are normally questioned. This information will hopefully help you understand better exactly what a Consumer Proposal is and how it will also help you clear the money you owe and AVOID individual bankruptcy.
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The most asked consumer proposal vs bankruptcy FAQs
Consider some of the advantages of the consumer proposal vs bankruptcy, such as:
- You keep all of your assets
- Actions against you by creditors, such as wage garnishments are going to be stopped
- Unlike informal unsecured debt settlement, the consumer proposal is a forum where all of your creditors must handle your restructuring
- You don’t need to declare bankruptcy
Additional reasons are:
- The opposed bankruptcy discharge process is not quick. Courts are backed up so your bankruptcy discharge hearing may not happen for many months. So think of 4 months or more being added on to the 21 or 36 months you have already spent in bankruptcy.
- The discharge hearing is a Court process. Sometimes, for valid reasons, the Court has to adjourn a hearing. What if it takes another 6 months for your discharge hearing to come back up again? You have now been in bankruptcy perhaps for over 4 years at this stage.
- If you could restructure by filing and completing a (consumer) proposal, you are not going to get an absolute discharge from the Court. The Court will most likely give you a conditional discharge. This is a discharge where you have to fulfill a condition being the payment of money to your LIT. The repayment will be in the form of monthly payments over a certain period; perhaps 12 months. You are now in bankruptcy, in this example, for close to 5 years.
- In a (consumer) proposal, the maximum time period for making the monthly payments that either the statute or your creditors, be prepared to wait is 60 months. However, there is nothing stopping you from paying it off early if you can. Consider the (consumer) proposal as someone giving you an interest-free loan for up to 60 months, and this loan is just a fraction of the total of your debts, and once you pay off this fraction, all of your debts (other than certain ones such as student loans, child support, and alimony) are all eliminated.
- In a (consumer) proposal, the self-reporting you need to do with your LIT is significantly less than in a bankruptcy. In a restructuring, all your LIT really cares about is that you don’t miss a payment.
- During your bankruptcy, you will have to report your monthly income and expenses to your Licensed Insolvency Trustee (“LIT“). The LIT is required to perform the surplus income calculation again and if your new income means that your surplus income obligation has increased, then you have to make up the difference by paying more surplus income to your LIT to get your discharge from bankruptcy. In a restructuring, the amount you initially agreed to pay that your creditors accepted, is the same amount you pay. There is no monthly reporting of your income to your LIT and no recalibration to an increased amount if your income rises.
If you win a lottery or receive an inheritance while being an undischarged bankrupt, you have to pay that over to your LIT for the benefit of your creditors. If the amount is more than needed to pay your creditors off in full, with interest, then you receive the difference back. In a (consumer) proposal restructuring, if you receive such an amount, good for you. You get to keep it and if you like, you can use part of it to pay off your (consumer) proposal early.
Excessive debt? Get the help you need now!
We hope you enjoy this video about consumer proposal vs bankruptcy. Click on this link to find out more about Consumer Proposals. You can also have many of the questions about bankruptcy answered by exploring our Bankruptcy FAQs link.
Instead of going deeper into debt and just putting your head inside sand like an ostrich, heed the advice of a licensed insolvency trustee and contact us today. Seek the help from a professional trustee, even if you’re definitely not considering bankruptcy at this stage.
We will evaluate your situation and provide help to arrive at the ideal solution for the problems, whether that solution is a bankruptcy alternative similar to credit counselling, consolidating debts or a customer proposal or individual bankruptcy. With immediate action as well as the right plan the Ira Smith Team can solve the financial problems Starting Over, Starting Now. We’re just a phone call away.
