Consumer Proposal vs. Personal Bankruptcy

Do I receive immediate protection from my unsecured creditors?

Consumer Proposal

Immediately upon electronically filing (e-filing) your signed Consumer Proposal documents with the Office of the Superintendent of Bankruptcy (Federal Government) you receive protection against any further action by your unsecured creditors. All legal proceedings, including wage garnishments, bank account seizures and unencumbered asset seizures, are terminated. The Trustee must send notice of your Consumer Proposal to all your creditors by regular mail within 5 business days following the Consumer Proposal filing date.

However, the protection you receive from your unsecured creditors ends if the unsecured creditors refuse to accept your Consumer Proposal and the rights of your unsecured creditors to pursue you for the recovery of your debt is reinstated. If your unsecured creditors refuse to accept your Consumer Proposal, you will be required to explore other debt restructuring plans and a Personal Bankruptcy may be your only remaining option.

Personal Bankruptcy

Immediately upon electronically filing (e-filing) your signed Personal Bankruptcy documents with the Office of the Superintendent of Bankruptcy (Federal Government) you receive protection against any further action by your unsecured creditors. All legal proceedings, including wage garnishments, bank account seizures and unencumbered asset seizures, are terminated. The Trustee must send notice of your Personal Bankruptcy to all your creditors by regular mail within 5 business days following the bankruptcy filing date.

Is acceptance required from my unsecured creditors and the Court?

Consumer Proposal

Within forty-five (45) days of filing your Consumer Proposal, the unsecured creditors vote to accept or refuse your Consumer Proposal. Once your Consumer Proposal is accepted by the required majority of your unsecured creditors, Court approval follows within fifteen (15) days.

If, within forty-five (45) days following the filing of your Consumer Proposal, twenty-five percent (25%) or more, in dollar value, of your proven unsecured creditors refuse to accept your Consumer Proposal, a Meeting of Creditors will be held to further consider your Consumer Proposal.

If a majority of your unsecured creditors refuse to accept your Consumer Proposal at the Meeting of Creditors, the Consumer Proposal process comes to an end. The rights of your unsecured creditors are reinstated and they will reconvene collection action against you for the recovery of your debt.

If your unsecured creditors refuse to accept your Consumer Proposal, you will be required to explore other debt restructuring plans and a Personal Bankruptcy may be your only remaining option.

Personal Bankruptcy

There is no voting process or other form of approval required from your unsecured creditors for your Personal Bankruptcy to be accepted, valid and enforceable. Your unsecured creditors are unable to ignore, refuse, stop or “opt out” of the Personal Bankruptcy process. The decision to file a Personal Bankruptcy is your decision and your decision alone. There is no Court approval process to file a Personal Bankruptcy.

Is there any limitation on the amount I owe to qualify?

Consumer Proposal

To qualify for a Consumer Proposal the amount your debts must not exceed $250,000, excluding the mortgage balance owing on your principle residence. If your debts exceed $250,000 you may want to consider a Division I Proposal, which has no limitations on the amount of your debts.

Personal Bankruptcy

There is no limitation on the total amount of your debts to qualify for a Personal Bankruptcy.

Is a Meeting of Creditors mandatory?

Consumer Proposal

A Meeting of Creditors occurs when twenty-five percent (25%) or more, in dollar value, of proven unsecured creditors request a Meeting of Creditors or refuse to accept the Consumer Proposal within forty-five (45) days following the filing of the Consumer Proposal.

Personal Bankruptcy

A Meeting of Creditors in bankruptcy proceedings is uncommon. Meetings occur only when the value of the non-exempt assets in a bankruptcy exceeds $15,000, or when the unsecured creditors or the Official Receiver request a Meeting of Creditors.

Is it possible that my monthly payments may increase or decrease?

Consumer Proposal

Your payments remain the same throughout the length of your Consumer Proposal regardless of whether your income increases or decreases. An increase or decrease in your income has no influence on your monthly payments.

Personal Bankruptcy

You are required to pay your surplus income to your Trustee during the length of your bankruptcy. If your income increases during your bankruptcy, your surplus income payments increase. Conversely, if your income decreases during your bankruptcy, your surplus income payments decrease.

Can I prepay to complete the process quicker?

Consumer Proposal

The length of a Consumer Proposal ranges from a minimum of ninety (90) days, in which a lump sum payment is provided as a settlement to your unsecured creditors, to a maximum period of five (5) years, in which monthly payments are provided as a settlement to your unsecured creditors.

The payments in a Consumer proposal may be prepaid at any time without penalty. Payment in full brings the Consumer Proposal process to an immediate end.

Personal Bankruptcy

The amount you are required to pay in a Personal Bankruptcy may be prepaid at any time, however prepayment will not bring the bankruptcy process to an end or reduce the length of your bankruptcy.

For a first time bankrupt with no surplus income. the length of the bankruptcy is nine (9) months. For a first time bankrupt with surplus income, the length of the bankruptcy is twenty-one (21) months.

For a second time bankrupt with no surplus income, the length of the bankruptcy is twenty-four (24) months, and for a second time bankrupt with surplus income, the length of the bankruptcy is thirty-six (36) months.

Is it possible to defer my monthly payments and extend the process?

Consumer Proposal

If three (3) payments are missed during the term of your Consumer Proposal your Consumer Proposal is “deemed annulled” which means it is brought to an end on the day in which the third payment is missed.

If you remedy the default in payments within thirty (30) days following the deemed annulment date, your Consumer Proposal may be revived without the Proposal Administrator having to obtain Court approval to revive your Consumer Proposal. If you remedy the default in payments beyond thirty (30) days following the deemed annulment date, the Proposal Administrator may, in certain circumstances, apply to the Court for an Order to revive your Consumer Proposal.

Alternatively, where your financial circumstances have changed and you can no longer afford to make the payments you agreed to make in your Consumer Proposal, you may file an Amended Consumer Proposal. The Amended Consumer Proposal must be presented to your unsecured creditors and the unsecured creditors will vote to accept or reject your Amended Consumer Proposal.

Deferring one or two payments in a Consumer Proposal is possible, but not recommended. Whenever defaults in the payment terms of a Consumer Proposal occur, there is a risk that the Consumer Proposal process will be terminated and the rights of your unsecured creditors will be reinstated.

Personal Bankruptcy

You may make monthly payments of an amount less than the monthly payment required under the Superintendent’s Standard, which is referred to as your surplus income payment. You may also defer your monthly surplus income payments from time to time during the bankruptcy term length. Reductions or deferrals in your monthly surplus income payment will extend the length of your bankruptcy. You will not receive a discharge from bankruptcy until all surplus income payments have been paid in full.

Do I have to attend financial counseling sessions?

Consumer Proposal

You are required to attend two (2) financial counselling sessions. The first counselling session must be completed within sixty (60) days following the date of your Consumer Proposal. The second counselling session must be completed within two hundred ten (210) days following the date of your Consumer Proposal.

At Faber we perform one on one counselling sessions. We do not perform group counselling sessions and we do not engage third party financial counsellors to perform counselling sessions.

All Faber financial counsellors are Certified Insolvency Counsellors, having successfully completed the Insolvency Counsellor’s Course offered by the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).

Personal Bankruptcy

You are required to attend two (2) financial counselling sessions. The first counselling session must be completed within sixty (60) days following the date of your bankruptcy. The second counselling session must be completed within two hundred ten (210) days following the date of your bankruptcy.

At Faber we perform one on one counselling sessions. We do not perform group counselling sessions and we do not engage third party financial counsellors to perform counselling sessions.

All Faber financial counsellors are Certified Insolvency Counsellors, having successfully completed the Insolvency Counsellor’s Course offered by the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).

Do I have to submit monthly Income and Expense statements?

Consumer Proposal

There is no requirement to complete or submit monthly Income and Expense statements or provide documentation to verify income.

Personal Bankruptcy

You are required to complete and submit to your Trustee monthly Income and Expense Statements disclosing the net monthly income and the monthly living expenses of the family unit. You must provide documentation to verify the monthly income earned and the non-discretionary expenses claimed, however there is no requirement for you to provide documentation to verify your monthly living expenses.

Will I lose my income tax refund(s)?

Consumer Proposal

There is no requirement for you to surrender your income tax refunds to your Trustee for the benefit of your creditors. You will continue to receive your income tax refund for the year in which you file your Consumer Proposal and all future years during the length of your Consumer Proposal.

Personal Bankruptcy

Income tax refunds for the year in which you declare bankruptcy are surrendered to your Trustee for the general benefit of your unsecured creditors. Future years income tax refunds are unaffected regardless of the length of your bankruptcy.

Will I lose my GST refunds?

Consumer Proposal

Your GST refunds will continue to be remitted directly to you by the Canada Revenue Agency throughout the length of your Consumer Proposal.

Personal Bankruptcy

Your GST refunds will be remitted to your Trustee by the Canada Revenue Agency during the length of your bankruptcy. Once you are discharged from bankruptcy your Trustee will forward to you all the GST refunds the Trustee received during your bankruptcy. In certain circumstances where you default in the performance of your duties, the Trustee may retain your GST refunds for the general benefit of your creditors.

Is it possible that I may lose some of my assets or property?

Consumer Proposal

There is no requirement to surrender non-exempt assets or repurchase non-exempt assets. Generally, in a Consumer Proposal, you retain possession of all your assets.

Personal Bankruptcy

Non-exempt asset(s) must be surrendered to your Trustee or you may repurchase the non-exempt asset(s) from your Trustee during the bankruptcy, usually for an amount equivalent to the auction value of the non-exempt asset(s).

When you elect to repurchase the non-exempt assets from your Trustee, you will be required to pay for the non-exempt assets in full prior to being eligible to receive a discharge from bankruptcy.

Will my credit rating be affected?

Consumer Proposal

You will receive an R7 credit rating when you file a Consumer Proposal. The R7 rating will remain on your credit report for three (3) years from the date you complete the Consumer Proposal and receive your Certificate of Full Performance.

Personal Bankruptcy

You will receive an R9 credit rating when you file a Personal Bankruptcy, which is the lowest rating. The R9 rating will remain on your credit report for six (6) years following the date of your discharge from bankruptcy, or fourteen years (14) from the date of your discharge from bankruptcy when you have multiple bankruptcies.

An R9 rating is also assigned to you if you have a bad debt, or your debt has been assigned to a collection agency, or you have moved without providing the creditor with a forwarding address.

Can I be a director of a limited corporation?

Consumer Proposal

There is no restriction in your being a director of a corporation when you file a Consumer Proposal.

Personal Bankruptcy

The federal and provincial corporation acts prohibit a bankrupt from being a director of a corporation. When you file a Personal Bankruptcy you must resign as director of a corporation.

Do I have to disclose the status of my financial situation if I enter into a business transaction?

Consumer Proposal

There is no requirement for you to disclose that you have filed a Consumer Proposal when you enter into a business transaction.

Personal Bankruptcy

If you enter into a business transaction, either as a consumer or by operating a business as a sole proprietor, you are required to disclose the status of your being in bankruptcy.