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Many individuals who file for bankruptcy are honest, hard-working people who file as a last resort after years of struggling to pay their bills. Their financial difficulty may be the result of a divorce, the loss of a job, a failed business venture, a serious illness, or even a family emergency. The idea behind personal bankruptcy is to permit an honest person in an unfortunate situation the option to eliminate their debts and focus on building a brighter financial future.

One benefit of filing for bankruptcy is that upon filing you will receive immediate protection from your creditors. This is referred to as a “stay of proceedings” and will bring an end to stressful collection calls, threats from collectors, wage garnishments and legal actions.

Below we explore the differences between consumer proposals and bankruptcy in order to help you make an informed financial decision:

Bankruptcy Consumer Proposal
Suitable for anyone who has more than $1,000 of unsecured debt. No upper limit. Suitable for as little as $1,000 of unsecured debt to as much as $250,000 (excluding mortgage).
Keep up to $32,000 in “exempt” assets. Keep your assets, such as your house, vehicle and RRSPs.
Monthly payments based on your income or surplus income* Fixed monthly payments until end of proposal (up to five years).
All tax refund(s) and/or GST credits must be surrendered (does not include child tax credits). Keep all of your tax refund(s) and/or tax credits.
Cannot act as a director of a limited company; however, you can be self-employed. Can continue to act as a director of a limited company.
Reporting of all income and expenses must be submitted to your trustee monthly. No income and expense reporting required.
R9 credit rating. Affects rating for the period of bankruptcy plus six years after discharge for a first bankruptcy. R7 credit rating. Affects rating for repayment period plus three years after last payment.

Surplus Income

*Surplus income is a calculation based on your net monthly earnings that determines whether or not you are required to contribute a portion of your earnings to your bankruptcy. The Office of the Superintendent of Bankruptcy sets a limit of income based on your family size. If your average net income is over the limit by $200 or more per month, you will be required to pay surplus income.

If you have surplus income and you are filing bankruptcy for the first time, your bankruptcy period will be extended to 21 months, rather than 9 months. If you are a second time filer and you have surplus income, your bankruptcy period will be extended to 36 months, rather than 24 months.

For more information about surplus income watch our short video here or use our online calculator to determine how much surplus income you will pay based on your circumstances.

Other Resources

If bankruptcy is not an option, a consumer proposal may be a good alternative to solve your debt problems. For a simplified approach to bankruptcy, watch one of these short videos here.

If you think that personal bankruptcy could be an option for you, contact one of our trusted Licensed Insolvency Trustees today or download our helpful bankruptcy information sheet click here.

Terry Rogers

Licensed Insolvency Trustee
Contact Terry

Greg Best

Licensed Insolvency Trustee
Contact Greg

Shelley Koehli

Licensed Insolvency Trustee
Contact Shelley

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