Bankruptcy versus Consumer Proposal – Part three of a Series

by Joel Sandwith on November 23, 2010

Last week I posted the second of a series of blogs that will show the differences between consumer proposals and personal bankruptcies.  If you are experiencing financial difficulty, either of these options may be helpful to you.  These articles are intended to shed a little light on each of them for you – but make sure that you contact us if you’d like a more specific evaluation of your situation.

This week I want to explain the differences DURING the process, what you have to do and how long it may last.  The following is a relatively simple outline of each process, be sure to read more info on this blog and click on any highlighted links for more detail.

In a bankruptcy, there are many ‘duties’ that must be accomplished in order to complete the process.  And, although it is possible to complete a bankruptcy in as little as nine months, there are several things that can extend it.

The first is a previous bankruptcy – if you have been bankrupt once before, your second bankruptcy will take at least 24 months to complete, possibly more.  If you have been bankrupt more than once before, you will have to appear in Court and the Court will then decide how long you are in bankruptcy, or whether you can even be discharged at all.

The second is if there is an ‘opposition’ to your discharge – click on that highlighted link for more information as to how that works, its important information if you are considering bankruptcy.  If one of your creditors or your trustee opposes your discharge, it will extend your bankruptcy, and in most cases you will need to appear in Court to learn how long your bankruptcy will take, and whether you will have pay money into the bankruptcy to get your discharge. 

The third thing that can extend bankruptcy is surplus income – again, click on that highlighted link.  Surplus is a concept that can be hard to understand when you are struggling financially.  Essentially, in a bankruptcy, your Trustee, acting according to the Bankruptcy Act, will measure your income each month, and if it rises above certain levels, you may have to pay money into the bankruptcy, and this alone can extend your bankruptcy by twelve months.

Compare all of this to a consumer proposal – assuming a consumer proposal is the right choice for you, it can be very simple.  Once we have helped you to decide how much to offer your creditors, the creditors vote on the proposal.  If a simple majority of votes accepts the proposal, all the creditors are bound by it.  They get 45 days to vote.  Then, the proposal runs for whatever length of time you’ve chosen – up to 60 months.  If you earn more money during that time, you are welcome to pay the proposal off as quickly as you like.  Once accepted, there is no chance of opposition, or extension due to income – in fact, you are not required to report your income to your trustee at all.  Your responsibility is  to make those payments.

Next week, we’ll continue this series, and talk a little about rebuilding credit after a bankruptcy versus after a consumer proposal.  Soon, we’ll also look at what happens if you come into money during a bankruptcy or a consumer proposal, and how that is handled.   For now, if you need help to learn more about your options call us at Hoyes, Michalos, toll free at 310-PLAN.

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