Insolvencies – bankruptcy and consumer proposals, are hot words in the debt relief community. Have you ever wondered what these words really mean to someone facing a financial crisis?
Every day, I work with people who are overwhelmed and confused by what options are available to them. I understand that these buzz words can be intimidating, especially when you’re faced with increased stress due to financial hardship..
The Office of the Superintendent of Bankruptcy has released the 2017 statistics. Here is a breakdown of how Nova Scotians faired compared to 2016:
– In total, there were 5773 filings, which is a decrease of 4.2%
– Bankruptcies decreased by 9.5%
– Consumer proposals increased by 8.7%
Because every situation is unique, it is important that you work with a Licensed Insolvency Trustee (LIT) to determine your best path forward. Both bankruptcy and consumer proposals are legal processes that provide immediate relief from unsecured debt, but there are significant differences between the two.
Let’s start with consumer proposals. If you owe between $1,000 and $250,000 in unsecured debt and you have the ability to repay a portion of this, a consumer proposal may be your better option.
However, if you owe $1,000 or more, do not have the ability to pay your debts and your asset value is less than your debt amount, bankruptcy might be the route you must take. There is no limit to the amount owed over $1,000.
A consumer proposal is a formal agreement with your creditors. The creditors vote on the proposal. The proposal terms are based on your ability to repay your debt. Consumer proposals offer more flexibility and examine your financial situation to propose a realistic repayment plan. You retain possession and ownership of your assets. You are required to attend two financial counselling sessions.
Bankruptcy is a structured process with no flexibility. You can voluntarily assign yourself into bankruptcy or a creditor can place you into bankruptcy through a Court Order. Upon bankruptcy, all your assets vest with the LIT, including tax refunds (some exemptions apply). The LIT has a duty to liquidate assets that have value and disburse the resulting funds to your creditors. With bankruptcy, you must complete monthly budget sheets and attend two financial counselling sessions. A Certificate of Discharge (release from bankruptcy) is obtained after a 9 or 21 month administration period of a first time bankrupt (income determines length of time – 9 or 21 months). The credit bureau’s policy is to remove the bankruptcy dates 6 years from the date of discharge.
If you feel like you are buried in debt and can’t get your head above water, I strongly recommend that you speak to a LIT about your options. Consumer proposals and bankruptcies are last resorts. It may not be too late to seek other options, like working with creditors, requesting lower payments or reduced interest rates, or consolidating your loans.
I invite you to email me at firstname.lastname@example.org with questions you would like answered in this article, or just to chat more about your debt relief options.
For more than 30 years, MacKenzie, Gillis, MacDougal Inc., Licensed Insolvency Trustee, operating as MGM Trustee, has helped thousands of people take control of their finances. With multiple locations throughout Cape Breton, our compassionate, knowledgeable and experienced team is here for you.