If it is possible in your situation, it may be advantageous to file a consumer proposal rather than declare a personal bankruptcy.
A consumer proposal is an offer you make to reimburse your creditors. This simplified procedure allows you to:
- suspend the proceedings instituted against you by your creditors;
- keep most of your property;
- retain your right to professional practice, if applicable;
- repay some of your debts interest-free.
The impact on your credit rating is also reduced, since the note will be removed from your file three years after your proposal is implemented.
A consumer proposal may be completed quickly if it is based on a single lump-sum payment (generally through a loan made on condition that your creditors accept your proposal).
You can make a consumer proposal if the total amount of your debts, excluding the hypothec on your main residence, is less than $250,000.
You must also ensure that you will be able to comply with the conditions of your proposal and obtain the approval of your creditors.
Your repayment offer cannot exceed a period of 5 years.
You must also be aware that the gain resulting from the settlement of some of your debts may have a major tax impact.
A consumer proposal is deemed to have been accepted unless, within 45 days of the filing of the proposal, creditors holding 25% of the total value of the proven claims have requested a meeting, or unless the sequestrator has requested a meeting.
Similarly, it is deemed to have been approved by the court unless, within an additional period of 15 days, no court hearing has been requested to review the proposal.
If a meeting of creditors is called, your proposal is accepted if it receives a majority of votes, based on the total monetary value of the claims. In other words, each creditor has a number of votes corresponding to the value, in dollars, of his or her claim.
If your proposal is not accepted or you fail to make payments
If your proposal is not accepted by your creditors, you will not be made automatically bankrupt. You will also not be made bankrupt if you fail to make payments or fail to comply with the conditions of your proposal.
However, in both cases, your creditors may resume any steps they have begun (for example, charging interest on your debt, contacting a collection agency, carrying out a seizure or instituting proceedings).
If your proposal is cancelled, you will not be able to present a new consumer proposal until you have paid all the debts in your first proposal, in full.
For more information on consumer proposals, you should contact a licensed insolvency trustee or a legal advisor.