April 5, 2021 | 
Bankruptcy Consumer Proposal

Bankruptcy is a tough topic. Whether you’re a consumer or a business, it creates stress for everyone involved.

Filing for bankruptcy means you surrender your assets or property to a Licensed Insolvency Trustee to settle your debts with creditors.

You might feel like all hope is lost when you file a bankruptcy, but that’s not the case.

With the right help and advice, you can restructure your finances to overcome your financial challenges.

Bankruptcy Rates in British Columbia

Insolvency leads to bankruptcy and British Columbia is leading the insolvency rise in Canada with a 14% increase in consumer insolvencies from September to October 2020.

2020 saw a total of 80 business bankruptcies and 2609 consumer bankruptcies. The construction industry saw the most amount with 12 filed in the one-year period and the manufacturing and retail trade industries tied second with 11 filed bankruptcies.

Although bankruptcies filed in 2020 were lower than the amount filed in 2019, it doesn’t mean that fewer people were financially pressured. Government support, mortgage deferrals, and other financial relief during the COVID-19 pandemic have managed to keep many consumers and businesses afloat. But this support won’t always be there.

Filing a Consumer Bankruptcy

As a consumer filing for bankruptcy, you will be eligible for an automatic discharged in 9 months if there is no surplus income. Otherwise, you will be eligible for an automatic discharged in 21 months.

Before you become discharged from your obligations, you must:

  • Report your income to a Licensed Insolvency Trustee monthly.
  • Make monthly payments and surplus income payments to the trustee.
  • Complete 2 mandatory in-person, credit counselling appointments.
  • Hand over all inheritances and lottery winnings to the trustee.

Not your first time filing for a consumer bankruptcy? Then, the process becomes more complicated and there are longer implications on your credit rating.

If you have no surplus income, you can be automatically discharged after 24 months. However, if you are required to make surplus payments, you must make them for 36 months before being eligible for an automatic discharge.

Filing a Business Bankruptcy

As a business filing for bankruptcy, the process depends on what type of business you are filing for.

The assets of a sole proprietorship are handed over to the Licensed Insolvency Trustee when the owner files for a consumer bankruptcy.

If a partnership files for bankruptcy, the partners generally must file for bankruptcy as well since they are jointly responsible for all the business’ debt.

For a corporation, it’s possible for the company to file for bankruptcy without the shareholders having to file unless they have signed personal guarantees or in specific cases set out by law. The same is true for the reverse. If a shareholder files for bankruptcy, the Licensed Insolvency Trustee will value the equity of the shares and may have to take ownership of the shares.

Bankruptcy Isn’t the Only Option

When you file for bankruptcy, your monthly payments increase if your financial situation improves.

That’s why filing a consumer proposal might be a better option depending on your situation.

Only a Licensed Insolvency Trustee can help you file a consumer proposal. They will assess your financial situation and present your creditors with an offer that reduces your overall debt. You will then make monthly payments to your trustee who will disperse the amount to your creditors over an interest-free period of up to 5 years. Keep in mind that a consumer proposal can be fully paid off at any time.

There are several benefits to a consumer proposal such as:

  • Stops creditors from collecting;
  • Allows for a single low interest-free monthly payment;
  • Can be fully paid at any time with no additional costs, and more.

To help you determine which option available is the best one for you, it’s beneficial to get expert advice from a Licensed Insolvency Trustee. At Douglas Loiselle and Associates, our team of financial restructuring experts will assess your situation and provide a solution that’s specifically designed for you. For more information about booking a free initial consultation, visit www.dldebthelp.ca or call us at 1-877-732-5457.