Are there different types of proposals?
Yes, there are two types: consumer proposals and proposals under Division 1 of the Bankruptcy and Insolvency Act.
Who can make a consumer proposal?
An insolvent person whose debts are less than $250,000, not including their home mortgage.
What are the fees in a consumer proposal?
The fees are set by the government and are the same across Canada.
How is my consumer proposal accepted by the creditors?
Your creditors have 45 days in which to respond to your proposal. If no creditors respond or your creditors vote yes, your proposal is approved pending Court approval. However, if more than 25% of your creditors vote no a meeting must be held in which your creditors vote whether or not to accept your proposal.
What happens if my proposal is not accepted?
You will no longer be protected by the Bankruptcy and Insolvency Act and your creditors will be able to take legal steps to recover their debts from you. The option of filing an Assignment in Bankruptcy is still available.
What if I owe more than $250,000?
You may file a proposal under Division 1. If this proposal is rejected by your creditors, automatic bankruptcy results. The fees are based on the Trustee's time charges as opposed to a fee set by the Government.
Are my spouse's assets or debts included in my bankruptcy or proposal?
No. Only assets owned by you are included. If assets are jointly owned, then your portion may have to be sold. If most of your assets and debts are joint with your spouse, then it may be appropriate for a joint bankruptcy or consumer proposal to be made.
Do I require a lawyer if I go bankrupt or make a proposal?
Generally, you do not require a lawyer to go bankrupt. If you feel the need for legal advice and cannot afford a lawyer, legal aid may be available.
What about my secured creditors if I go bankrupt?
In most cases, bankruptcies and consumer proposals do not affect the rights of secured creditors. If a creditor has a valid security against your property (i.e., car or house), and if you can afford monthly payments, financial arrangements may be made with the secured creditor to keep the property and continue paying for it.