Proposal or Bankruptcy

October 15, 2020

Proposal or Bankruptcy?  It’s your choice either one will have an impact on your credit report, either one will require you pay some money and either one will help you get out of debt.

Q:  How long does it take to finish a proposal or a bankruptcy?

A:  A first time bankruptcy will take between 9 – 21 months to complete.  A proposal can be completed within about 3 – 60 months depending on the payment terms.

Q:  How much does it cost to file a bankruptcy?

A:  There are a lot of variables involved so that question cannot be accurately answered without a consultation, but for a typical first-time bankruptcy (with no assets or surplus income) the fee is usually around $200 per month for 9 months.

Q:  How much does it cost to file a proposal?

A:  LITs (proposal administrators) are paid a percentage of the money recovered under the proposal, according to a tariff established by the government.

Q:  Can a bankruptcy be discharged before the 9 months?

A:  Yes, in rare circumstances, with compelling reasons, the court may grant an early discharge, it is usually done on a consent to judgement in the event that the bankrupt individual does not fulfill the balance of any outstanding duties.  Which means the bankrupt acknowledges there are still things that must be done, and they agree that if they do not follow through the LIT may apply to court to enforce their compliance. 

Q:  How does a bankruptcy affect a credit report?

A:  A first time bankruptcy will sit on a credit report for 6 years following the discharge, a second (or more) time bankruptcy will show for 14 years following discharge.

Q:  How long will a proposal affect a credit report?

A:  A proposal will stay on a credit report for 3 years following completion.

Q:  Can I get credit during a bankruptcy or a proposal?

A:  Yes, different types of credit are available but usually at an extremely high interest rate.

Q:  How long after completing a bankruptcy or proposal before I can re-establish credit?

A:  Most people can start to re-establish credit immediately after finishing their bankruptcy or proposal.  But it is a process, at first having access only to high-risk credit and gradually improving over months or years to follow.

Q:  Do I have to sell my house and car if I file a bankruptcy or a proposal?

A:  No, that is not a requirement under the law, your LIT will talk to you about the equity you may have in any of your assets, how much of that is exempt and how much you will have to make payments for, in order to re-purchase the equity in the asset.

Q:  Do I have to declare CERB as income?

A:  CERB does not exist as far the Bankruptcy and Insolvency Act applies, so collecting CERB is irrelevant.

Q:  What happens to my spouse if I file bankruptcy or a proposal?

A:  The only concerns your spouse would have if you are filing and your spouse isn’t is that s/he would still be responsible for the full outstanding balance of debts that are joint and you might not be a viable co-signer for some debts until you are discharged or have completed your proposal.

Q:  Can my spouse file a joint file with me?

A:  You should ask your LIT about your specific situation but generally speaking if your debts are very similar it may make sense for you to file jointly.  Filing jointly is also more affordable for you since you will only have one set of fees to contend with.

Q:  How can I get started or learn more information?

A:  Call the office at 519-646-2222 or email to arrange for a virtual consultation without any obligation.