BANKRUPTCY VS PROPOSAL

Are you wondering what the best solution is to resolve your debt problems in Ontario?

Bankruptcy and consumer proposal are the top two debt relief options available in Ontario. While both will resolve your debts and provide legal protection from creditors, there are differences between them. Find out exactly what these differences are:

Topics Consumer Proposal Personal Bankruptcy
Who can claim? You must have the ability to repay a portion of your debts. A proposal must be accepted by your creditors by simple majority. Any person, who owes more than $1,000 in debt, is eligible to file a personal bankruptcy in Canada. Ideal candidates are those who need rapid financial relief and the ratio between debts and income is too great.
Debt limit Must be less than $250,000 in debt (excluding mortgage on personal residence). If more a DIV1 Proposal applies There is no limit on the size of debt load.
Payments Once your creditors agree to a proposal amount, your monthly payment is fixed and it will remain the same until your proposal is completed (you can pay sooner if you want, there is no penalty). Monthly payments vary as they are based on your household income (Surplus Income Calculation). The more you earn, the more you will be required to pay.
Assets You will not lose any assets and you are not required to surrender anything, unless you want to make them part of your repayment. In order to be absolved of your debts you are required to surrender certain assets, or make an arrangement to pay for them off to be able to keep them.
Credit Rating You will receive an R7 credit rating which indicates that you have made a settlement with your creditors and will stay as R7 for three years after making your last payment. This is not a good credit rating, but it is better than a bankruptcy R9. You will receive an R9 credit rating, which is the worst rating you can have. Depending on your circumstances, it will remain on your credit report for 6 years for a first time bankrupt.
Monthly Reporting You have no monthly tasks or reporting. You are required to complete a monthly budget for all income and expenses, as well as supply copies of your pay stubs to your trustee.
Taxes You are entitled to all tax refund(s) and/or credits which you are owed. You will lose any tax refund(s) for the year that you file your bankruptcy and any previous years that you have not filed.

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