Bankruptcy is a legal process governed by the Bankruptcy and Insolvency Act for a person who can no longer pay back debt. The person who owes the debt assigns all assets — with some exceptions which are governed by Provincial legislation — to a trustee in bankruptcy who sells the assets that are not exempt to help pay your debt to the creditors.
A Consumer Proposal is a formal offer by a debtor to creditors. This may include an offer to pay a percentage of the debt, pay back the debt over a period of time (maximum of 60 months), or some combination of both.
This option is available to individuals whose total debt does not exceed $250 000, not including debts secured by their principal residence.
Division I (Commercial) Proposal
A Division I (Commercial) Proposal is a formal offer by a debtor to creditors. This may include an offer to pay a percentage of the debt, pay back the debt over a longer period of time, or both. Unlike a consumer proposal there is no limit with respect to how much money is owed, nor is there a limit to the number of months that you may choose to make in your offer to make monthly payments.
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Rumanek & Company Ltd. – Trustees in Bankruptcy & Administrators of Proposals
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I met with a couple today who were filing a consumer proposal.
We were talking about how they got into this financial mess when it came out that they read about bankruptcy and consumer proposal a while ago but did nothing.
I asked why they did nothing and they said they did not believe it was true that debts can be wiped out. They thought it was a scam. So I then asked what changed your mind. The answer was they were speaking with a family member who dealt with us in the past and they verified that debts in Canada can be wiped out. This resulted in a telephone call and a subsequent proposal.
The most difficult part of filing for a bankruptcy or proposal is calling a trustee and meeting with someone to have a conversation about your options.
I have noticed that people getting into financial difficulty seem to be getting younger than in prior years. I hope that this is not just myself getting older. It is an obligation that we have as parents to train our children to understand what it means to earn money and to not foolishly spend it.
Simply giving them an allowance is not good enough. They should do something simple such as making their bed, cleaning the kitchen table after dinner or cutting the grass in order to earn the allowance. The concept or work equals money is very important when training young children. As they grow older and want to play organized sports, go to camp or go on trips, it is wise to have them get a part time job to pay a small portion of the cost. If they are going to university, there are several months of time off in the summer to find a part time job which teaches them about money, time management, discipline and much that will help them in school and their future job. If you decide to introduce your children to a credit card, consider having a very serious discussion about the credit card being for emergency use only. The options are to give them their own low limit card (which often requires the parent to guarantee) or to give them a duplicate card from the parent’s credit card. The downside to the latter is that they can have access to the entire limit on your credit card.
As a parent, your duty is to properly train your children, have faith that they learned what you taught them and pray they do not abuse the freedom that they have as they grow older.