In­sol­ven­cies – Bank­ruptcy and Con­sumer Pro­pos­als, Oh My!

The Victoria Standard - - Business - MAR­I­ANNE STEELE-MACSWEEN, LIT

In­sol­ven­cies – bank­ruptcy and con­sumer pro­pos­als, are hot words in the debt re­lief com­mu­nity. Have you ever won­dered what these words re­ally mean to some­one fac­ing a fi­nan­cial cri­sis?

Ev­ery day, I work with peo­ple who are over­whelmed and con­fused by what op­tions are avail­able to them. I un­der­stand that these buzz words can be in­tim­i­dat­ing, es­pe­cially when you’re faced with in­creased stress due to fi­nan­cial hard­ship.

The Of­fice of the Su­per­in­ten­dent of Bank­ruptcy has re­leased the 2017 statis­tics. Here is a break­down of how Nova Sco­tians faired com­pared to 2016: • In to­tal, there were 5773 fil­ings, which is a de­crease of 4.2% • Bankrupt­cies de­creased by 9.5% •Con­sumer pro­pos­als in­creased by 8.7%

Be­cause ev­ery sit­u­a­tion is unique, it is im­por­tant that you work with a Li­censed In­sol­vency Trustee (LIT) to de­ter­mine your best path for­ward. Both bank­ruptcy and con­sumer pro­pos­als are le­gal pro­cesses that pro­vide im­me­di­ate re­lief from un­se­cured debt, but there are sig­nif­i­cant dif­fer­ences be­tween the two.

Let’s start with con­sumer pro­pos­als. If you owe be­tween $1,000 and $250,000 in un­se­cured debt and you can re­pay a por­tion of this, a con­sumer pro­posal may be your bet­ter op­tion.

How­ever, if you owe $1,000 or more, do not have the abil­ity to pay your debts and your as­set value is less than your debt amount, bank­ruptcy might be the route you must take. There is no limit to the amount owed over $1,000.

A con­sumer pro­posal is a for­mal agree­ment with your cred­i­tors. The cred­i­tors vote on the pro­posal. The pro­posal terms are based on your abil­ity to re­pay your debt. Con­sumer pro­pos­als of­fer more flex­i­bil­ity and ex­am­ine your fi­nan­cial sit­u­a­tion to pro­pose a re­al­is­tic re­pay­ment plan. You re­tain pos­ses­sion and own­er­ship of your as­sets. You are re­quired to at­tend two fi­nan­cial coun­selling ses­sions.

Bank­ruptcy is a struc­tured process with no flex­i­bil­ity. You can vol­un­tar­ily as­sign your­self into bank­ruptcy or a cred­i­tor can place you into bank­ruptcy through a Court Or­der. Upon bank­ruptcy, all your as­sets vest with the LIT, in­clud­ing tax re­funds (some ex­emp­tions ap­ply). The LIT has a duty to liq­ui­date as­sets that have value and dis­burse the re­sult­ing funds to your cred­i­tors. With bank­ruptcy, you must com­plete monthly bud­get sheets and at­tend two fi­nan­cial coun­selling ses­sions. The process for a first­time bank­rupt is from 9 to 21 months, and for a second time bank­rupt, from 24 to 36 months.

If you feel like you are buried in debt and can’t get your head above wa­ter, I strongly rec­om­mend that you speak to a LIT about your op­tions. Con­sumer pro­pos­als and bankrupt­cies are last re­sorts. It may not be too late to seek other op­tions, like work­ing with cred­i­tors, re­quest­ing lower pay­ments or re­duced in­ter­est rates, or con­sol­i­dat­ing your loans.

I in­vite you to email me at trustee@mgm.ca with ques­tions you would like an­swered in this ar­ti­cle, or just to chat more about your debt re­lief op­tions.

For more than 30 years, Macken­zie, Gil­lis, Mac­dou­gal Inc., Li­censed In­sol­vency Trustee, op­er­at­ing as MGM Trustee, has helped thou­sands of peo­ple take con­trol of their fi­nances. With mul­ti­ple lo­ca­tions through­out Cape Bre­ton, our com­pas­sion­ate, knowl­edge­able and ex­pe­ri­enced team is here for you.

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