How long does a bankruptcy last?

The length of the bankruptcy depends on a few factors – whether you have ‘surplus income’ (see below) and whether you have been bankrupt before. If you have no surplus income and have never been bankrupt before, you will be eligible for an automatic discharge after nine months.

How long does the Consumer Proposal last?

A Consumer Proposal must be completed within 5 years. Usually the payments are monthly (over 60 months), but a Consumer Proposal can also include a lump sum payment, or a combination of the two. If your finances allow, you can pay it off sooner than the agreed-upon payment schedule lays out.

What is a bankruptcy?

A bankruptcy is a legal process to discharge your debts. It is a declaration that your debts are too high for you to repay – and far better than the old concept of a ‘debtor’s prison’! It allows for a fresh start, while giving your creditors some return on what’s owed only if you have a level of income that allows for payments to be made to them, or unprotected assets that can be liquidated (however, most common assets are protected during this process – see below for more information on protected personal assets).

What is a Licensed Insolvency Trustee (LIT)?

Licensed Insolvency Trustees (LITs) are federally regulated professionals who provide advice and services to individuals and businesses to reorganize and resolve financial difficulties with expertise and compassion. LITs help individuals or businesses make informed choices to deal with their financial difficulties. They are the only professionals able to administer bankruptcies or proposals.

Home » Blog » How a Consumer Proposal Helped a Retiree Decrease Debt by 66% After The Loss of a Partner

How a Consumer Proposal Helped a Retiree Decrease Debt by 66% After The Loss of a Partner

Q: What is a Consumer Proposal?

A Consumer Proposal is an offer to your creditors to pay back a percentage of what you owe them, based on your ability to pay. It is governed by the Bankruptcy and Insolvency Act, administered by a Licensed Insolvency Trustee. Unlike other negotiated debt settlement plans, it is legally binding on all creditors and usually involves paying back less than the total amount of your debt.

Dealing with the loss of a loved one and facing financial challenges can be incredibly overwhelming and incredibly hard. Here’s a real-life example of how we assisted a BC resident in reducing their debt by 66% through a consumer proposal after the loss of her husband.

The Situation

We began working with a 59-year-old widowed resident of British Columbia who was supporting their 19-year-old child through their studies. Since the passing of her spouse in 2022, she faced a series of financial hardships exacerbated by deceitful online phishing.

We always recommend being mindful when sharing financial information online. Cyber attackers often use deceptive tactics, such as convincing emails, fake websites, and misleading messages, to trick you into revealing sensitive details like passwords and credit card numbers. Always verify the authenticity of any request for personal information to protect yourself from potential scams and fraud.

Scammers provided excuses ranging from needing funds to resolve legal issues in their home country to promising an inheritance or help for a sick child in the USA. Despite working two jobs to manage their finances, our client’s debt had ballooned to $61,600.

What is a Consumer Proposal?

To address their mounting debt, we filed a consumer proposal on her behalf. A consumer proposal is a formal debt relief option in Canada where a Licensed Insolvency Trustee (LIT) negotiates with creditors to reduce the total debt and set up manageable payment terms. It’s an alternative to bankruptcy.

A consumer proposal consolidates your debt into a single monthly payment, halts interest accrual and creditor calls, and has a less severe impact on your credit score compared to bankruptcy. To qualify, you must be a Canadian resident with unsecured debt totaling less than $250,000 (excluding a mortgage on your principal residence).

The Results

After filing the consumer proposal, our client’s debt was reduced from $61,600 to $21,000. She is now making manageable monthly payments of $350 over 60 months. This substantial reduction has provided her with a clear path forward, helping to alleviate the financial strain and offering a chance to rebuild her credit and secure her financial future.

If you’re struggling with debt and need support, we are here to help. A Licensed Insolvency Trustee (LIT) is a professional licensed by the Superintendent of Bankruptcy Canada (OSB) to assist you in managing financial difficulties through insolvency. We treat you with the respect and care you deserve. Book your free consultation to get started.