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 Decreased a BC Resident’s Debt by 73%

How a Consumer Proposal Decreased a BC Resident’s Debt by 73%

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.

Sometimes life can throw you a curveball, shifting you from financial security to feeling overwhelmed by debt. Let’s look at a real-world example of how we helped a local BC resident reduce their debt by 73% using a consumer proposal.

The Situation

We began working with a 32-year-old single resident of British Columbia who worked in healthcare and was unable to work full-time due to mental health issues. On top of this, unexpected veterinary bills for their pet had to be charged to their credit card.

As a result, their total unsecured debt exceeded $100,000.

What is a Consumer Proposal?

We filed a consumer proposal on their behalf. A consumer proposal is a formal debt relief option available in Canada, where a Licensed Insolvency Trustee (LIT) negotiates with creditors to reduce the total debt and establish manageable payment terms. It serves as an alternative to bankruptcy.

A consumer proposal consolidates your debt into a single monthly payment, always halting interest accrual and creditor calls. It also has a less severe impact on your credit score compared to bankruptcy.

To qualify, you must be a Canadian resident with unsecured debt totalling less than $250,000 (excluding a mortgage on your principal residence).

The Results

After filing the consumer proposal, our client saw their debt decrease from $100,000 to $27,000, with monthly payments of $450. This significant reduction provided our client with a clear path forward and relief from overwhelming debt.

With simple monthly payments and no additional interest charges, they could start rebuilding their credit and look towards a more secure financial future.

If you are feeling the weight of debt we are here to help. A Licensed Insolvency Trustee (LIT) is a professional licensed by the Superintendent of Bankruptcy Canada (OSB) to help you manage financial difficulty through insolvency. We treat you like a person, not just a number. Book your free consultation to get started.