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.

What Happens After a Debt Consultation?

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.

Article Summary
Recap: Your First Meeting with a Licensed Insolvency Trustee
Step 1: Reviewing Debt Relief Options
Step 2: Making Your Choice
Step 3: Filing with the Office of the Superintendent of Bankruptcy
Step 4: Attending Credit Counseling Sessions
Step 5: Following the Terms of Your Debt Solution
Bankruptcy Terms Outlined
Consumer Proposal Terms Outlined
Step 6: Rebuilding Your Credit and Financial Health
FAQs About Bankruptcy and Consumer Proposals
Starting Fresh After a debt Consultation

You’ve had your first debt consultation, and now you’re left wondering—what’s next? That meeting may have felt like a whirlwind of information, but this is where the real clarity begins.

In this article, we’ll walk through exactly what happens after your consultation, so you can feel confident about the steps ahead. From stopping creditor calls to rebuilding your credit, here’s what you need to know to take control of your financial future.

Recap: Your First Meeting with a Licensed Insolvency Trustee

During your consultation, you will review your income, expenses, and total debt.

The LIT explained options like personal bankruptcy, consumer proposal filing, and other debt-relief options. This initial meeting helps you understand how each choice may impact your credit score, credit rating, and financial stability.

Step 1: Reviewing Debt Relief Options

After the consultation, you’ll have time to discuss your debt relief options. Here’s a quick look at the two main paths:

A consumer proposal: allows you to pay back part of your debt over time. You make manageable monthly payments, usually for five years. Filing a consumer proposal protects your assets, stops creditor calls, and puts a “stay of proceedings” in place. This stay is a legal action that stops collection activities, wage garnishments, and other legal actions from creditors.
Personal Bankruptcy: Filing for bankruptcy is a legal way to get rid of unsecured debts. This includes credit card debt, payday loans, and tax debt. Certain debts, such as student loans under specific conditions and secured debts, may remain after bankruptcy.

Learn more about how a consumer proposal works in BC or review your full options comparing different debt solutions. It is important to make a truly informed decision on your debt.

Step 2: Making Your Choice

When you’re ready, your Licensed Insolvency Trustee will help you decide on the best debt relief option. Here’s what to expect:

Consumer Proposal Agreement
If you choose a consumer proposal, your LIT will create an agreement. This agreement will explain your monthly payments and the repayment terms. Creditors then have 45 days to vote on whether to accept the proposal. If accepted by the majority of the creditors, the consumer proposal is in place and is legally binding over all of the unsecured creditors.

Bankruptcy Requirements
If bankruptcy is the best choice, your trustee will help you with the steps. This involves signing official forms, which will be sent to the Office of the Superintendent of Bankruptcy (OSB).

There is a lot more within these two steps to get you set up but your LIT will help you through all the paperwork and filing that needs to be completed.

Step 3: Filing with the Office of the Superintendent of Bankruptcy

After you finish your paperwork, your Licensed Insolvency Trustee will submit your consumer proposal or bankruptcy. They will file it with the Office of the Superintendent of Bankruptcy (OSB). This legal filing provides an official start to the process.

Filing with the OSB starts the stay of proceedings. This stops creditors from contacting you or taking legal action. It also prevents them from garnishing your wages.

Step 4: Attending Credit Counseling Sessions

The OSB requires two mandatory credit counseling sessions after you file for bankruptcy or a consumer proposal. These sessions are designed to help you rebuild your credit by teaching financial skills, like budgeting and managing debt. The goal is to provide you with tools to help prevent future debt problems.

For tips on budgeting and managing debt, check out our budgeting guide.

Step 5: Following the Terms of Your Debt Solution

Whether you choose bankruptcy or a consumer proposal, it’s essential to follow the terms of your plan:

Bankruptcy Terms Outlined

Bankruptcy often requires surplus income payments based on your income and family size. You must report your income to the LIT each month so that your payments can be calculated accurately. Once you complete all your duties, you will receive a discharge from bankruptcy, which removes most unsecured debts. Completing your bankruptcy may take nine months to a few years, depending on your situation.

Consumer Proposal Terms Outlined

With a consumer proposal, you’ll make agreed monthly payments to your Licensed Insolvency Trustee. This regular payment structure allows you to reduce debt while avoiding bankruptcy. Once you complete all payments, the proposal is ‘fully performed’, releasing you from your remaining debt obligations.

Step 6: Rebuilding Your Credit and Financial Health

After you finish a bankruptcy or consumer proposal, focus on rebuilding your credit. Work toward financial stability. Regular, healthy financial habits can boost your credit score and rating over time, even if they start low.

To start rebuilding your credit, consider these steps:

Budgeting: Set a monthly budget to track your spending and avoid future debt.
Timely Payments: Make all payments on time, including bills and any new credit accounts.
Avoid High-Interest Debt: Stay away from payday loans or other high-interest credit that could lead to further financial stress.

Read our guide on rebuilding your credit after bankruptcy.

FAQs About Bankruptcy and Consumer Proposals

How Does Bankruptcy Work in Canada?
Bankruptcy is a legal process. You will work with a Licensed Insolvency Trustee to get rid of most of your unsecured debts. Once filed, bankruptcy provides immediate relief by stopping creditor calls, wage garnishments, and other collection actions. After completing your duties, you’ll receive a discharge, which releases you from most debts.

What is a Consumer Proposal in BC?
A consumer proposal is a legal agreement. It lets you pay back part of your debt over time, usually in five years. This option helps avoid bankruptcy and lets you keep assets like your home and car. It also includes a stay of proceedings, which stops creditors from taking legal action.

Will My Credit Score Improve After Bankruptcy or a Consumer Proposal?
Your credit score can improve after completing a consumer proposal or bankruptcy. The mandatory credit counseling sessions provide strategies to rebuild your credit rating over time. You can work toward a stronger financial foundation with budgeting and timely payments.

Which debts does bankruptcy or a consumer proposal include?
Bankruptcy and consumer proposals can discharge unsecured debts like credit card debt, tax debt, and payday loans. Secured debts, like mortgages or car loans, are not included if you want to keep the asset (house or car). Student loans which are less than 7 years old (from the end date of studies), family maintenance debt, Court fines, and CRA deemed trust amounts, such as source deductions for your employees if you ran a small business, are some debts that will not be cleared by an insolvency proceeding.

How Long Does Bankruptcy Stay on My Credit Report?
Bankruptcy stays on your credit report for six to seven years after discharge (or fourteen for a second or subsequent bankruptcy), depending on the credit bureau. A consumer proposal remains on your report for three years after you complete it or six years after filing, whichever is sooner.

Starting Fresh After a Debt Consultation

A Debt consultation can be tough. However, understanding what happens next can help you plan next steps.

Working with a Licensed Insolvency Trustee can help you learn about debt relief options and the legal process. This support can help you regain financial stability. With dedication, budgeting, and strong financial habits, a fresh start is within reach. CS Van has guided countless Canadians through the bankruptcy process, helping them regain control of their financial future.

For more information on debt solutions, contact Campbell Saunders and start your journey toward financial peace.