What is Personal Bankruptcy, and How Does it Work?

Should I File for a Consumer Proposal or Bankruptcy? Part 2

Part 2 of our post “Should I File for a Consumer Proposal or Bankruptcy?”. For part 1 of this post and more details about consumer proposals, use the link below: Should I File for a Consumer Proposal or Bankruptcy? Part 1

Personal bankruptcy is a process that is usually entered into voluntarily, which requires discharge (or release) from a Licensed Insolvency Trustee (LIT) confirming you have no further legal responsibility regarding your debts. To file for bankruptcy, you must:

  • be insolvent (i.e., you have more debts than assets, including if you sold all of your assets and property at fair market value), 
  • owe at least $1,000, and
  • be unable to make regular monthly payments to your creditors as they become due

In bankruptcy, you must surrender your non-exempt assets to receive a discharge. Your LIT will sell these assets to pay your creditors. You are also required to file monthly income and expense statements and make any surplus payments during the bankruptcy period (which for 2019 is income above $2,203/month for a one-person household and $2,743/month for a two-person household). You will also need to provide tax information to your LIT and attend two mandatory financial counselling sessions.

declare bankruptcy

In What Situations Would Personal Bankruptcy Be a Good Option?

There are several reasons why bankruptcy may suit your situation better than a consumer proposal:

  • You have few assets to lose, or you may have accepted letting a significant asset go. If you have an expensive vehicle or large home, you may be relieved to be rid of this asset which created financial trouble for you.
  • You have little income and are not expecting a significant increase in income. Your payments are based on your income and what you own, so if both are low, bankruptcy may be cheaper than filing a consumer proposal. By contrast, if your average surplus income exceeds $200/month, your bankruptcy could be extended an extra year, from nine to 21 months.
  • Your income is uncertain. If you do not have a secure job or family commitments, you may not want to commit to the fixed monthly payments involved in a consumer proposal.
  • You want the fastest process possible. In most situations, bankruptcy will be finished sooner than a consumer proposal. There is relief in knowing your financial concerns will end quickly.

Speak to a Licensed Insolvency Trustee to Discuss the Best Option in Your Situation

Simply asking for help, a qualified professional can assess your unique situation and review available options. A Licensed Insolvency Trustee can answer your questions and help to resolve any uncertainties you may have about whether to pursue a consumer proposal or bankruptcy in Edmonton.

At Fox-Miles & Associates, our Licensed Insolvency Trustees serve the Edmonton area, including Sherwood Park, Fort Saskatchewan, St. Albert, Spruce Grove, Stony Plain, Leduc, Hinton and Edson. We can submit a consumer proposal or bankruptcy and advise the best debt help for your circumstances. For a free assessment of your financial situation, contact us at 780-444-3939.