Should I file a consumer proposal or declare bankruptcy in Ontario?
A consumer proposal settles debt at a negotiated fraction while protecting assets; bankruptcy discharges most debt faster but involves surrender of non-exempt property and possible surplus income payments.
Both processes are federal and both trigger an immediate stay of proceedings that stops garnishments, collection calls and most lawsuits. A consumer proposal is available where unsecured debt is under $250,000 excluding the mortgage on a principal residence, and it lets you keep assets while paying an agreed amount, usually over up to five years.
Bankruptcy is generally shorter — often nine or twenty-one months for a first bankruptcy — but non-exempt assets vest in the trustee and surplus income payments apply where income exceeds the prescribed threshold. Some obligations survive both: support arrears, most student loans within seven years, and debts obtained by fraud.
For a business owner the analysis also has to account for personal guarantees, director liability for HST and source deductions, and whether a restructuring is preferable to insolvency proceedings at all.
Source: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3
This work is handled by Leena Kumar (Bankruptcy & insolvency). Read more about bankruptcy & insolvency at VK Law Group, or send us the facts and we will tell you where you stand.
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