The choices for an individual in financial difficulty are varied and best discussed with a trustee in bankruptcy (licensed and regulated by the federal government), who can advise on statutory and non-statutory solutions. Our trustee members are also members of CAIRP and subject to the additional standards of practice published by CAIRP.
You must use a trustee to declare bankruptcy or to file a consumer proposal. A Trustee is an officer of the Court and has responsibilities to all stakeholders in the bankruptcy and proposal processes including the bankrupt/debtor, creditors, the Court and the Office of the Superintendent of Bankruptcy.
Under the Bankruptcy and Insolvency Act (BIA), a reasonable and honest individual is given the chance to be released of his/her debts by declaring bankruptcy. If you perform certain duties required of you by law, your debts will be discharged or wiped out subject to certain exceptions (Some debts such as student loans, fines and fraud will not be discharged.) It is intended to allow you to make a fresh start. The bankruptcy gives you protection against phone calls from your creditors; wages will no longer be garnisheed; and your utilities will not be cut off. Generally, you are allowed to keep basic furniture and your personal effects when you go bankrupt, and under certain circumstances you may even be allowed to keep your car; your house/trailer, RRSPs and life insurance policy.
A consumer proposal is a formal offer under the BIA to your creditors to settle your debts, usually for an amount less than what is owing, but for a greater amount than the creditors would receive if you filed for bankruptcy. You offer to pay an amount that you can realistically afford, for a fixed period of time – often up to 5 years. The benefit of a proposal over a bankruptcy is that you generally get to keep your assets. If approved by your creditors you will have a binding contract. Make your payments as agreed and the debts covered by the proposal will be legally discharged.