When you filed an assignment in bankruptcy the first time, you swore you would never get yourself into a position where you couldn’t pay your debt again.   Then the credit card offers started to come in and it made sense to utilize them for convenience and to rebuild your credit.  A large car repair was maybe charged to a credit card; monthly living expenses increased; or income decreased due to a job loss and you find yourself in a situation where you need debt relief.

In deciding whether you should file a second bankruptcy or a consumer proposal, you will want to consider the following:

  • Value of realizable assets. In a bankruptcy, the trustee must realize on the equity in any non-exempt assets.  If you have significant equity in your house that you want to retain, a consumer proposal is usually a better option as it allows you a longer period of time to make payments.
  • Monthly income and living expenses – if surplus income payments are required, they will be payable in a second bankruptcy for a period of 36 months.  Depending on your actual monthly funds available, a consumer proposal will allow you to offer a compromise over a longer time period (maximum 5 years) which typically results in a lower, more manageable monthly payment.
  • Discharge – you will be eligible for an automatic discharge in 24 months if you are not required to make surplus income payments or 36 months if you are required to make surplus income payments. Until you are discharged, if you receive an inheritance, win a lottery or acquire any major assets, the trustee can realize on them for the benefit of your creditors.  Alternatively, once a consumer proposal is accepted by the creditors and approved by the court, you are free to deal with your assets.
  • Opposition to discharge – creditors can oppose your discharge from bankruptcy which results in a court hearing and the court determining if any conditions or suspensions should be imposed. If you are concerned a creditor may oppose, a consumer proposal may be a better option as only a majority of creditors need to vote in favour of the proposal for it to be approved.
  • Credit rating – a second bankruptcy will remain on your credit report for 14 years from your discharge (typically 24 or 36 months). A consumer proposal will be reported for 3 years from completion of the proposal and thus would be removed in a maximum of 8 years depending on the length of your proposal.

Don’t be embarrassed that you are in this situation again; seek the help of a Licensed Insolvency Trustee.  The initial assessment with Taylor Leibow Inc. is free of charge and will review options in a non-judgmental manner to see if a second bankruptcy or a consumer proposal is the best solution for you.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)