Consumer proposals carry many potential advantages over bankruptcy, not the least of which is the ability to hold positions of trust while dealing with your debts.
In Canada, a bankrupt cannot be a director of a corporation. If a director of a corporation files personal bankruptcy in Canada, they must resign the directorship. If you are the sole director of a personal business, this can mean handing over control of your business to the trustee. This option can be extremely difficult and complicated if all you are trying to do is deal with personal debts.
An option is to file a consumer proposal. A consumer proposal is a separate procedure under the Bankruptcy & Insolvency Act. If you file a consumer proposal you are not bankrupt. This means that if you file a consumer proposal instead of personal bankruptcy, you are allowed to both keep your directorship and maintain control of your business.
A consumer proposal is a debt restructuring arrangement to repay a portion of your debts. Since you are not filing bankruptcy, you can maintain control of your assets, including an incorporated business.
Restrictions for an undischarged bankrupt can affect other areas of trust as well. In all these cases a consumer proposal can be a better option.
- Bankruptcy can affect your eligibility to serve on various boards. If you are on your condo board, or the board of a charitable organization, and file a personal bankruptcy, you will likely have to resign those positions. However, if you file a consumer proposal instead, your ability to be on those boards remains intact and you do not have to resign.
- If you file personal bankruptcy you cannot be the executor of an estate. If a family member passes away, you’d have to allow someone else to be the executor in the event that you file personal bankruptcy. In this case as well, if you file a consumer proposal, you may continue or take on executorship of an estate.
- An un-discharged bankrupt is not bondable. In contrast, a consumer proposal does not affect your bondability.
- Another area of concern is how bankruptcy will affect a professional designation and the possible option to file a consumer proposal.
If you need to hold a position of trust, talk to a licensed consumer proposal administrator about filing a consumer proposal as an alternative to bankruptcy to protect your assets, your role in the company and deal with your debt.
- Can Business Debts Be Discharged in Personal Bankruptcy in Canada?
- Top 5 Bankruptcy Issues for Small Business Owners
- What Happens To My Professional Designation If I File Bankruptcy or Consumer Proposal?
- Why a Consumer Proposal May Be Your Best Option
- Self-Employed and Considering a Consumer Proposal? 5 Things You Need to Know