What Are The Alternatives To Consumer Proposals and Bankruptcy?

Acknowledgement: Many thanks to Karen Adler, CIRP, who reviewed and improved this series of posts. Karen is a federally-licensed Trustee in Bankruptcy with Rumanek and Co.

Karen has contributed to the educational materials and development of the national CIRP Qualification Program for trustees, and conducts seminars on bankruptcy and consumer proposals for CAMH’s Problem Gambling Institute.


Today we continue the dialogue with Jordan Rumanek who is a licensed Trustee in Bankruptcy and Administrator of Proposals whose firm Rumanek & Company Ltd. processes well over a thousand insolvency files each year in the GTA.  We want to talk about some of the alternatives we keep hearing about on the radio, or reading in the magazines. “Government approved relief programs etc.”

Ross: There are some businesses that promote alternatives to bankruptcy or consumer proposals. Should people be considering these other approaches? If not, why not?

Jordan: I know about these people as I see and hear their advertising as well. Their message sounds quite compelling, and I totally understand why debtors might be attracted to their message. Some call them debt settlement companies.

Debt settlement is a negotiation process with creditors, and results can’t be guaranteed. Creditors are not required to participate, and the debt settlement companies are not required to follow through to the end. The only way to ensure all creditors are included, and that all debts are addressed, is through a formal consumer proposal.

In Canada, if you are struggling financially, a consumer proposal provides a far more effective way of addressing outstanding debts.  There is immediate protection from creditors, it deals with all creditors on a consistent basis, has a regulated and fully disclosed fee schedule, and the process is overseen by government licensed and supervised professionals. These other businesses are informal and not approved by the court. Please be very careful.

If you are in financial difficulty and are considering using a debt settlement company to deal with your debts, you should be aware the Ontario Government’s Ministry of Consumer Services is warning consumers to exercise caution when considering a contract for debt settlement services. You can also read this story published in Maclean’s magazine earlier this year.

Ross: Do you believe there are many more people out there that should be using your services, but for whatever reason do not?

Jordan: I think some people have a misconception they will lose their home if they file for bankruptcy, and many have never heard of a proposal. You do not lose your home, and bankruptcy is not the only option. We need to educate consumers of the options available to them.

Ross: Do you have a rule of thumb about when it makes sense to seek relief from a trustee like Rumanek and Company?

Jordan: If your wages are being garnisheed see a trustee. If you are using one credit card to pay another credit card, see a trustee. If you are receiving telephone calls from collection companies more than once a day, call a trustee. If you do not know what to do about your debts call a trustee.

Ross: What do people tell you is the most difficult part of the bankruptcy process?

Jordan: For most people, the hardest part is making that first phone call. They feel it is an admission of defeat, and that all of the balls they had been juggling are falling to the ground. Trustees and their staff are very sensitive to these feelings, and we do our best to provide information and understanding. Remember, that first call is often the first step to a fresh start and a future free from the crushing burden of debt.

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Will Debt Problems Hurt My OSAP Application

Dear Ross,

I have $25k credit card debt, three small children, and a $235k mortgage. I have been jobless for over a year. Spouse has been jobless for almost a year. I decided to go back to school to pursue my passion and so far I have $10k in student debt. I have 3 years to go. I don’t want to sell my house even though it is worth about $275k. Hubby and I have started to build home offices to work out of.

I want to keep getting OSAP while in school. What can I do about my credit card debt? I can no longer keep up with the payments and I do not want to disqualify for further OSAP funding.

Ross replied:

Thanks for writing, here is an extract from OSAP’s website:

Basically they say your application will not be processed until you provide proof that you meet the following four conditions:

  • At the time you filed for Bankruptcy or initiated a Related Event you were enrolled in an approved program of study at an approved institution and you were taking the minimum required course load; and
  • You continue to be enrolled in the same approved program of study in which you were enrolled at the time that you filed for Bankruptcy or initiated a Related Event; and
  • You have not had a break in studies of longer than six months since the date you filed for Bankruptcy or initiated a Related Event; and
  • It has not been more than 3 years since the date you filed for Bankruptcy or initiated a Related Event.

This information suggests you can pursue either course of relief. There are pluses and minuses to both a Consumer Proposal or a personal bankruptcy, but in my experience, both approaches would affect your eligibility for OSAP.

Ross Taylor is a registered credit specialist and mortgage agent who blogs frequently at ASKROSS

If you have any questions about anything financial, send him an email at info@askross.ca, he answers everyone personally.

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