New rules coming into force
Finally after years of delay new regulations regarding the administration of bankruptcies and proposals in Canada will come into force September 18 2009.
I could go into details regarding the reasons for the delay of coming into force for these new rules, but it’s not really relevant to someone considering making a proposal to their creditors or filing for bankruptcy. The fact is, after September 18, the way bankruptcy laws will apply to situations will change.
In general there are aspects of the rules that simplify the trustee’s job and should make the whole system simpler and less costly to administer, but again, that does not really matter to someone thinking of filing bankruptcy. What does matter is how the new rules will affect persons who file after September 18 2009.
In General many people who file after September 18 will see the term of bankruptcy extended beyond the current minimum 9 month period out to 21, 24 or 36 months. Automatic discharges will apply for the majority of cases of personal bankruptcy . The number of cases that will need to be heard in court will reduce dramatically. What this means is we can more reliably predict the outcome of a bankruptcy filing at the outset allowing people to make better informed decisions about filing.
After September 18, the only people who will see their bankruptcy finished within 9 months are persons or households with minimal income. Individuals or households with greater means will be required to pay for a longer period but will still qualify for an automatic discharge after a stipulated period. For someone who has never been bankrupt before but has income above a set threshold ($1870.00 net income per month for one person , more for larger households) they will be discharged automatically after 21 months of bankruptcy. For persons filing for a second time, with minimal income, they will be discharged after 24 months, and if they have income above the threshold, after 36 months. In all cases no court appearance will be required unless requested by their creditors.
These changes may make proposals to creditors much more attractive to persons having debt problems. There are some changes to proposals as well. The most significant change is the limit of debt allowed to be managed under a consumer proposal has been increased from $75000.00 per person to $250 000.00 ( not including a mortgage on their principal residence ) Meaning that the more complex and expensive “Division 1″ proposal process will not apply for the vast majority of individuals facing debt problems for which a proposal is their only viable option.
From these changes it’s clear that the direction of law changes are designed to favor consumer proposals as the typically chosen remedy to debt problems.
If you are having debt problems call us today at 310-PLAN. We can review your options and show you how these new rules may affect you.
