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.
I meet with a lot of people who are self-employed – for the most part, they are involved in roofing, floor installation and trucking. In some cases they are involved in insurance or mutual fund sales. Most of these self-employed folks are set up as sole proprietors, rather than being incorporated. However, some of them are owners of a corporation and typically are the ‘director’ or one of the directors of the corporation.
If a self-employed person running a sole proprietorship files a personal bankruptcy they can continue to run their business (it involves changing the HST number if there is one, but that’s relatively easy to do). However, if a director of a corporation files personal bankruptcy, they must resign the directorship and possibly hand over control of the business to the trustee. This option can be extremely difficult and complicated if all you are trying to do is deal with personal debts.
Having said 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. Essentially, in a consumer proposal, you are making a deal with your creditors; one that is legislated and clear, but a deal nonetheless.
Since you are not declaring that you can’t pay your debts, you are allowed to maintain control of your assets, including an incorporated business.
There are a couple of other areas that this applies to as well.
- Serving 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. For example, 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.
If you are self-employed or hold a position of trust within a corporation, talk to a licensed consumer proposal administrator about filing a consumer proposal to protect your assets, your role in the company and deal with your debt.