During the month of September in 2009 the Canadian federal government adjusted the
bankruptcy law in Canada and made bankruptcy much more expensive for Canadians. A test for income determined the amount payable in bankruptcy stages and was a requirement to determine the length of time personal bankruptcy will last.
The old rules required that those claiming bankruptcy prove their income to trustees each month through submission of their pay stubs. If the income exceeded amounts that were set, the claimant of bankruptcy has to pay penalties of fifty percent of the income amount that was exceeded.
These rules still continue to exist but with added conditions. If the income exceeds the $200 mark bankruptcy is extended for a further year with a continuance of penalty payments.
If a bankruptcy claimant who is single, has no dependents or any unusual expenses is allowed to earn $1870 per month and there is an earning of $2470 the limit has exceeded with an amount of $600.The penalty that is payable of this id 300$ per month.
The $300 penalty is due for 21 months in contrast to if there was no surplus the bankruptcy period will last for a total of nine months. A bankruptcy trustee has to be consulted before there is a filing of bankruptcy to analyze estimates of income surplus possibilities.
A consumer proposal can be filed which is a bankruptcy alternative. Consumer proposals are a negotiated settlement that is agreed on between creditors and debtors. This proposal consists of monthly payments by debtors for a total of five years to be distributed to creditors. Creditors have a total of forty-five days in which to reject or accept the proposal of the consumer. After the proposal has been accepted debtors allocate payments to proposal administrators every month or as per contract stipulations. Creditors are prevented from further collection or legal action. In case the proposal is not accepted, the debtor is then returned to an insolvent state and has no other alternative but declaring personal bankruptcy.
This proposal can made by debtors with debts that do not exceeds $250,000. If debts exceed the $250,000 mark, the proposal has to be filed under Division one of the act of bankruptcy law in Canada . A Proposal Administrator will be required. This new law is totally applicable to all clients since then.