In 2019, just under three out of every 1,000 Canadians decided to file a consumer proposal.
The government’s Office of the Superintendent of Bankruptcy also reported that consumer proposals were more prevalent than bankruptcies, making them a popular choice.
When people look at filing a consumer proposal, one of the most common questions is whether they can be directors, executors, or bonded.
This handy guide will give you all the information you need on the topic so you can make an informed decision.
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Bankrupts cannot be directors of corporations
If you decide to file for bankruptcy in Canada, you cannot become a director of a corporation.
And if a newly bankrupt individual already holds a directorship, they must resign from their position immediately.
For many existing sole corporation directors, that can be a huge problem.
That’s because they are effectively handing over control of their business to their bankruptcy trustee.
It makes life more complicated if a sole director merely wants to deal with their personal debts.
Of course, the rules of bankruptcy in Canada are different for consumer proposals.
The good news is you’re allowed to be a director of a corporation if you’ve filed a consumer proposal.
You can file a consumer proposal, safe in the knowledge that you’re still free to become a director of a corporation.
A consumer proposal doesn’t make you bankrupt
If you decide to file a consumer proposal because you want to tackle your debt situation, there’s one fact you need to remember.
Having a consumer proposal doesn’t mean you are bankrupt.
Yes, consumer proposals fall into the insolvency umbrella.
But, they differ from bankruptcy in many ways.
And they are a preferable option to bankruptcy for all parties concerned.
That’s because bankruptcy gets thought of as a “last resort” option when dealing with debt.
What if I want to be an executor or be bonded?
Some people find themselves having to fulfil the duty of an estate executor if a loved one passes away during an active consumer proposal or bankruptcy.
As you can appreciate, the rules differ in such cases between those two forms of insolvency.
Individuals with an active consumer proposal are free to be an estate executor.
However, if you filed for bankruptcy, you wouldn’t be allowed to do that.
In those situations, someone else would need to get appointed as the estate executor.
The same rules also if you wanted to be bonded.
People with a consumer proposal are allowed to be bonded.
But undischarged bankrupts cannot be bonded.
How to file a consumer proposal
You’re likely going to have other questions and concerns you want to discuss before filing a consumer proposal.
To talk through your queries with some of the country’s leading insolvency experts, contact us today on (877) 879-4770.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal