Can a Consumer Proposal Help With Gambling Debt?
Financial instability is a universal problem, and it’s often intensified when one is dealing with gambling debt. In Ontario, there are two primary solutions for such financial predicaments: Bankruptcy and Consumer Proposals. However, the differences between the two are often misinterpreted, leading to further confusion and stress for those in dire financial straits. This article aims to shed light on these two solutions, particularly focusing on Gambling Debt and Consumer Proposals in Ontario.
Understanding Bankruptcies and Consumer Proposals
In Ontario, Bankruptcies and Consumer Proposals are the two most common pathways for individuals facing severe financial issues. While both of these solutions aim to alleviate debt and provide necessary protection from creditors, their differences can significantly impact one’s financial recovery journey.
Eligibility for Bankruptcy and Consumer Proposals
The eligibility criteria for Bankruptcy and Consumer Proposals differ significantly. For Consumer Proposals, you can only apply if your total debt doesn’t exceed $250,000 (excluding mortgage(s) on your home), and you have the capability to repay a part of those debts.
Contrarily, Bankruptcy in Ontario is available to any person who owes their creditors more than $1,000 in debt. Unlike Consumer Proposals, there is no need for creditor approval to file for bankruptcy.
Creditor Acceptance: A Key Difference
In the case of Consumer Proposals, your creditors must accept your proposal. This differs from bankruptcy, where there is no requirement for creditor approval.
Ideal Candidates for Bankruptcy and Consumer Proposals
Bankruptcy tends to be a more suitable solution for individuals seeking immediate financial relief and cannot afford to pay off the reduced amount agreed to in a Consumer Proposal within a maximum of 60 months.
Consumer Proposal Payments vs. Bankruptcy Payments
Another critical difference lies in the payment structure of Consumer Proposals and Bankruptcies. In a Consumer Proposal, you and your creditors agree on a fixed monthly payment, which remains constant throughout the proposal’s duration. However, in a Bankruptcy, the monthly payments may vary based on your income. The higher your regular income, the more you need to pay per month.
Impact on Assets and Credit Rating
In a Consumer Proposal, there is no requirement to surrender your assets. However, in a Bankruptcy, with only a few minor exceptions, you will have to surrender your assets to the Licensed Insolvency Trustee. The Trustee then sells them to cover the cost of administration and potentially pay a dividend to your unsecured creditors.
Your credit rating is also affected differently by Consumer Proposals and Bankruptcies. A Consumer Proposal will result in an R7 rating on your credit report, which will remain for up to 3 years after paying off your loans. However, Bankruptcy will result in an R9 rating, the worst possible rating, which can remain on your report for up to 7 years.
Treatment of Gambling Debt in Bankruptcy and Consumer Proposals
The Bankruptcy and Insolvency Act and the Superintendent of Bankruptcy are very concerned about debts resulting from addiction. In a bankruptcy, the Licensed Insolvency Trustee must oppose the bankrupt’s discharge if any debts have arisen as a result of addiction. The individual must then enter a rehabilitation program and prove their progress to hope for an absolute discharge from the Court.
This approach differs significantly from the treatment under a Consumer Proposal. In a Consumer Proposal, the Licensed Insolvency Trustee will still want to ensure the individual is seeking help for their addiction but there will never be a bankruptcy if you complete your consumer proposal payments.
Conclusion: Navigating Financial Distress
If you are an individual or a company struggling with severe debt, particularly due to an addiction, reaching out to a trusted entity like Bankruptcy Canada can be a step in the right direction. They can help you devise a unique plan to alleviate your financial challenges and pave the way towards a financially sound life.
Remember, whether your solution is a bankruptcy alternative like credit counselling, debt consolidation or a consumer proposal or bankruptcy, the expert advice of a professional, Licensed Insolvency Trustee can be indispensable.
