Canada's bankruptcy new rules make it easier to avoid a filing

Changes to Canada's bankruptcy rules, which came into effect Friday, will make it easier for many consumers to avoid a filing, but sharply raises the amount to be repaid to creditors if they do file.

Under the new rules, those who file for bankruptcy won't see their debts discharged for 21 months, significantly longer than the nine months previously. Those who go bankrupt for a second time could take up to three years to emerge from under their debts.

But while the new rules are financially more onerous - sparking a flurry of last-minute bankruptcy filings this week - they do make it easier for most Canadians to pay off their debts without declaring bankruptcy. Debtors may now owe up to C$250,000 to qualify for a consumer proposal - a plan under which debtors offer to modify their payments to creditors - significantly higher than the C$75,000 previous limit. Canadians with higher debt levels must make a Division 1 proposal, a more complicated process that requires all creditors to agree. Failure results in an automatic bankruptcy filing.

The latest changes are part of an ongoing process by the Office of the Superintendent of Bankruptcy Canada to update regulations governing consumer and commercial insolvencies, and come amid a spike in filings.

Source:

GETTING PERSONAL CANADA: Bankruptcy Law Revisions - WSJ.com