What is a consumer proposal?
The Consumer Proposal
A Consumer Proposal is a payment of a decided dollar value over time to be divided equally between creditors. For example, the debtor may agree to pay $300 for 5 years as full satisfaction of their debts. The amount required differs depending on the debtor’s financial situation. Usually 20-40% of the total debt load is paid in order to fulfill the obligations of the agreement. It should be noted, however, that all parties must agree to the terms of the Proposal, and as such the amount of repayment that is accepted by creditors can vary widely.
Benefits of a Consumer Proposal
A Consumer Proposal allows you to retain your assets for your own use and enjoyment, unlike a Declaration of Bankruptcy.
The creditors are unable to ask for more money. Once they have agreed to the proposal. This puts an end to collection calls and demands for payment, which enables you to rebuild your financial future.
Your Credit Bureau rating will not be as adversely affected as in a bankruptcy scenario. It is possible to obtain a secured credit card or secured car loan during the proposal process.
There are significantly less complications with a Consumer Proposal than a bankruptcy. Under a proposal, there are no monthly reporting requirements, whereas those who elect to file for bankruptcy are required to make monthly reports to their Licensed Insolvency Trustee in order to comply with their obligations and obtain a discharge.
How to File a Consumer Proposal
Review your finances with a Licensed Insolvency Trustee who will assess your situation and discuss all your alternatives. Should it be determined that a Consumer Proposal is the best solution for you, the necessary paperwork will be prepared and filed, and any legal action will be immediately stopped. A Licensed Insolvency Trustee is the only person authorized to act as the Administrator of a Consumer Proposal, so your initial consultation is key to ensuring you are making the best choices for you and that the appropriate actions are being taken on your behalf.
Commonly Asked Questions
Am I Eligible to Make a Consumer Proposal?
Any individual who is bankrupt or insolvent and whose debts, excluding a mortgage on the debtor’s principal residence, are not more than $250,000, is eligible to make a Consumer Proposal.
How Long Does it Take to File a Proposal?
There are several factors to consider. Gathering the relevant information is the lengthiest part of the process and arranging an independent evaluation to establish the value of a home or property, if required. Once the application has been completed, a Licensed Insolvency Trustee can prepare and file the documents almost immediately.
Do I Need a Lawyer or a Debt Management Company?
Lawyers or Debt Management Companies are not eligible to file Consumer Proposals. Only a Licensed Insolvency Trustee can file a Consumer Proposal.
Do My Creditors Have to Accept The Terms?
If most of the creditors represented by dollar value vote in favour of the Proposal all unsecured creditors are legally bound by the process. If a creditor doesn’t vote they are legally bound by the creditors that do vote.
What Happens Once I Complete the Payments/Terms of the Proposal?
When the terms of the Consumer Proposal are complete you receive a Court Order titled, Certificate of Full Performance of Proposal. This discharges the debtor from those debts included within the Proposal. Certain debts are not eligible to be discharged from bankruptcy or a Proposal; more information on these debts can be found HERE.
What Does it Cost to File a Proposal?
The Licensed Insolvency Trustee’s fees are governed by the Bankruptcy and Insolvency Act. All funds/payments under your Consumer Proposal are deposited into a Trust Account. From that The Trustee may withdraw its fees and costs from that trust account. The remaining funds are paid out to the creditors.
Currently, the Bankruptcy and Insolvency Act allows the Trustee to withdraw from this Trust account $750 plus applicable taxes upon the filing of the Consumer Proposal, another $750 plus taxes once the Proposal is court-approved/deemed court-approved and 20% of the distribution to the creditors.
Typically, if the Trustee believes the Proposal would be successful, all that is required is your first month payment when you sign the documents.
Please contact our office to discuss your options in greater detail.
A Licensed Insolvency Trustee explains to Mary and Paul that a consumer proposal might be the way to resolve their financial situation. The trustee tells them how a consumer proposal is different from bankruptcy and what they need to do.....