An alternative to filing bankruptcy, the Consumer Proposal is a payment plan geared to income/payment ability option that protects you against creditors and allows you to keep your assets.
A Consumer Proposal is a formal, legally binding process that is an offer to either pay back a percentage of what is owed to your creditors, or extend the time you have to pay off your debts – or both.
The length and amount of your offer will depend on a combination of affordability and how your offer compares to bankruptcy. A Consumer Proposal is a popular alternative to bankruptcy because it allows you to keep your assets.*
• Allows you to keep your assets*
• Stops collection calls and wage garnishments
• Freezes interest and penalties on your debts
• May reduce your debt substantially
A consumer proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). In this process, the LIT will work with you to develop a "proposal"—an offer to pay creditors a percentage of what is owed to them, or extend the time you have to pay off the debts, or both. The term of a consumer proposal cannot exceed five years.
Payments are made through the LIT, and the LIT uses that money to pay each of your creditors.
To find out if a consumer proposal (or a different option) is the right choice for you, set up a meeting with an LIT to discuss your personal circumstances.
The LIT will evaluate your financial situation and explain the pros and cons of the various options that could help you solve your financial problems.
If you decide to submit a consumer proposal, the LIT will work with you to develop a proposal that works for both you and your creditors.
The LIT will file the proposal with the Office of the Superintendent of Bankruptcy (OSB). Once your proposal is filed, you stop making payments directly to your unsecured creditors. In addition, if your creditors are garnisheeing your wages or have filed lawsuits against you, these actions are stopped.
The LIT will submit the proposal to your creditors. The proposal will include a report on your personal situation and the causes of your financial difficulties.
A meeting of creditors is held if one is requested by the required number of creditors provided they are owed at least 25% of the total value of the proven claims.
A request for a meeting must be made by the creditors within 45 days of the filing of the proposal. The OSB can also direct the LIT to call a meeting of creditors at any time within that same period.
The meeting of creditors must be held within 21 days after being called. At the meeting, the creditors vote to either accept or refuse the proposal.
If no meeting of creditors is requested within 45 days of the filing of the proposal, the proposal will be deemed to have been accepted by the creditors—regardless of any objections received.
At the meeting of creditors, a creditor’s acceptance or refusal of a proposal counts as a vote, provided it is received at or before the meeting.
The number of votes corresponds to the total dollar value of the proven claims. The vote is decided by a simple majority of this dollar value (i.e., 50% plus 1). For example, if the proven claims total $150,000, and if the creditors who vote to accept the proposal are together claiming at least $75,001, then the proposal will be deemed accepted and all other unsecured creditors must accept it as well.
If your consumer proposal is accepted, you will
be responsible for paying either a lump sum or periodic payments to the LIT;
be required to adhere to any other conditions in the proposal; and be required to attend two financial counselling sessions if applicable.
However, if you are making monthly payments and miss three payments, or if your payment schedule is less frequent but your last payment is more than three months past due, the proposal will be deemed annulled. This means your creditors will be able take action to collect the money you owe them, unless the court has ordered otherwise, or unless an amendment to the consumer proposal has been filed. A consumer proposal that has been deemed annulled may be revived under certain conditions.
If your consumer proposal is not accepted, you can
make changes to the proposal and resubmit it;
consider other options for solving your financial problems; or declare bankruptcy.
If you meet the conditions in full, you will be legally released from the debts included in the proposal.
Generally, a person who declares bankruptcy or submits a consumer proposal is assigned the lowest possible credit score. Information that affects your credit score is usually removed from your records after a certain period of time, depending on the type of information and where you live. Similarly, depending on which province you live in, the proposal will be on your credit report for the duration of the proposal’s term, plus a few years after. Your ability to obtain and use credit after a consumer proposal depends on convincing lenders of your personal financial maturity and ability to repay the debt; there are no guarantees—no one is required to give you credit.
• Keep your car, home and RRSPs*
• Stop harassing creditor calls immediately
• Get the largest debt reduction that is fair
Upon filing a bankruptcy, a stay of proceedings is automatic. This means your unsecured creditors have no legal recourse against you. Your unsecured creditors cannot commence or continue with any legal proceeding, wage garnishment or contact you for payment.
If you are having trouble repaying your debts, you are likely looking for options that can help you. One option that many people consider is an unsecured debt consolidation loan. This is a situation where you take out a new loan with the aim to consolidate all debt into one payment. Not only does this simplify the bill paying process, but it can also save you money.
If you feel that your financial situation is getting worse and that debt relief is more remote than ever, there are a number of preliminary steps you can take to resolve your debt - without participating in a formal legal process (such as a Consumer Proposal or Bankruptcy). Get Help with your Money Problems The first step is to sit down and examine your household budget.
For more information please
contact us at 807-285-2525