Stop the harassment, protect yourself and take back control of your finances with this proposal based on your income, assets and ability to pay.

Who Can File a Consumer Proposal?

Individuals who are “insolvent” and owe $250,000 or less not including mortgages on your principal residence are eligible to file a consumer proposal.

You may notice that the words “insolvent” and “insolvency” are commonly used when discussing bankruptcy, but many people are unclear as to what these words mean. “Insolvency” or being “insolvent” means that one of the following two things applies to you:

  • You can no longer pay your debts as payments come due – or you borrow from one creditor to allow yourself to pay another
  • The value of your property is less than the total amount of your debts.

How does a Consumer Proposal work?

A consumer proposal is filed with a Licensed Insolvency Trustee under the Bankruptcy and Insolvency Act and is a way of dealing with your debts while avoiding bankruptcy. The Licensed Insolvency Trustee acts as the proposal administrator and makes an assessment of your financial situation and helps you put together a Statement of Affairs, which you sign under oath before it is shared with your creditors.

An offer is then made to your creditors and your creditors get 45 days to vote. Each dollar a creditor is owed counts as one vote. Creditors can vote “yes”, “no” or come back with a counter-offer. Creditors can also request a meeting of creditors at which they would consider your financial situation and there may be negotiation on the terms of the proposal. 50% plus 1 of the votes by your unsecured creditors in favour of the consumer proposal means the consumer proposal is approved and all your unsecured creditors are bound by its terms.

Who administers a proposal to creditors?

The administrator of a Consumer Proposal has to be a Licensed Insolvency Trustee. LITs have undergone extensive training and screening before obtaining their license from the Federal Government.

For more information, click here to visit the website for the office of the Superintendent of Bankruptcy Canada.

Is there creditor protection during a Consumer Proposal?

Yes, with certain exceptions, once you send your offer to the creditors they are not allowed to contact you for payment, take court action against you, or garnish your wages. If the proposal does not get approved then the creditor protection stops and you may want to consider whether bankruptcy makes sense.

What can the terms of a Consumer Proposal be?

A consumer proposal can be as simple as a monthly payment or it can be a monthly payment and/or lump-sum payment and/or sale of assets. Also, a consumer proposal cannot be for longer than 5 years. The proposal often results in you paying back a percentage of your debt with the remainder being discharged once you complete the proposal.

How do I complete my Consumer Proposal?

To complete your consumer proposal, you need to meet all the terms of the consumer proposal which usually means making your monthly payment. Payments are made to the Administrator of the Consumer Proposal who holds the funds in a trust account and makes disbursements to the creditors. Also, you must attend two counselling sessions with the Proposal Administrator.

*While the information provided is meant to inform the reader about consumer proposals and bankruptcies generally, it is not comprehensive and does not replace speaking with a Licensed Insolvency Trustee. Discussion with a Licensed Insolvency Trustee is always recommended if you are experiencing financial difficulty.

 

Visit our Frequently Asked Questions  about Consumer Proposals for further information.

To find out more about whether a Consumer Proposal is right for you contact Sean today.