CONSUMER PROPOSAL
Under the Canadian Bankruptcy and Insolvency Act, you may make a proposal or compromise to your creditors. Your offer may be to compromise the total amount you owe your creditors or extend the time you have to pay your debts in full. Instead of monthly payments to your creditors, you could also offer to cash certain assets to pay a portion or all of the debts. A Trustee in Bankruptcy will assist you in making a fair offer to your creditors. The filing of the consumer proposal stops unwanted calls from creditors, stops your wages from being garnished, and allows you time to make arrangements to pay your creditors what you can afford.
What is a consumer proposal?
A consumer proposal is a formal offer made by a debtor to his/her creditors to settle the debts on debt reduction terms he/she can afford and which the creditors are willing to accept.
Who can make a consumer proposal?
A consumer debtor who is insolvent and whose debts are less than $250,000 excluding their home mortgage can file a consumer proposal as a debt solution.
How do I make a consumer proposal?
You must first decide on what kind of offer you can make to your creditors. Next, you should meet with a trustee to discuss your offer. The trustee will help you prepare the proposal documents and lodge them with the Federal government.
Will my creditors stop calling me?
Yes. By law, actions against you cease once the proposal is filed. This includes garnishees, judgements and other civil legal actions.
How long must I wait to see if my proposal has been accepted?
First, you must wait 45 days to see if your creditors accept your offer. During that time a meeting of your creditors may be called to discuss your proposal. The creditors will vote to accept or reject your proposal. If the majority of your creditors accept the proposal, you must wait an additional 15 days to see if a creditor or other interested party wishes a bankruptcy court to review your offer for its reasonableness. In general, a total of 60 days is required.
To whom do I make my proposal payments?
Once your proposal is accepted, you make all payments to our office. As an officer of the court, we administer your funds and distribute them evenly to your creditors.
What happens if my proposal is rejected?
If the majority of your creditors or the court refuses your proposal, it has failed and you are back to square one again. The creditors rights are revived and the calls and garnishments may start again.
What happens if I cannot fulfill the terms of my proposal?
If you make a debt reduction proposal which is accepted by the majority of your creditors you must keep your promises to them. If you cannot, you may decide to amend your proposal, failing which your proposal will be deemed annulled and your creditors are free to start legal action again.
What happens once my proposal has been completed?
You will receive a “Certificate of Compliance” from our office which is your proof that the proposal has been completed. Any remaining balances owing to your creditors are extinguished. There are some exceptions to this as a debt reduction solution, and these will be discussed at your meeting with us.
How will the proposal affect my credit rating?
You will have an R7 credit rating at the credit bureau for a period of 6-7 years after the completion of your proposal. You are required to attend 2 financial counseling sessions during the proposal which will teach you to use credit wisely in the future.
These debt reduction solutions along with financial management counseling or insolvency counseling are intended to get you out and keep you out of debt.