A Consumer Proposal is a legally binding process governed by the Bankruptcy and Insolvency Act that can only be administered by a Licensed Insolvency Trustee (“LIT”). It is available to individuals who have total debts of less than $250,000 (excluding mortgage secured by principal residence).
Advantages of Consumer Proposal
Opting for consumer proposal can have the following benefits:
- Interest charges are stopped, starting from the date the proposal will be filed.
- You will have to pay just a portion of the debt.
- You can repay your debt in monthly installments (maximum within 5 years).
- Creditors will no longer be able to harass you.
- You won’t have to pay wage garnishments.
- You will be able to pay your credit card debts, loans, and taxes.
- Mostly, you will be able to keep all your assets (car and home included).
- There will be no additional costs except for your regular monthly payments.
How the Consumer Proposal Works
The consumer proposal is very flexible and can be based around your financial situations. Below are some of the points depicting how the proposal works:
- You will work together with the Administrator under the supervision of the LIT to develop a proposal for your creditors.
- A proposal will be in the form of an offer to pay your creditors a percentage of what is owed to them, a request to extend the time you have to pay your debts, or both.
- After the proposal is made it is forwarded to all the creditors as well as the Office of the Superintendent of Bankruptcy (“OSB”).
- If creditors holding at least 25% in value of the total claims request a meeting within 45 days, a meeting can be called. The OSB can also request a meeting. But, if no request for meeting is made then it will be regarded as accepted by your creditors and will be binding on all of your unsecured creditors regardless of any objections received.
- If a meeting is requested, the creditors will vote by simple majority in dollar value.
- If your proposal has been accepted, you will be responsible for complying with the terms of the proposal and attend two counselling sessions.
- You get to keep your assets provided that you have continued to make payments to your secured creditors who hold a charge against those assets.
- If your proposal is accepted by your creditors, the OSB or any interested party will have 15 days to ask the LIT to apply to Court to have the proposal reviewed. If no request is made, the proposal will be regarded as accepted by the Court.
- Once the terms of your proposal have been fulfilled, you will be issued a Certificate of Full Performance, and you will be legally released from the debts included in your proposal.
To find out if a Consumer Proposal is the right choice for you, please contact one of the professionals at Crowe MacKay & Company. We will evaluate your financial situation and explain the pros and cons of the various options available that could help you solve your financial problems. We are here to help.