What is a Consumer Proposal?

In Canada, if you find yourself in financial trouble and unable to repay your debts, the Bankruptcy and Insolvency Act allows for two options: (1) filing for bankruptcy; or (2) making a consumer proposal. Today marks the first in a ten-part series dealing with questions we hear from clients with regard to the second option: consumer proposals.

To start, we thought we’d cover the basics of just what, exactly, a consumer proposal is.

In short, a consumer proposal is a formal and legally binding agreement—a contract—that you make with your creditors. You agree to pay them back part of what you owe them, interest charges are generally waived, and instead of making several different payments each month, you make only one to your trustee, who then pays out the funds to your creditors as per the agreement. For most people, the main benefits are a manageable, single monthly payment, and the fact that bill collectors will stop harassing them.

Because a consumer proposal falls under the Bankruptcy and Insolvency Act, it must be administered by a licensed insolvency trustee. No one else is authorized (despite what certain radio advertisements might tell you) to file a proposal on your behalf—and nothing less than a properly filed proposal will be binding on your creditors…so be aware and be careful, and don’t be afraid to ask questions! A licensed trustee will be more than happy to discuss his/her credentials to you.

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As for the proposal itself, terms will vary depending on your circumstances. Your trustee will work with you to negotiate a satisfactory arrangement with your creditors, taking into account your income, living expenses, family responsibilities, and whatever other details are relevant. This means your consumer proposal will be specifically tailored to fit you as well as possible.

Next week, we’ll look at some of the requirements for filing a proposal to see whether it might be an option for you. In the meantime, if you feel your financial situation is critical, Contact Us now for a free consultation. At Doyle Salewski, we’re here to help.


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