Consumer Proposals Ontario: What to Know
If you feel overwhelmed by debt and creditors, filing a consumer proposal may be the best way for you to secure your financial future. The consumer proposal process is how thousands of insolvent Canadians in Ontario, Quebec, and beyond reduce their debt and start the journey back to financial freedom.
Scroll down to see the info on consumer proposals Ontario residents and Canadians everywhere should know when considering debt reduction solutions.
What is a Consumer Proposal?
A consumer proposal (sometimes called a Registered Consumer Proposal or Consumer Credit Proposal) is an agreement between you and your creditors to pay back a portion of the debt you owe them, instead of the whole amount.
With a consumer proposal, you are offering more to your creditors than they would receive if you were to declare bankruptcy. A consumer proposal can reduce the debt you owe by as much as 70%.
Consumer proposals are custom made to fit your financial situation, based on what you own, earn, and owe. Your income, living expenses, and family responsibilities are taken into consideration when the terms of your consumer proposal are made.
Consumer proposals are one of the ways that good faith debtors (i.e.; an insolvent person) are protected from permanent debt. Federal legislation called the Canadian Bankruptcy and Insolvency Act (BIA) ensures Canadians the right to use debt management processes like a consumer proposal or bankruptcy to resolve debts they can’t repay.
In other words, if you find yourself with debt you can’t afford to pay back, a consumer proposal is one of the debt settlement tools you can be eligible for when you’re unable to repay what you owe to creditors.
What are the advantages of consumer proposals?
Consumer proposals are a commonly used instrument for insolvent Canadians. In fact, 60% of the insolvency filings made in 2019 were consumer proposals.
By filing a consumer proposal, you’ll be able to:
- Reduce your debt to a fraction of its current amount
- Repay your reduced debt in affordable monthly payments that never increase
- Stop interest from building on your debt
- Negotiate a debt settlement plan that is legally agreed to by all parties
Compared to filing for bankruptcy, which allows you to eliminate all of your debt, there are many advantages of a consumer proposal.
When your creditors accept a consumer proposal, it becomes your responsibility to make regular repayments on your reduced amount of debt. The agreed repayment amount is fixed, and will not increase if your income increases. And unlike filing for bankruptcy, all your possessions are protected.
Just like when you declare bankruptcy, once creditors accept your consumer proposal, you are protected from:
- Harassing collections calls
- Any and all legal action taken against you by creditors
- In most cases, wage garnishment
You can learn more about whether filing a consumer proposal or bankruptcy is best for your situation by reading our guide to Bankruptcy vs. Consumer Proposal.
Could filing a consumer proposal cause me to lose my job?
No — employers cannot dismiss, suspend, or layoff an employee solely because the employee has filed a consumer proposal.
Will I lose my house if I file a consumer proposal?
Keeping your home is possible with most consumer proposals, and depends on your priorities and financial circumstance.
How does a consumer proposal work?
Who can get a consumer proposal?
Anyone who is not able to meet his or her payment obligations can file for a form of insolvency. You meet the requirements for a consumer proposal if:
- Your debts are less than $250,000 (not including the mortgage on your primary residence); or,
- You have combined debts of less than $500,000 with your spouse or someone else
Businesses or individual debtors that have more than $250,000 worth of debt can instead file a Division I proposal (more on that below).
If you don’t meet the eligibility requirements for a consumer proposal, you have other options for debt relief, like declaring bankruptcy.
As part of your debt relief process, a Licensed Insolvency Trustee, will work with you to decide whether a consumer proposal or bankruptcy is right for you.
What is a Division I proposal?
Division I proposals are a debt management process available to businesses or individuals carrying a substantial amount of debt. They are similar to consumer proposals in structure but have some differences — read our guide to consumer proposals Frequently Asked Questions for more details.
What is a Licensed Insolvency Trustee
A Licensed Insolvency Trustee (LIT) acts as a consumer proposal advisor on your insolvency filing. They’re responsible for helping you better understand your financial situation, and providing you with options for debt relief based on which province you live in.
Ottawa residents, for example, can start a consumer proposal in Ontario by contacting an LIT like Doyle Salewski. Our firm has helped more than 20,000 clients in Ontario and Quebec through the insolvency process.
Why do I need a Licensed Insolvency Trustee?
LITs are the government-authorized administrators of insolvency proceedings. LITs are regulated by the Office of the Superintendent of Bankruptcy Canada (OSB) and are the only licensed professionals who can file a consumer proposal or bankruptcy application in your name.
What does an LIT do?
When you retain an individual LIT (a trustee), they will work with you to understand what your assets and income are, then explain what debt solutions are available to you.
If your best option is a consumer proposal, your trustee will prepare and file your consumer proposal with the OSB. At this point, your payments to creditors, and any collections calls or legal action taken against you by those creditors, will stop.
Your trustee will then negotiate with your creditors to determine an agreeable consumer proposal for all parties, or provide you with other options if creditors reject your consumer proposal.
Once your consumer proposal is accepted, you start making payments based on the amount and frequency agreed to in your consumer proposal, and continue to do so until your creditors are repaid the reduced amount of your debt.
How is a trustee paid in a consumer proposal?
When you start your consumer proposal, your trustee will explain what fees are required to administer the file. There will be no surprise or extra charges. The OSB ensures that trustee fees are standardized across Canada. Whether you have a consumer proposal or a division I proposal, the trustee’s fees are negotiated and included in the regular payment amount agreed to in your proposal.
Because you cannot file a consumer proposal yourself, it’s important you retain a trustee that understands your unique needs. That’s why Doyle Salewski offers a free consultation for all Ontario and Quebec residents interested in filing a consumer proposal to eliminate their debt.
Read our helpful consumer proposal FAQ to see some of the common consumer proposal questions our clients have asked us in the 25 years we’ve been providing debt relief solutions in Ottawa and beyond.
Our satisfied client base has made us one of the highest-rated LITs in Ontario; our Ottawa, ON offices are available for contact at 613-237-5555.
How much debt reduction is possible with a consumer proposal?
With a consumer proposal, you only repay a portion of the unsecured debt you already owe. Your debt can be reduced to as little as 30% of its original amount using a consumer proposal.
Also, a consumer proposal prevents interest from building on your reduced debt amount, saving you even more money.
How much a consumer proposal can reduce your debt depends on your financial circumstance, and your trustee will work with you to find the repayment amount that makes sense.
Try using our Debt Reduction Calculator to estimate much you can reduce your debt and save on interest by filing for a consumer proposal.
Consumer Proposal or Bankruptcy: Which is better?
There are advantages to bankruptcy versus a consumer proposal. Because consumer proposals usually require lower payments than other debt management options, they can take a longer time to fully repay than bankruptcy. However, once fulfilled, your consumer proposal will be reported on your credit score for a shorter period of time than a bankruptcy.
Read our guide to learn more about the difference between a consumer proposal and bankruptcy.
Remember: your trustee will always advise you about whether a consumer proposal, bankruptcy, or another option makes the most financial sense for your situation.
“Couldn’t asked for a better service, all my questions were answered and my financial problems solved. Cheers to a new start!!!.”
Where to get a consumer proposal in ON
Securing a debt-free future starts with finding the right Licensed Insolvency Trustee. At Doyle Salewski, we offer free consultations that give you a comprehensive understanding of your finances and your options.
As your trustee, we will give you a clear picture of how the consumer proposal process will go, and who is responsible for what.
Book Your Free Financial Analysis and Consultation below. Contact us today to speak with the consumer proposal advisors Ontario and Quebec residents trust to find their bankruptcy solution.
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