What is a Consumer Proposal?
A consumer proposal is a formal, legally binding agreement you make with your unsecured creditors to pay them back when you’re unable to do so in the normal way.It protects you from creditors’ harassing phone calls and legal threats. A Proposal can only be made by a certified trustee. It is designed with your financial situation in mind including the payment schedule, which is based on your income, living expenses, and family responsibilities and circumstances .
Consumer proposals contain a variety of terms, but most consist of an offer to make one low monthly payments and/or a lump sum payment, resulting in debt reduction and an end to interest charges. You pay the agreed-upon sum to your trustee, who will in turn distribute the money to your creditor(s).
You may be able to make a consumer proposal, under which you can
- offer to pay creditors a portion of what you owe
- make a reduced monthly payment
- eliminate accumulating interest charges
- eliminate creditor phone calls and/or legal threats
Who can file a proposal?
Anyone who is unable to meet his/her payment obligations can file a proposal.
- If your debts are less than $250,000 (not including the mortgage on your primary residence), you will file a proposal.
- If you have joint debts (less than $500,000 combined) with your spouse or someone else, you can file a joint proposal.
- If your debts exceed $250,000 (not including your mortgage), you must file a Division I proposal.
Do I need a lawyer?
Generally speaking, no. Only a bankruptcy trustee can legally initiate and process proposal proceedings, so unless your situation is particularly complex, a lawyer won’t be necessary. If circumstances require, however, your bankruptcy trustee can and will work with your choice of counsel.
What will a trustee do for me?
A bankruptcy trustee is an insolvency expert who will:
- provide a free consultation to determine if, when, and how you should proceed with a consumer proposal
- explain options other than a consumer proposal, such as consolidation loans, re-mortgaging your home, borrowing from family/friends, budgeting, proposals, and/or selling assets
- provide you with personalized attention throughout your proceedings
- deal with creditors on your behalf
How can a consumer proposal benefit me?
A proposal can:
- relieve the stress of creditors calling and demanding payment;
- help you reach an agreement with all your creditors at the same time;
- reduce the total amount you owe;
- begin repairing your damaged credit rating;
- prevent further interest charges from accumulating on your existing debt.
Can my consumer proposal be refused?
A proposal can be refused, but if it’s reasonable, your creditors are likely to accept it. If a majority of your creditors feel that your consumer proposal is not reasonable, they may reject it and you will have to consider other options such as filing for bankruptcy.
If you are making a Division I proposal, yes, it can be refused.
How do creditors vote in consumer proposals?
In a proposal, creditors file a proof of claim with the trustee. The trustee then validates and accepts the claims, with each dollar of debt representing one vote. If a simple majority of the dollar value of the claims filed are accepted, the consumer proposal is approved. The claim and validation process is the same in a Division I proposal, but a majority of the actual number of creditors (representing two-thirds or more of the total debt) is required for approval.
What if one of my creditors votes against my consumer proposal?
If a creditor votes against your proposal but does not request a meeting of creditors, the vote is not taken into consideration. If a creditor does request a meeting of creditors , the trustee will arrange the meeting for you. The acceptance or rejection of your proposal will be decided at this meeting, so you will also have to attend. The trustee will help you with any negotiations that take place in order to ensure a favourable outcome for you.
In a Division I proposal, if acceptance by a majority of creditors is not provided, you will automatically be declared bankrupt at that time.
Do my creditors have to have a meeting about a consumer proposal?
A meeting of creditors is required for a consumer proposal only if 25 per cent of the creditors request it. For a Division I proposal, a meeting of creditors is required 21 days after filing.
Could filing a consumer proposal cause me to lose my job?
No, the Bankruptcy and Insolvency Act specifically forbids an employer from dismissing, suspending or laying off an employee solely because the employee has filed a proposal.
Will I lose my house?
If you’d like to keep your home, you may be able to do so under a consumer proposal. Even if it turns out that you’re better off with a bankruptcy, if retaining the house makes sense from an emotional, family, and financial viewpoint, then we will try to help you make it happen.
Can my landlord evict me or terminate my lease?
No, a landlord cannot evict or terminate your lease just because you filed a proposal.
Can my utilities be disconnected?
No, your fuel, water, electricity, and telephone services cannot be disconnected just because you file a proposal, even if you are in arrears. A public utility can, however, require you to provide a cash deposit before supplying services to you in the future.
Can I keep my personal possessions?
Yes. You must still tell your trustee about your major possessions, but you don’t have to surrender them in a consumer proposal the way you do in a bankruptcy. If you want to keep your house, vehicle, or other secured assets, you can simply maintain your payments on those items.
If I owe taxes, can they be included in a consumer proposal?
Yes. Personal income tax, HST, GST, and PST are all debts that can be included in a consumer proposal. If you owe a significant amount of tax debt, you should see a trustee immediately.
When will creditors stop coming after me for payments?
Creditors must stop calling you for payment as soon as they are notified of your filing, whether you’ve told them about it yourself when they call or they’ve received the proposal documents from the trustee. If one of your creditors or a collection agency continues to harass you, tell your trustee, who will personally call them.
My wages are being garnisheed right now. Will a consumer proposal stop that?
In most cases, yes.
How will my creditors know I filed a proposal?
In a proposal, the trustee will send the documents to your creditors within five days of the filing date. If creditors contact you between the time you file the proposal and the time they’re officially notified, refer them to your trustee. You don’t need to give them any other information. In a Division I proposal, the trustee must send the documents to the creditors 10 days prior to their meeting.
Will the trustee help me with meeting the terms of the proposal?
The trustee provides limited financial counselling to help you better manage your money, but ultimately, you are responsible for making the payments and not defaulting.
What is counselling and do I have to take it?
You are required to attend two counselling sessions in order to complete your proposal. Counselling is normally one on one with yourself and your trustee, and covers areas such as:
- money management skills
- enhancing clients’ well being
- goal setting
- implementing lifestyle changes
- how to prevent a relapse
- securing family co-operation
- examining what brought about your financial distress.
Counselling sessions are not required for Division I proposals.
What happens if I miss a payment?
If you file a proposal you can miss a total of two payments. Your proposal terms will be extended to include the missed payments. A missed third payment results in the automatic annulment of your proposal. At this point, your debts will be reinstated and your creditors are free to renew collection attempts. A Division I proposal typically allows you to miss up to three payments. If three payments are missed, the trustee will send you a letter telling you to rectify the default within 30 days. If you fail to do so, the trustee notifies creditors that it intends to seek its discharge. At this point, your debts will be reinstated and your creditors may resume collection efforts.
What if I find I can’t meet the terms of my consumer proposal?
While your proposal can be amended with the approval of the creditors, it isn’t likely they’ll accept a smaller amount. If you can’t meet the terms of your existing agreement, talk to your trustee again. You may want to consider bankruptcy.
How is a trustee paid in a Consumer Proposal?
In a proposal, fees are paid according to a government tariff that your trustee will explain to you when your proposal is put together. The fee will be included in the amount you pay to the trustee for distribution to your creditors. There will be no surprises or extra charges. In a Division I proposal, the trustee’s fees are a negotiated term of the proposal and will be included in the money you pay under the proposal.
Is a consumer proposal my only option?
No. Depending on your situation, there may be other alternatives. These options can be discussed at your first consultation and include:
- consumer bankruptcy
- refinancing your house or property
- financial or credit counselling
- debt consolidation loans
Can I leave a creditor out of the proposal?
No. You must include all your unsecured creditors, including family and friends to whom you owe money. The only exception is a credit card with a zero balance, which you are not required to list.
Book your Free , No Obligation consultation with one of our certified counsellors today to see if a consumer proposal might be an option for you in: