What Is The Consumer Proposal?
The consumer proposal is an official procedure provided for by the Bankruptcy and Insolvency Act and administered by an LIT.
The LIT works with you to develop an agreement to repay your debts. This agreement generally provides for the repayment of a portion of your debts in a monthly payment that can be spread over a maximum period of 5 years.
- You protect all your assets (house, car etc.…).
- You do not pay any interest.
- Allows you to restore your financial situation faster.
- Your creditors will cease harassment or any other recourse against you.
- Suspension of all proceedings brought against you (seizure etc.)
- Consolidates all your debts into one payment.
- The consumer proposal cannot be grounds for dismissal of your employment.
- The consumer proposal will have an impact on your credit report. The information will remain on file throughout the installments of your proposal plus 3 years once the proposal has been fully executed.
- Cancellation in case of failure to respect the terms of your consumer proposal (some exceptions apply).
- Initial meeting with one of our insolvency professionals. This meeting will make it possible to assess your overall financial situation and work out with you the terms and conditions of your consumer proposal.
- A statement of affairs will be prepared with the help of our insolvency professional, a statement which will reflect your situation and allow your creditors to analyze your consumer proposal. They will then have 45 days to respond. Most consumer proposal are accepted by all creditors. If the creditors vote against, they often submit a counteroffer, and, in these circumstances, your LIT will negotiate the best possible agreement for you.
- Upon approval by your creditors of the consumer proposal, payments will begin and must be respected until the end.
- During the period of the consumer proposal, you will have two (2) counselling session which will help you improve your financial management, set financial goals to achieve and have better control over your finances.
- A certificate of full performance will then be issued by the LIT and you then will be released from all your debts.
Most Frequently Asked Questions
If you are an individual and your total debts do not exceed $250,000, excluding debts that are secured by your principal residence (for example, your mortgage), a consumer proposal may be a good choice for you.
The consumer proposal is an alternative to bankruptcy that can be advantageous in many situations.
The consumer proposal might be your best option:
- It allows you to protect all your assets which would normally become sizeable in the context of personal bankruptcy (house, car, investments, etc.)
- It makes it easier for you to restore your credit report.
- You absolutely want to avoid bankruptcy.
Indeed, the consumer proposal offers several advantages, including:
- You make one reasonable monthly payment.
- You repay a partial amount of your debts and without interest.
- You keep all your belongings: car, house, etc.
- You are protected against wage garnishment.
- You suffer less impact on your credit report.
When filing a consumer proposal, your credit rating will be R9 for the duration of your proposal and R7 for a period of 3 years after the end of your proposal. Fortunately, it is possible to rebuild your credit during this period.
Here are the definitions of the R7 and R9 dimensions:
- A7: Regular payments are made according to the following debt management options: a merger order, an orderly payment of debts, a consumer proposal, a debt management program with a credit counseling agency.
- R9: Write off for “bad debt”, sent to a collection agency or bankruptcy.
The consumer proposal must be made through a Licensed Insolvency Trustee (LIT) and as such we are specifically trained and licensed to administer consumer proposal. We will help you prepare the best proposal for your creditors and see to negotiating with your creditors if necessary. We will be there to guide you through this process from start to finish.
As soon as a consumer proposal is filed, any seizure or legal proceedings against you are suspended, except:
In the case of secured creditors (a mortgage on your home). For example, mortgage creditors can continue to pursue their remedies if you are in default of paying your mortgage, but only about the repossession of the house; mortgagees cannot therefore sue you for an amount of money.
For a seizure for alimony, if the creditor has obtained permission from the Court.
The proposal can be spread over a maximum period of 60 months. It is always possible to spread it over a shorter period. During your evaluation, we will evaluate together the most appropriate duration for your situation.
If you are filing a consumer proposal, you must include all your debts. The only debts that you could respect, but will nevertheless have to declare, are debts secured by property such as, your house or your car.
Student loans are non-dischargeable debts under the Act if you have ceased to be a full-time or part-time student and the consumer proposal is filed less than seven (7) years before the end. It is essential to know the end date of study which is indicated in your school file. The Ministry will refer to it. End of studies means the date you have completely stopped studying with or without a loan from the Ministry of Education.
The consumer proposal does not necessarily have an impact on the spouse. If you have a debt in common, however, the spouse will remain responsible for this debt if you make a consumer proposal, and he/she will have to pay it. The spouse's credit file will not be affected unless he/she does not repay the creditor for the debt that you would have in common.
If you have no joint debts, the decision of one of the spouses to make a proposal does not affect the credit report of the other spouse. Everyone has their own credit file, and their payment habits or decisions only affect their credit.