What is Consumer Proposal | How to file it
A consumer proposal is an agreement between a creditor and debtor where the debtor makes an offer to his creditors to settle the debt on installments.
A consumer proposal is a legally binding, negotiated debt settlement that you can use to pay off your debts and avoid bankruptcy.
It is advisable to file a consumer proposal through your Licensed Insolvency Trustee since it must be filed in-person.
Only Licensed Insolvency Trustees are licensed by the federal government to work as Consumer Proposal Administrators. They also authorized to help consumers file for bankruptcy.
LIT’s are experts in insolvency law and can provide impartial advice on a variety of financial issues. Such as how to avoid bankruptcy, restructuring debts or dealing with creditors.
Can I make a consumer proposal to my creditors by myself?
This is a question that is asked frequently. The simple answer is no, you can’t.
You can try and make an informal or private offer to your creditors on your own. But be prepared to encounter many problems when negotiating with creditors.
You can make things easy for you, iIf you work with a trustee to make an offer and negotiate with your creditors. Either you want to modify your payments or repay only a percentage of what you owe.
Your LIT will work with you to figure out how much you can afford and how much your creditors might be willing to accept. Its all based on your financial circumstances.
Filing a Consumer Proposal in Ontario
Filing a Consumer Proposal in Ontario is a legal process under the Bankruptcy and Insolvency Act. The Ontario government has set up specific rules that govern how you can file.
Here are the steps and requirements and also some tips on how to get your proposal accepted by your lender.
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Meet with a Licensed Insolvency Trustee for a debt assessment
All LITs in Canada provide a free debt assessment on first consultation. During this initial consultation, your trustee will review your finances. Explain all your debt relief options to find out if a consumer proposal is the right solution for you.
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Put together the proposal
At this point, the LIT will ask you to provide a complete list of what you own and what you owe and will use this information to put together the offer and payment plan based on your ability to pay.
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Preparing the consumer proposal documents
Your trustee is responsible for preparing all the necessary paperwork to legally document your proposal. These documents will include:
- A Statement of Affairs is a financial statement that details the estimated value of your assets and the total amount of your debts. It includes information related to your creditors, such as their names and addresses.
- A Statement of Income and Expenses detailing your household income and expenses for the family to help creditors have a clear understanding of your finances.
- An Assessment Certificate to certify that the Licensed Insolvency Trustee has informed you of all your options and possible alternatives. It is your decision and choice to file a consumer proposal.
- The Consumer Proposal which includes your current finances as well as the proposed repayment plan. Also its specify how much debt you propose to repay, how long you intend to pay and how much your monthly payment will be.
- Other administrative documents required by the BIA.
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Filing the proposal & creditor protection
Once your documents are complete. Your trustee submits them for filing at the Office of the Superintendent of Bankruptcy.
Many filing options are now available, but mostly through an electronic system that all licensed insolvency trustees use across Canada.
As soon as the documents are received by the OSB. You receive what is called a ‘stay of proceedings’ which will immediately give you protection from your creditors.
This means your creditors can no longer contact you for collection, charge you interest, or garnish your wages.
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Consumer proposal notification & acceptance
The LIT has to notify all your creditors within 5 days from when the documents have been filed with the OSB.
Your trustee sends out a Notice to Creditors informing them of your financial situation. Also presents them the proposed payment plan .
Once they receive notification, your creditors have 45 days to review your proposal. Ask for a creditors meeting if necessary and make a decision to accept or reject the proposal.
If your creditors ask for a meeting in order to discuss your proposal and ask questions. Your LIT will attend the meeting with you and work as an intermediary to negotiate an offer that works for everyone.
After 45 days, your proposal is deemed to be accepted. If the consumer proposal is rejected then you would have to pursue another debt solution.
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Completing your consumer proposal
Once your proposal is accepted, you start making the required payments when they become due.
You are also required to attend two credit counseling sessions which are designed to empower you with skills and resources to help you manage debt and avoid future insolvency.
If you missed more than two payments, then the proposal is deemed to be annulled and will no longer be in effect. You can avoid any default by regularly communicating with your Trustee and making contingent plans for any changes on your income.
If you believe you must miss a payment, contact your Trustee as soon as possible.
Once you complete all the obligations of the consumer proposal. Your Trustee will issue a Certificate of Full Performance as proof that you have satisfactorily met the terms of the proposal. Any outstanding balance you still owe that were outlined in the proposal can be discharged.
See Also: Filing a Bankruptcy
What happens next?
In Ontario, the OSB forwards a copy of your Certificate of Full Performance to TransUnion and EquiFax.
A consumer proposal will still appear on your credit report for up to three years but you can begin the process of improving your credit score during this time or even while you are still in the proposal.
You can contact a LIT in your area for more information about how to file a consumer proposal in Ontario.
