What are the advantages of filing a consumer proposal?
Why are creditors willing to accept a consumer proposal?
What creditors can be included in a consumer proposal?
What happens to secured creditors when I file a consumer proposal?
What happens to my assets when I file a consumer proposal?
Who is eligible to file a consumer proposal?
What is the process for filing a consumer proposal?
What if my creditors don’t vote?
What happens if my creditors don’t accept my consumer proposal?
What happens if I miss payments on my consumer proposal?
How does a consumer proposal affect my credit rating?
What are the advantages of filing a consumer proposal?
- Avoid bankruptcy and protect assets
- Prevent creditors from taking further legal or collection action against you
- Stop wage garnishments, interest and penalties
- Bankruptcy and Insolvency Act forces creditors to participate
- Ability to compromise debts
- Flexible payment terms
- Allows you to protect asset that would be affected by filing personal bankruptcy.
Why are creditors willing to accept a consumer proposal?
The choice to accept your consumer proposal is a business decision. Creditors want to maximize the amount they are able to recover. By accepting your consumer proposal creditors will recover more than they would if you were filing personal bankruptcy.
What creditors can be included in a consumer proposal?
- All of unsecured creditors (ie: creditors that don’t hold any collateral)
- Your secured creditors (ie: creditors that hold collateral) aren’t affected by the proposal
What happens to secured creditors when I file a consumer proposal?
- The rights of secured creditors are unaffected
- You must maintain payments to your secured creditors if you want to keep the encumbered property
- If you do not want to stop paying your secured creditors you can surrender the asset to them and any shortfall that results will be included in your consumer proposal
What happens to my assets when I file a consumer proposal?
You retain possession and control of your assets. Your creditors and/or the trustee have no interest in any of your property.
Who is eligible to file a consumer proposal?
- Anyone whose debts excluding the mortgage on the principal residence are less than $250,000. For larger debts a Division I Proposal is filed.
- Two people can file a joint consumer proposal provided that they have a financial relationship and the majority of their debts are joint.
- Individuals that owe over $250,000 can file a Division I Proposal
What is the process for filing a consumer proposal?
Meet with a licensed Trustee in Bankruptcy who will:
- Review your finances and determine what you can afford to pay creditors
- Determine what you need to offer your creditors based on your situation
- Help you prepare the proposal documents
Consumer proposal voting and approval includes:
- Creditors have up to 45 days from the date of filing to vote on your proposal
- If the majority (51%) of creditors by dollar value ($1 = 1 vote) vote in favour of the proposal it becomes binding on all creditors.
- Deemed Court approval 60 days after filing provided there are no objection.
Upon approval of your consumer proposal you must:
- Make payments
- Attend two credit counseling sessions
- File your taxes on time
- Pay any taxes owed in the post-proposal period
What if my creditors don’t vote?
If creditors don’t vote within 45 days of filing the consumer proposal is deemed accepted.
What happens if my creditors don’t accept my consumer proposal?
If your creditors don’t accept your consumer proposal as filed the trustee will help you to negotiate further with your creditors. It may be possible to convince creditors to reconsider their position and accept the original proposal or you may have to amend the terms of the proposal to gain creditors acceptance. When creditors vote against a consumer proposal they will usually make a counter offer. If after negotiating you are unable to reach an agreement then the proposal would fail and you would have the option of filing personal bankruptcy.
It is extremely rare that consumer proposals fail because creditors don’t want people filing personal bankruptcy because they know they will get more through the consumer proposal.
What happens if I miss payments on my consumer proposal?
If you become in arrears to the extent of three monthly payments your consumer proposal is deemed annulled. This means you will no longer be protected from your creditors and cannot file another consumer proposal. The next step is to consider filing personal bankruptcy.
How does a consumer proposal affect my credit rating?
You receive a R7 credit rating meaning you have compromised the amount you owe. This stays on your credit report for three years after your consumer proposal is paid in full.
