What is a Consumer Proposal?
A consumer proposal is a legal process that provides a debtor with a simplified streamlined method to settle their debts with creditors without filing an assignment in bankruptcy. The proposal can be tailored to suit your present financial situation, whether it’s extended payments terms or a percentage of the total debt to be paid in monthly payments or in a lump sum.
Consumer proposals are intended to help reduce the number of bankruptcy filings by allowing debtors who owe less than $250,000 (excluding a mortgage on their principal residence) to negotiate with their creditors for the reduction of their debt and/or the extension of time for repayment.
As long as the consumer proposal offers more to your creditors than they would receive in a bankruptcy and your trustee is satisfied you can fulfill the terms, this may be a viable option for you to avoid bankruptcy.
Consumer proposals offer debtor rehabilitation while at the same time providing financial protection.
Who can make a Consumer Proposal?
A natural person who is bankrupt or insolvent and whose aggregate debts, excluding any debts secured by the person’s principal residence, do not exceed $250,000.00.
What are the Benefits of a Consumer Proposal?
A consumer proposal has many featured benefits:
- Stops creditors from taking any legal action
- Stops wage garnishments
- Stops interest from accruing at the date you file a consumer proposal
- Offers one manageable and affordable monthly payment
- Extension of time for repayment and/or the reduction of debt you owe
- Protects your assets
- Allows you to avoid bankruptcy
Contact a Trustee at Paddon + Yorke Inc.
A Trustee is an individual or corporation who is licensed by the Government to administer proposals.
The trustee will explain the process for making a consumer proposal as well as the effects. The trustee will also prepare all the necessary documents to file the proposal with the Office of the Superintendent of Bankruptcy (OSB).
Notification of Proposal to Creditors
Once the consumer proposal has been filed with the Office of the Superintendent of Bankruptcy (OSB), the trustee will send a notice of the proposal along with a copy of the consumer proposal and other pertinent information to all known creditors.
Creditors Vote on Acceptance of the Consumer Proposal
Unsecured creditors have the opportunity to vote within 45 days of filing the consumer proposal. Where, at the expiry of the 45-day period, no obligation has arisen to call a meeting of creditors the Consumer Proposal is deemed to be accepted by the creditors. This means that all the unsecured creditors are bound by the terms of the proposal even if they voted against it.
If the unsecured creditors requesting a meeting are owed more than 25% of the total debt of creditors who responded to the consumer proposal, the trustee will arrange for a meeting to vote on the acceptance or rejection of the consumer proposal. At the meeting, if the majority of unsecured creditors vote in favor of the consumer proposal, it will become binding by the debtor and all creditors.
When the creditors accept the consumer proposal, it is deemed approved by the Court after 15 days expire, unless a court hearing is requested to approve the consumer proposal.
Counselling
You will be required to attend two credit counselling sessions that must be completed within a prescribed period of time. These sessions will help you discover and understand the cause(s) of your financial difficulties. These sessions will also provide information to assist you in managing your money. Additional counselling may be available should you require further assistance.
Payments
Upon the acceptance of the consumer proposal, you will make the required payments to the trustee as outlined in the proposal. The payment terms may be comprised of a one-time lump sum payment or monthly payments for a period of time that does not exceed five years.
The creditors will receive dividend payments made by the trustee in accordance with the terms of the consumer proposal.
Certificate of Full Performance
Once all payment requirements have been met and both counselling sessions have been completed, the trustee will issue a certificate that demonstrates that the terms of the consumer proposal have been successfully completed.
Please visit our FAQs about consumer proposals page or for more information on consumer proposals contact a Paddon + Yorke professional today – and get on with your life!