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If you are having problems paying the bills each month, but you have a good job and could afford to pay the money if given a certain amount of time, you may want to consider a Consumer Proposal. Consumer proposals are a good alternative to bankruptcy.
A Consumer Proposal is a bit like a Debt Management Plan: You can afford to repay a portion of your debts, but you just need more time to do so.
Unlike a Debt Management Plan, a Consumer Proposal is legally binding and is administered by the courts by a licensed bankruptcy trustee.
Consumer Proposals are best for those with debts in excess of $5,000 (to a maximum of $75,000), who are able to repay a portion of their debt.
Some advantages of a Consumer Proposal include a maximum period of 5 years, it is generally accepted by your creditors, interest is frozen at the date you file, you can negotiate to repay only a portion of the debt, wage garnishments are stopped immediately, and your creditors are “stayed” and cannot take any legal action against you.
At the start of the process, your personal bankruptcy trustee will summarize your financial situation to determine what kind of monthly payment you can afford to make. They will then compare that amount to your total amount of debt, and figure out how many months you will be required to pay. If the numbers seem reasonable to both you and your creditors, the trustee will prepare the necessary documents to file a consumer proposal. You must include all of your unsecured creditors in the proposal.
The next stage is up to your creditors. Under the Bankruptcy and Insolvency Act, your creditors have 45 days to vote for or against your proposal. If a majority (50% plus 1) vote for your proposal, then it is considered acceptable by all of your creditors. In most cases your creditors will accept the proposal, as they would be getting even less money if you filed for bankruptcy.
Fifteen days later, if there are no objections; your proposal will be approved by the court. From that date on, you and your creditors are locked into the terms of the proposal.
If 25% or more of your creditors do not vote for accepting your proposal, your trustee will call a meeting of creditors. It is essential that you attend this meeting. The trustee will help you and your creditors come to an agreement that is acceptable for everyone.
Throughout the duration of a consumer proposal, you may miss up to two payments, and the trustee will simply add two payments onto the end. However, if you miss three payments, the consumer proposal collapses and is annulled by the court. Your creditors may then immediately apply to the court to garnish your wages, and interest charges are applied to your debts all the way back to the day you filed.
As soon as you file a consumer proposal, your credit rating will be revised to reflect your current situation, and will likely remain that way until the proposal in completed. A note will also remain on your credit report for seven years starting from the date that you filed.
The trustee fees are set by the Superintendent of Bankruptcy. In most cases, your trustee will be paid out of the proceeds of your proposal.
If you are experiencing financial difficulty, and think a consumer proposal may be the right option for you, please contact us immediately. Our bankruptcy trustees will offer you an initial consultation free of charge. We will assess your situation and determine the best alternative for you.
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