What is a Consumer Proposal & how does a Consumer Proposal work?
A consumer proposal is an alternative to bankruptcy.
Essentially, a Consumer Proposal is an offer to repay a part of what you owe, often as low as 20%. It is a legal process to consolidate your debts under the Bankruptcy and Insolvency Act and is arranged and administered by a Licensed Insolvency Trustee.
Once the consumer proposal is accepted by your creditors, you will begin making the agreed payments over as long as 5 years.
What happens to my assets in a Consumer Proposal? Will I lose my house or my car?
No. When you file a Consumer Proposal you are able to keep all of your assets.
How do I know if a Consumer Proposal is the best option for me?
If you are unable to make your monthly payments to creditors, a Consumer Proposal may be an option to consider.
You can meet with Hardie & Kelly who will complete an assessment of your current financial situation and determine if filing a Consumer Proposal is right for you.
Who can file a Consumer Proposal?
To file a Consumer Proposal, you must:
1) Be a person, not a business; 2) Be insolvent, meaning you are unable to pay your debts as they become due; 3) Have total debts less than $250,000, not including your home mortgage; 4) Have a stable source of income, so you are able to make the monthly payments; 6) Have no prior proposal proceedings still open, as you cannot have two filings open at the same time.
How much debt must I owe before to be eligible to file a Consumer Proposal?
If you are unable to make your monthly debt payments or repay your debts in full, a Consumer Proposal may be the option for you. To be eligible to file a Consumer Proposal, your debts, not including the mortgage on your residence, must be less than $250,000.
Can I pay off my Consumer Proposal early?
Yes! Once your creditors have agreed to accept your Consumer Proposal, it is a legally binding agreement for an agreed upon sum of money, which can be paid any time, prior to the 5 year period or other date agreed upon.
The sooner you pay off your Consumer Proposal - the better!
What if I filed a Consumer Proposal before, can I file another one?
If you have previously filed a Consumer Proposal that was annulled, which means you didn’t complete the agreed upon payments, you cannot file another Consumer Proposal until all of the claims filed in your prior proposal have been paid in full or extinguished through a bankruptcy.
What if my situation changes and I can no longer make the payments? What if I cannot complete the Consumer Proposal?
If you miss a total of three payments during the term of the proposal, the Consumer Proposal is automatically annulled. If your Proposal is annulled you cannot file another Consumer Proposal for those debts however, you can file for bankruptcy at that time.
Do I have to include all of my creditors in a consumer proposal, including debts I owe to family and friends?
You must tell the Licensed Insolvency Trustee about all of your debts including family and friends. You must include all of your “unsecured debts” in your Consumer Proposal and you can continue to make payments on your secured debts such as your mortgage and car loans.
How does filing a Consumer Proposal affect my credit rating?
If you file a Consumer Proposal it will affect your credit rating with the debts included in your Proposal being given an R7 rating. Once you have completed the terms of your Consumer Proposal, you will receive a “Certificate of Full Performance,” which you can send to the credit reporting agencies to ensure your credit record is updated.
What are the fees for filing a Consumer Proposal?
There are no additional costs to you in addition to your agreed upon Proposal payments. The fees for a Consumer Proposal are legislated in the Bankruptcy & Insolvency Act. The fees are deducted from the payments you make into the Consumer Proposal.