Filing a Consumer Proposal
A consumer proposal is a legal process through which you make an offer to your unsecured creditors to pay them on terms that you can afford. In most consumer proposals, you offer to repay a portion of the debt that you owe in monthly payments over a specific period of time. Once you have made all of the agreed-upon payments and satisfied the terms of the proposal, the remaining outstanding debt is forgiven. Many people wonder about the specifics of a consumer proposal and ask who can file a consumer proposal and how to file.
If you are in a situation where you are unable to pay your bills as they become due, filing a consumer proposal may be an option that you would may choose to proceed with.
In terms of who can file a consumer proposal, in order to file, the following must be true:
- You must be an individual. Businesses may not file consumer proposals.
- You must be insolvent.
- This means that you must be in a situation where you are not able to pay your debts as they become due or you do not have enough assets to pay your debts.
- You must have a stable income so that you can make the proposal payments as agreed.
- You must have less than $250,000 in unsecured debts.
- You must have no prior proposals open.
- You are not able to have one that one consumer open at the same time. This means that all previous proposals must be discharged before you can file a new consumer proposal. This is true even if the debts are new and completely different from the debts included in the previous proposal.
- If you have a previous proposal that was annulled, all of the claims in this prior proposal must be dealt with (either paid or eliminated due to bankruptcy) before you can file another consumer proposal.
How to File a Consumer Proposal
If you wish to file a consumer proposal, you must do so with a licensed trustee in bankruptcy (who is called a “proposal administrator” during the consumer proposal process). This is a person who has been licensed, trained and registered by the federal government to administer bankruptcy and proposal processes. You cannot file a consumer proposal with a credit counsellor, financial advisor, debt settlement company or any other person or organization. It must be done with a licensed trustee.
Most trustees offer the initial consultation at no cost. During the consultation, the trustee will review your financial situation and provide you with details on all of the options that are available to you. The trustee will inform you of all options, not just those that he or she is able to assist you with. Bankruptcy trustees are bound by a strict code of ethics and thus they are required by law to provide you with information on all possible options.
Your trustee will not push you to choose any particular option. The decision for how you wish to proceed is always entirely up to you. The trustee will, however, let you know who can file a consumer proposal and how one is filed.
If you decide that you wish to file a consumer proposal, the trustee will determine what a fair offer to your creditors will be. In order to do so, the trustee will review your financial situation and examine several different factors, including your income and expenses, any equity you may have in your house, as well as how much your creditors would receive if you were to file for bankruptcy. This offer is then sent to all of your unsecured creditors.
Consumer proposals can only include unsecured debt. This includes debt such as credit cards, unsecured lines of credit, personal loans, bank overdraft charges and other such debts. A consumer proposal does not include secured debt such as mortgages and automobile loans. In addition, a consumer proposal does not include court ordered fees such as alimony and child support. Your trustee will inform you of which debts can be included in the proposal before you file.
A consumer proposal must be sent to all of your unsecured creditors. You cannot exclude any. If the majority of your unsecured creditors vote to accept the proposal, then all are bound by its terms.
As you can see, since it is a legal process, the terms of a consumer proposal are relatively straightforward. Your trustee will help you understand the proposal process and provide you with all of the information you need regarding who can file a consumer proposal, what debts can be included and the cost of the proposal.