Consumer Proposal: Ontario Laws & Procedures
A consumer proposal is an alternative to bankruptcy and a good option for many people who are struggling with debt payments and financial issues. A consumer proposal is a legal process, so the terms of the process are set by the government and must be followed. If you wish to file a consumer proposal, Ontario and Canadian laws state that it must be done by a licensed trustee in bankruptcy. You may have previously thought that this type of trustee only handled bankruptcy cases, but that isn’t true.
Speaking to a bankruptcy trustee is the first step to filing a consumer proposal in Ontario. Most trustees offer a free consultation, so you will be able to sit down with the trustee and have them review your financial situation at no cost to you. The trustee will then provide you with the options that are available to you based on your finances.
If you choose to submit a consumer proposal, Ontario has laid out the exact process that needs to be followed in order to do so. As mentioned, only a bankruptcy trustee can file the proposal, but it isn't a bankruptcy so they are technically called "Administrators". It can’t be done by a debt settlement company, a financial counsellor or by you yourself. This is actually good news since the trustee understands Ontario and Canadian law and will ensure that the proposal is filed properly so that it is legally-binding on you and all your unsecured creditors.
Filing an Ontario Consumer Proposal
Your bankruptcy trustee will assist you in filing the proposal. The process involved is dictated by the federal government’s Bankruptcy and Insolvency Act. This same act also governs the actions of the bankruptcy trustee.
In general, the process of filing a consumer proposal in Ontario is as follows:
- After reviewing your financial situation, the trustee determines what a fair offer to your un secured creditors would be. Your trustee will take into account how much you can afford as well as how much your creditors would be likely to get if you were to file for bankruptcy.
- You will need to give the trustee a complete list of all of your assets and debts as well as details of your income.
- This offer will not interfere with your mortgage or car payments, so you can continue to keep your home and car.
- This offer is prepared and submitted to all of your unsecured creditors. They then have 45 days to decide whether or not they would like to accept the terms of the proposal.
- From the minute your proposal is filed with the government this point on, you receive financial protection from your creditors. They cannot take any legal action against you to collect their debts and any wage garnishments against you will stop.
- Also, at this point, all communication with your creditors will be done by the trustee. Your creditors are no longer able to contact you directly to discuss your debt.
- In Ontario, consumer proposals are usually accepted if they are fair. This is because creditors know that they will get significantly less money if you were to go bankrupt instead.
- Any of your creditors can request a meeting of creditors if they wish, as long as they are owed at least 25% of the total value of the debt. In addition, the Office of the Superintendent of Bankruptcy can also direct the trustee to call a meeting. A meeting of creditors must be held within 21 days after being called. The creditors will vote on your proposal at the meeting.
- In most Ontario consumer proposal cases, a meeting of creditors is not called and creditors will instead simply vote on whether to accept the proposal.
- If your proposal is accepted by the majority of your creditors, then all unsecured creditors are bound by its terms even if they did not vote in favour of it. The majority is determined by the total amount of the debt owed. Therefore, if the creditors who are owed 50% plus one of the debt vote in favour, all must accept the terms.
- After the proposal is accepted, there is a standard 15-day waiting period until the court approves the proposal.
- Your responsibility for the duration of the proposal term is to make the regular payments as outlined. These payments are set at the same amount each month and are paid directly to the trustee who distributes the proceeds to the creditors.
- You are also required to attend two financial counselling sessions with a licensed and registered financial counsellor.
- At the completion of the proposal, if you have successfully made all of your payments, you will receive a certificate of full performance that is signed by your trustee. The balance of your debts are then eliminated
- Once you receive this certificate, you are back on the road to rebuilding your financial life!