Filing Consumer Proposal: FAQ & Common Myths
When it comes to filing consumer proposal in Ontario, many people have questions. In fact, many incorrect myths unfortunately continue to persist. While a consumer proposal is a common option for people with debt troubles, a lot of information about this procedure isn’t common knowledge.
It’s important that you understand as much as possible about filing a consumer proposal in Ontario before you make a choice on how to proceed with your financial life. Having accurate information is crucial to making the right decision for your particular situation.
Here are some common questions related to filing a consumer proposal in Ontario. If you have other questions that you don’t see answered here, specific inquiries related to your particular situation, or if you are unsure as to whether or not a consumer proposal is the right choice for you, speaking with a trustee in bankruptcy can help. A trustee is trained, licensed and registered to review financial situations and provide those who are having financial trouble with information on the options available to them. Most trustees offer a free consultation.
What is a Consumer Proposal?
A consumer proposal is a legal process where you develop an offer to your creditors to pay them on terms that you can afford. A consumer proposal offer usually includes extending the period of time you have to pay your debts, and offering to pay creditors a portion of what is owed.
A consumer proposal can only be filed by a trustee in bankruptcy (sometimes called a “proposal administrator” when dealing with consumer proposals.) It is filed with the Office of the Superintendent of Bankruptcy.
Which Creditors are Included in a Consumer Proposal?
All unsecured creditors are included in a consumer proposal. In fact, you must include all of your unsecured creditors. You can’t leave any out. Under the terms of a consumer proposal, all unsecured creditors must be treated the same.
Unsecured debts include credit card debt, personal loans, unsecured lines of credit, bank overdrafts and other such loans. It does not include loans such as mortgages or automobile loans. If you are having trouble paying these debts, you’ll need to speak with these creditors individually.
When filing a consumer proposal in Ontario, the trustee’s administration fees are set by the federal government and come out of the proposal payments that you make. You do not have to pay any extra fees. In addition, trustees typically offer the initial consultation for free.
How Long is the Consumer Proposal Process?
Once your proposal has been paid, your unsecured creditors have 45 days to vote on the proposal. Once your creditors have approved your proposal, there is a standard 15-day waiting period until the court approves it. A consumer proposal can be paid in between one and five years. However, you can pay your proposal more quickly if this is possible for you. There are no fees or penalties associated with completing your proposal early.
How Long does a Consumer Proposal Remain on my Credit Report?
When filing consumer proposal in Ontario, a note remains on your credit report for three years after the proposal has been completed.
What Happens to my Assets when Filing Consumer Proposal in Ontario?
In the majority of cases, you are able to keep all of your assets when filing a consumer proposal in Ontario, assuming your creditors accept the terms of the proposal. The consumer proposal process does not usually involve surrendering assets.
Money that is invested in RRSPs, RESPs and TFSAs is generally protected under a consumer proposal. Speaking with a licensed trustee can help you understand how a consumer proposal affects your particular assets and investments.
In addition, a consumer proposal does not impact your mortgage or car payments, so you are able to keep these assets as long as you continue to make payments as they become due.
How can I Rebuild my Credit After Consumer Proposal?
Once you have received your certificate of full performance, indicating the completion of your consumer proposal, you are free to begin rebuilding your financial life and improving your credit rating. This can be done by proving to your creditors that you are able to borrow money and pay it back successfully.
As one of your duties when filing consumer proposal in Ontario, you will be required to attend two financial counselling sessions. These sessions will teach you about budgeting and money management. They will also provide you with guidance and tips for rebuilding your financial life and improving your credit rating once your proposal is complete.
One way that this can be done is by using a secured credit card. This is a card that is secured by a deposit and where this deposit becomes the credit limit for the card. Using this card and paying your bills on time can help rebuild your credit rating after filing consumer proposal in Ontario.