What it means to File a Consumer Proposal
When it comes to filing a consumer proposal in Ontario, it’s important to understand the facts. This includes knowing exactly what your duties are. Since a consumer proposal is a legal process, these duties are clearly defined.
The process is outlined by the Bankruptcy and Insolvency Act, which is a federal act in Canada. This same act also governs the actions of trustees in bankruptcy. Speaking with a trustee in bankruptcy can help you understand all of the details of the consumer proposal process.
The Consumer Proposal Process
A consumer proposal must be filed by a consumer proposal administrator (who is also a licensed trustee in bankruptcy). Other individuals such as credit counsellors, debt management companies and financial advisors cannot file a formal consumer proposal.
When you meet with a trustee, he or she will review your financial situation and determine what a fair offer to your unsecured creditors will be. When making this decision, the trustee will take into account how much you are able to afford as well as what your creditors would likely receive if you filed for bankruptcy.
This offer is then sent to all of your unsecured creditors who have 45 days to decide whether or not to accept the proposal. If the proposal is accepted by the majority of your unsecured creditors, then all of your unsecured creditors are bound by its terms. After the proposal is accepted, there is a 15-day waiting period until the court approves the proposal.
After filing a consumer proposal in Ontario, you will be responsible for following the terms of the proposal and fulfilling all duties associated with filing a consumer proposal. Your trustee will inform you of your specific duties.
In order to successfully complete your proposal, your main duty and responsibility is to ensure that you make your proposal payments as agreed. These payments will be made directly to your trustee who will then distribute them to your creditors. It is very important that you make these payments. If you miss three payments over the life of your proposal, the proposal can be annulled. This means that your creditors will be free to take legal action against you in order to collect the full amount of debt owing to them. If your proposal is annulled, you may not have any choice but to file for bankruptcy.
When you file your proposal, a meeting of creditors may be called. If one is called, you will need to attend this meeting. However, these meetings are quite rare. In most cases, after filing a consumer proposal in Ontario, your creditors will simply vote on whether to accept the proposal without a meeting.
You will also need to attend two financial counselling sessions with a registered financial counsellor. In these sessions, you will learn about budgeting, financial management and how to rebuild your credit rating after being discharged. The goal of these sessions is to assist you in handling your finances in the future and show you how to avoid financial trouble going forward.
You will also need to ensure that you provide your trustee with up-to-date contact information. If you move, change jobs or change your phone number, it is important that you provide this new information to your trustee. After all, he or she needs to be able to get in touch with you.
After a Consumer Proposal
A consumer proposal can last for up to five years, depending on your situation. Once you have made all of the payments as outlined in the proposal and fulfilled the other duties expected of you, you will receive a Certificate of Full Performance that is signed by your trustee. This marks the end of your consumer proposal. The balance of your remaining unsecured debts will be eliminated.
A note will be placed on your credit report and it will remain for three years after you have been discharged from the proposal. In general, a person who files a consumer proposal is assigned a low credit score. However, it is possible to rebuild your credit score after a consumer proposal. Do not believe the myth that your credit rating will be damaged forever. Once your proposal is completed, you are free to take steps to rebuild your financial life by using the strategies outlined in the counselling sessions.