Consumer Proposal: Ontario and Across Canada
One option for dealing with debt and financial stress is filing a consumer proposal. Ontario residents often choose this option to help them reduce the amount of debt that they are dealing with. With a consumer proposal, you make a formal offer to your unsecured creditors that sees you offer an amount that you are able to pay. This typically involves paying less than the overall amount owing. At the conclusion of the consumer proposal process, if you make all of the required payments, the remaining outstanding balance is forgiven and your unsecured debts are considered paid.
A consumer proposal must be filed by a licensed proposal administrator (who is also a trustee in bankruptcy.) It cannot be done by a credit counsellor, financial advisor or debt management company. This is because a consumer proposal is a legal process. The terms of this process are outlined by the federal Bankruptcy and Insolvency Act. The Office of the Superintendent of Bankruptcy is responsible for ensuring that this process is handled fairly. This office is also responsible for licensing and regulating bankruptcy trustees.
If you are having financial difficulties and finding it difficult to pay your debts as they become due, it is a good idea to meet with a trustee. He or she can review your financial situation and provide you with information on the options that are available to you to relieve your debt issues and improve your financial situation. One of these options may be filing a consumer proposal.
Ontario residents are often able to speak with a trustee for free, as many trustees offer free initial consultations.
Filing a Consumer Proposal in Ontario
If consumer proposal is an option for you, it is your decision as to whether or not you want to proceed with this option. A bankruptcy trustee is not there to pressure you into choosing a particular option. Instead, he or she is there to help you understand the available options so that you can make an informed choice.
If you decide to proceed with a consumer proposal, your trustee will assist you in completing all of the required paperwork and submitting it. Whether you file a consumer proposal in Ontario or any other province, the forms must be submitted to the Office of the Superintendent of Bankruptcy. This can now be done electronically, saving time and hassle. The Superintendent of Bankruptcy is a Canadian government position.
The trustee will also determine what a fair offer to your unsecured creditors will be. Only unsecured debts can be included in a consumer proposal. The trustee is responsible for ensuring that the entire process is fair to both the debtor and his or her creditors. When determining what a fair offer will be, a bankruptcy trustee typically looks at your financial situation ( income, assets and dependents), the amount of debt that you have and what your creditors would get if you were to declare bankruptcy. This offer is then sent to your creditors. They then have 45 days to decide if they would like to accept the proposal or not. If the majority of your unsecured creditors decide to accept the proposal, then all will be bound by its terms.
In most cases in Ontario consumer proposal offers are accepted. This is because creditors know that the offer has been prepared by a trustee who has reviewed your financial situation. In addition, they know that the debtor may need to file for bankruptcy if the proposal is not accepted. In general, creditors do not receive a great deal (if anything) when a debtor files for bankruptcy. Therefore, most creditors would rather receive something instead of nothing and they choose to accept the proposal.
Once your proposal is accepted, you begin making the payments as outlined in the proposal agreement. It is important that you make the payments as required. Failing to make three payments over the life of your proposal can lead to the proposal being annulled. If this happens, your creditors are once again free to take legal action against you to collect on the full amount of outstanding debt.
You will also need to attend two financial counselling sessions. These sessions are designed to help you with money management and assist you in rebuilding your financial life after your proposal is complete.
When you file for consumer proposal in Ontario, you are taking steps to improve your financial situation. With the assistance of a trustee in bankruptcy, you can put yourself back on the road to a more stable financial future.