A consumer proposal is a legal process where you make an offer to your unsecured creditors that will allow you to repay them on terms that you can afford. In most cases, your offer will involve paying a portion of the debt owed over a set time period. Many consumer proposals are paid in monthly payments. Once the proposal is complete, all payments are made and all duties associated with the proposal are completed, the remaining outstanding debt is eliminated. A consumer proposal is a way for people who can afford to repay a portion of their debt to eliminate this debt over time. A consumer proposal must be filed with a licensed trustee in bankruptcy who will act as your proposal administrator. One common question that is often asked is “How much are consumer proposal fees?” When you make your proposal payments, they are made directly to your trustee who distributes them to your creditors. All fees associated with a consumer proposal are set and regulated by the federal government. The costs associated with the proposal are deducted from these payments and the net amount is distributed to your creditors. Bankruptcy trustees are licensed by the government to handle proposals and bankruptcy processes.
In addition, most trustees offer the initial consultation at no charge. In this consultation, the trustee will review your financial situation. He or she will then let you know which options are available to you. The trustee does not just list services that he or she offers. Instead, trustees are legally obligated to explain all possible options, not just those that they can assist you with.
The Consumer Proposal Process
As mentioned, consumer proposal fees are taken from the monthly payments that you make to your unsecured creditors through your trustee. The amount of payments is determined by your financial situation. If you decide to proceed with a consumer proposal, your trustee will determine what a fair offer to your unsecured creditors will be. Only unsecured creditors can be included in a consumer proposal. Unsecured creditors include debts such as credit card debt, unsecured lines of credit, department store cards, bank overdrafts, personal loans and other such debt. Secured debt, such as your mortgage or your automobile loan, cannot be included in a consumer proposal. If you are unable to pay these debts, you must contact these creditors directly and discuss the situation. Once your consumer proposal offer is prepared, it is sent to your unsecured creditors. They will then vote on whether or not they wish to accept the proposal. If the majority of your unsecured creditors choose to accept the proposal, then all unsecured creditors are bound by its terms. A consumer proposal also provides you with legal protection. Once your proposal is accepted, all communication with your unsecured creditors is done by your trustee. Your unsecured creditors will not be able to contact you directly, nor will they be able to send collection agencies after you. For many people, this is a great relief. In addition, all wage garnishment and legal action against you stops when your proposal is accepted and no new legal action or wage garnishment can be initiated by your unsecured creditors during the proposal period.
Making Consumer Proposal Payments
If your proposal is accepted, your main responsibility is to make the payments as outlined in the terms of the proposal. As mentioned, all consumer proposal fees come out of these payments. You do not pay additional monthly fees. For example, if your proposal offer is to pay $300 each month for 36 months, this is exactly what you pay. In effect, your creditors are paying the consumer proposal fees. If you fail to make your payments as agreed, your proposal can be annulled. This usually happens after three missed payments. If your proposal is annulled, your creditors can once again take legal action against you for the full amount of the debt owed to them. Dealing with high amounts of debt can be stressful and lead to a variety of health issues. A consumer proposal allows you to repay a portion of your debt and eliminate the remaining debt, putting you in a position where you can rebuild your financial life. The initial consumer proposal fees for the consultation are often free, so speaking with a trustee can be a very good idea if you are struggling with debt.