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Consumer Proposal

In Canada, a person can file a consumer proposal as an alternative to bankruptcy. A consumer proposal is a negotiated settlement between a debtor and their creditors.

A typical proposal would involve a debtor making monthly payments for a maximum of five years, with the funds distributed to their creditors. Even though most proposals call for payments of less than the full amount of the debt owing, in most cases, the creditors will accept the deal, because if they don't, the next alternative may be personal bankruptcy, where the creditors will get even less money. The creditors have 45 days to accept or reject the consumer proposal. Once the proposal is accepted the debtor makes the payments to the Proposal Administrator each month, and the creditors are prevented from taking any further legal or collection action. If the proposal is rejected, the debtor may have no alternative but to declare personal bankruptcy.

A consumer proposal has a maximum dollar value allowed, up to $75,000 for an individual. Bankruptcy has no maximum limit. Consumer proposals only cover unsecured debts and you propose to pay only a certain portion of your debts back to your creditors. Your creditors each get a chance to approve or deny the proposal. Your payments must be discharged within 5 years, but the proposal only stays on your credit rating for 2 years.

During the first step (the assessment) your trustee was given a list of your budget, liabilities, and assets. This information is used to create the paperwork needed to file a consumer proposal. The most important of these documents are:

• The Consumer Proposal
• The Statement of Income and Expenses
• The Statement of Affairs
• The Assessment Certificate
• The Terms of Payment and Conditions

You will be required to sign these forms before the consumer proposal can be filed. Your bankruptcy trustee will also ask you sign forms that indicate that the process has been properly explained and that you understand the legal commitment that you are making. At this point, if you find some of the language unclear, or are uncertain as to why you have to provide certain information, or what your duties and responsibilities will be, it is very important to ask your trustee to go over the forms and explain them until you are clear on your commitments.

Call us today to find out more about consumer proposals