A consumer proposal is a formal proceeding under the Bankruptcy and Insolvency Act wherein you offer a compromise to your creditors to settle your debts. A consumer proposal can only be filed with a Licensed Insolvency Trustee (“LIT”) who acts as the administrator of your proposal. A free initial appointment can be scheduled with a LIT who will review your financial situation and explain the following process:
- A detailed analysis of your assets, liabilities, monthly income and expenses, any transfer or sale of assets, co-signors on debts and garnishments of income will be performed by the LIT
- The LIT will explore possible solutions with you – debt consolidation loan/mortgage refinance, debt management program through a not for profit credit counselling agency, consumer proposal or bankruptcy
- The terms of your proposal will be formulated, offering your creditors more than they would receive in a bankruptcy at a payment term you can afford over a maximum of five years. The terms of the proposal can be creative with set monthly amounts, seasonal monthly amounts, lump-sum payments, third party payments or any combination.
- Statutory documents will be signed by you and filed with the Official Receiver which institutes a “stay of proceedings” stopping most unsecured creditors legal actions to collect their debt (garnishments, etc.)
- The creditors have 45 days to vote on the proposal, and the majority of those voting (50.1% of the dollar value) must vote to accept the terms offered
- If more than 25% of your creditors are voting against the proposal, then the LIT will call a meeting of creditors
- The LIT will negotiate with any dissenting creditors to try and amend the proposal to terms agreeable to yourself and your creditors
- You must attend two counselling sessions on budgeting, money management, and rebuilding credit
- You are free to deal with your assets and income during the term of the proposal
- You can pay the proposal off sooner if your financial situation improves
- Once the terms of the proposal are completed, the LIT will issue a Certificate of Completion
- The proposal will remain on your credit report as an R7 for the earlier of: three years from completion of your proposal or six years from filing
If you are unable to pay your debts in full, a consumer proposal is a solution that can provide you with relief and enable you to move forward with a fresh start. Feel free to contact Taylor Leibow Inc., Fresh Start Now to discuss your specific situation over the telephone, virtually or in person.
By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)
Leave A Comment