A consumer proposal can be filed by a consumer debtor who owes not more than $250,000 (excluding debts secured by the individual’s personal residence). The proposal is an offer to compromise the debt owing over a maximum of five years and usually is comprised of fixed monthly payments. The proposal terms can be as creative as the debtor’s circumstances require, and a majority of the unsecured creditors must vote to accept the proposal.

I wanted to highlight two very different consumer proposals we recently filed.

“James” is single, in his fifties and has been receiving disability income of approximately $1,200 per month for years. He has no assets and owes $17,000 on various high-interest credit cards and loans. James’ income is significantly below the threshold set by the Superintendent of Bankruptcy, and thus he would not be required to make surplus income payments if he filed bankruptcy. As a first time bankrupt, James would likely be discharged in nine months and pay minimum trustee’s fees of $1,800. Many may think a bankruptcy would be the best solution for James, but he felt he could keep his living expenses to a minimum to allow him to offer something back to his creditors. He filed a consumer proposal to his creditors offering payments of $100 per month for five years and the creditors have accepted these payment terms.    

“Emma” is in her sixties, is married with children and runs her own business. She has a couple of cars in her name with minimal value and equipment that is required to operate her business and thus is exempt from seizure. Emma concentrated on the operations of her business and failed to ensure her bookkeeping, tax filings and payments were made on time. She owed in excess of $130,000, with a large portion of that amount owed to the Canada Revenue Agency for personal income tax and HST. Her monthly family income is substantial and she would be required to pay surplus income payments of $23,000 in a bankruptcy. Emma does not want to file bankruptcy and wanted to try offering her creditors a consumer proposal at a monthly amount that she could afford and would allow her to continue to provide for her family and pay taxes on time in the future. Emma’s creditors accepted a proposal that would provide them with a recovery of 25% of their debt.  

The above situations are very different, but both debtors felt a consumer proposal was the best solution to make them feel they were doing the best they could to repay their debt and still have a fresh start financially.

If you are struggling with debt, contact a Licensed Insolvency Trustee for a free, initial assessment to discuss the debt-relief solution that is best for you.  

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)