A consumer proposal might be the right option for you if the total outstanding balance on your unsecured debts does not exceed $250,000.
What is a consumer proposal?
A consumer proposal is a formal, legally binding process, whereby we would work with you to develop a “proposal” to pay a percentage of your outstanding debts to your creditors.
The payment under a proposal can take the form of a lump sum payment or a monthly payment for a term not exceeding five years or it could encompass part lump sum and part monthly payment.
The goal is to come to an amicable solution with your creditors which would allow you to avoid bankruptcy and ensure your creditors would be paid back more than they would receive in the event you filed a bankruptcy.
When is a consumer proposal appropriate?
To find out if a consumer proposal (or a different option) is the right choice for you, set up a meeting with one of our debt experts to discuss your personal circumstances.
We will evaluate your financial situation and explain the pros and cons of the various options that could help you solve your financial problems.
What protection does a proposal offer?
The proposal provides a stay of proceedings and halts any legal actions that have been commenced against you. In addition, you are allowed to keep all your assets, your house, your car, your RRSP and even your income tax return, if one is owed.
If you file a consumer proposal, you must
- Provide complete financial disclosure including your sources of income, assets and liabilities;
- attend the first meeting of creditors, if a meeting is requested (see below);
- attend two counselling sessions;
- advise of any change in your address; and,
- generally be responsive and assist with any information that is needed to allow your creditors to decided whether or not to accept the proposal.
How a consumer proposal works
- We would work with you to discuss your current financial situation and prepare a proposal which would be provided to a trustee of our choosing.
- The trustee would file the proposal with the Office of the Superintendent of Bankruptcy (OSB) and submit your proposal to your unsecured creditors. The proposal would include the report on your personal situation and the causes of your financial difficulties.
- Creditors then have 45 days to either accept or reject the proposal.
- In order to be accepted a majority of your creditors, by dollar value, would need to accept the proposal. In the event that the majority of creditors would not accept the proposal, they would typically come back with a counter-offer for a higher amount or they would respond with a request for more information.
- Even though some proposals are not accepted immediately, after some negotiation and document disclosure, Rabideau Debt Law is seeing over 90% of our proposals being accepted.
- The creditors could also request and require you to attend a meeting of creditors.
When is a meeting of creditors held?
A meeting of creditors is held if one is requested by one or more creditors provided they are owed at least 25% of the total value of the proven claims.
A request for a meeting must be made by the creditors within 45 days of the filing of the proposal. The OSB can also direct the trustee to call a meeting of creditors at any time within that same period.
The meeting of creditors must be held within 21 days after being called. At the meeting, the creditors vote to either accept or refuse the proposal.
Understanding the vote to accept or refuse the proposal
At the meeting of creditors, a creditor’s acceptance or refusal of a proposal counts as a vote, provided it is received at or before the meeting. (If there is no meeting, an objection does not count as a vote on the proposal.)
As mentioned above, the number of votes corresponds to the total dollar value of the proven claims. The vote is decided by a simple majority of this dollar value (i.e., 50% plus 1).
If your proposal is accepted, the OSB (or any other interested party) has 15 days to ask the trustee to apply to the court to have the proposal reviewed. If no such request is made, the proposal will be deemed to have been approved by the court.
When your consumer proposal is accepted
If your consumer proposal is accepted, you will
- be responsible for paying either a lump sum or periodic payments to the trustee;
- be required to adhere to any other conditions in the proposal;
- retain your assets (provided you make your payments to your secured creditors); and
- be required to attend two financial counselling sessions.
If your consumer proposal is not accepted
If your consumer proposal is not accepted, you can
- make changes to the proposal and resubmit it;
- consider other options for solving your financial problems; or
- declare bankruptcy.
How will a consumer proposal affect my credit rating?
A person who submits a consumer proposal is assigned an R7 for the specific debts included in the proposal.
This information will be removed from your credit report 3 years after you make the final payment on your proposal.
Your ability to obtain and use credit after a consumer proposal depends on convincing lenders of your personal financial maturity and ability to repay the debt; there are no guarantees that anyone will give you credit again, however, we have seen clients receive new credit facilities within 12 months of paying off their proposal. This, however, is based on your income versus expenses, your assets and your payment history since signing the proposal.
Once you have fulfilled the terms of your consumer proposal, you will receive a “certificate of full performance.” To ensure your credit record is updated we would invite you to send a copy of this document to the major credit reporting agencies.
If you meet the conditions of your proposal
If you meet the conditions in full, you will be legally released from the debts included in the proposal.
However, if you are making monthly payments and miss three payments or if your payment schedule is less frequent but your last payment is more than three months past due, the proposal will be deemed annulled. This means your creditors will be able to take action to collect the money you owe them, unless the court has ordered otherwise or unless an amendment to the consumer proposal has been filed. A consumer proposal that has been deemed annulled may be revived under certain conditions.