What is a consumer proposal?
There is an alternative to bankruptcy: the individual can attempt to reach a deal with the creditors, offering to pay a percentage of what is owed. A proposal is made to the creditors through a trustee. The filing of a proposal stops all legal actions by unsecured creditors. This gives the debtors some breathing room so that they can explain their financial situation to creditors and seek their support. The trustee gives the creditors an estimate of what they would realize under a bankruptcy compared with what they are being offered under the proposal. For the proposal to be justified, the creditors must be further ahead under its terms than they would be under a bankruptcy. If a majority of creditors (holding at least two-thirds of the debt) vote to accept the proposal, and the court approves it, then the proposal becomes a contract — binding on all the creditors. (If the creditors reject the proposal, the individual is immediately bankrupt.) Anyone who has positive cash flow (i.e. t
Consumer Proposals (“proposal”) are the main alternative to filing an assignment in bankruptcy. A consumer proposal is an arrangement between you and your creditors which enables you to pay a portion of your debts over an extended period of time. The amount that you pay and the length of time you pay this amount is determined in a consultation with a trustee in bankruptcy who acts as the Administrator of your consumer proposal and is based on the amount of your income living expenses and any other financial responsibilities you have. A consumer proposal is also called a “Debt Consolidation Arrangement”. Who is eligible for a proposal? In order to file a Consumer Proposal, your debts must be less than $75,000 in total. Secured debts (mortgages on your principal residence and vehicle leases) are not included in this $75,000 figure, but all other debts must be included. If your debts exceed $75,000 you can still file a proposal, but it falls under the Division 1 proposal rules, which are
As an alternative to filing an assignment in bankruptcy, a debtor can make a consumer proposal to their creditors based on their circumstances under the Bankruptcy and Insolvency Act. A consumer proposal must be offered to all preferred and unsecured creditors. It does not affect the rights of secured creditors and must be completed within five years. In order to file a consumer proposal, an individual must owe less than $75,000 excluding a mortgage on their principal residence.
A consumer proposal is an offer made by a debtor to his or her creditors to modify his or her payments. For example, you may propose that you will pay a lower amount each month, but over a longer period of time. Or you may propose that your creditors accept being paid a percentage of what you owe. How does a consumer proposal benefit you? Your unsecured creditors will not be able to take legal steps to recover their debts from you (such as seizing property or garnisheeing wages) unless the proposal is withdrawn, rejected or annulled or until the administrator is discharged where the proposal was not fully performed (except for debts which would not be released in a bankruptcy by an order of discharge). Who can make a consumer proposal? Any natural person who is insolvent, including a bankrupt, whose debts are less than $75,000, excluding a home mortgage, can make a consumer proposal. When someone who is bankrupt wishes to make a proposal, it must first be approved by the inspectors and
