In Canada, a consumer proposal is a legal procedure that can only be administered by a Licensed Insolvency Trustee. It is a form of debt relief solution that can help those who are in debt to get back on track following rules set by the Bankruptcy and Insolvency Act.
Many consumers in Canada choose to use a consumer proposal to pay off their debt. It is a popular alternative to bankruptcy and can be used by those who do not wish to go bankrupt and want to keep some of their assets.
There are many benefits that come from using a consumer proposal instead of bankruptcy:
- It doesn't require an upfront lump sum payment
- You have the ability to negotiate with creditors for lower payments
- It allows you to keep your property, you can keep your house, car, and other assets
- Your credit score will not be affected as much as in bankruptcy
- You don't need to wait any set period before you can apply for credit again
- It can be tailored to the specific needs of the individual, and
- It can also help rebuild your credit score as long as you keep up with your payments
This form of debt relief has become popular because it offers a way for people with debt to get relief from the pressure of monthly payments. When you file for a consumer proposal, you must offer your creditors an amount of money that you can afford to pay back over a period of time. You will then make regular payments to the trustee who is managing your proposal until the debt is paid off.
If you have unmanageable debt and have no other way to pay creditors, filing for a consumer proposal may give some relief. It allows you to keep your assets and provides an affordable way to manage your monthly payments while giving you time to improve your financial situation.
The best benefit is the automatic stay which provides you with legal protection from any collection activities that creditors have used against you to get what they are owed. As soon as the proposal is filed, the automatic stay immediately puts a stop to harassing phone calls, threatening collection letters, wage garnishments and lawsuits.
Consumer proposals are often used when people have secured some form of collateral or equity in their home or business, because they will not lose these assets while they are paying back their debt.
What a Licensed Insolvency Trustee Can Do
Through the proposal, a licensed insolvency trustee or LIT makes a formal request to creditors to repay a portion of the debt over time. The LIT takes care of everything, from preparing and documenting the paperwork, liquidating your assets, negotiating with your creditors, informing the Office of the Superintendent of Bankruptcy and your creditors once the proposal is filed, distributing your monthly payments to creditors, representing you in meetings when required, and making sure you complete all the requirements. From start to finish, the role of the licensed insolvency trustee is to oversee that the entire process is just and fair for both you and your creditors.
A consumer proposal includes the following steps:
- The licensed insolvency trustee makes a proposal to your creditors to pay a portion of your debt in a fixed monthly amount over a period of three to five years
- The creditors will then vote on whether or not they approve of the proposal, if they do, then the proposal will be sent back to the court for approval
- If it is approved, then the court will issue an order approving it and setting out how much each creditor should be paid and how long payments should take place.
- Monthly payments are made to your LIT for a set period of time that is no longer than five years. You also have the option to make a lump-sum payment or a combination of a lump-sum payment and monthly payments, according to what you can afford.
A consumer proposal is a type of personal insolvency proceeding in Canada. The licensed Insolvency Trustee acts as the Consumer Proposal Administrator and is responsible for administering and mediating the legal procedure between the debtor and creditors according to the rules governed by the Bankruptcy and Insolvency Act of Canada.
To find out if a consumer proposal is a method of debt relief that can meet your financial needs, it is important to talk with a licensed insolvency trustee who is considered the highest debt professional in Canada licensed and regulated by the OSB. All LIT’s provide a free confidential initial consultation as it is mandated by federal standards of practice.
The trustee will look at your income and assets you may own, such as your house and vehicles to get a clear picture of your financial situation. The licensed insolvency trustee is also obliged to explain all of your other choices to deal with your debt, which includes debt consolidation, debt management, counseling and bankruptcy so you can decide whether a consumer proposal is the best option or whether filing for bankruptcy will be a better choice.
