Understanding Consumer Proposals and Legal Implications
Are you in the midst of a consumer proposal and wondering, “Can I be sued while in a consumer proposal?” It’s a common concern that many people have. But don’t worry, this article aims to provide comprehensive insights on this subject matter.
Consumer proposal is a legal term that many Canadians are becoming increasingly familiar with. It’s a debt relief solution that allows individuals to negotiate the terms of their debt repayment with their creditors.
What is a Consumer Proposal?
A consumer proposal is a legal agreement crafted between you and your creditors that essentially involves creating a plan to pay back a portion of your total debts owed, over a specific period, which cannot exceed five years.
The primary purpose of a consumer proposal is to offer debtors an alternative to bankruptcy, where they can still manage their financial obligations but under more favorable conditions.
The Process of Filing a Consumer Proposal
Now that you know what a consumer proposal is, let’s delve into the steps involved in filing one:
Initial Assessment
The first step involves an initial assessment with a Licensed Insolvency Trustee (LIT). During this meeting, the LIT will review your financial situation to determine if a consumer proposal is the best option for you.
Payment Terms
The LIT will help you develop a proposal that outlines how much of your debt you can pay back, how long you will take to pay it back, and how often you will make payments.
Filing the Documents
Once the terms are set, the LIT will file the proposal with the Office of the Superintendent of Bankruptcy (OSB).
Voting by Creditors
After the proposal has been filed, your creditors will have 45 days to vote on whether to accept or reject it.
Amending a Consumer Proposal
If your proposal is rejected, you may need to amend it to make it more appealing to your creditors or consider other debt relief options.
After the Consumer Proposal is Completed
Once all payments have been made under your consumer proposal, you will be legally released from the debts included in the proposal.
Legal Implications: Can I be sued while in a consumer proposal?
A common question that comes up during this process is, “Can I be sued while in a consumer proposal?” The simple answer to this is no.
Once a consumer proposal is filed, it provides an automatic stay of proceedings. This stay prevents creditors from taking legal action against you to recover their debts.
This stay is one of the significant benefits of a consumer proposal. It allows you to focus on making your payments without the fear of legal action from your creditors.
Exceptions to the Rule
However, it’s important to note that there are certain exceptions to this rule. These exceptions typically involve debts that are not included in the proposal.
For instance, child and spousal support debts cannot be included in a consumer proposal. Hence, legal action can still be taken to recover these debts. Similarly, secured creditors may still be able to take action to recover their security if you default on your payments.
The Role of a Licensed Insolvency Trustee
A Licensed Insolvency Trustee plays a crucial role in the consumer proposal process. They act as the proposal administrator, providing guidance throughout the process, and ensuring that all legal requirements are met.
Consumer Proposal and Credit Rating
It’s worth noting that a consumer proposal will have an impact on your credit rating. While it’s less severe than bankruptcy, it will still be noted on your credit report and can affect your ability to obtain credit in the future.
Conclusion
In conclusion, if you’re in a consumer proposal, you generally cannot be sued by the creditors included in the proposal. However, it’s important to understand the process, your rights, and obligations. Consulting with a Licensed Insolvency Trustee can provide clarity and guide you through the process.
Remember, the purpose of a consumer proposal is to help you manage your debts. So, focus on completing your payments, and soon enough, you’ll be on your way to financial recovery.
