Can I File a Consumer Proposal After Bankruptcy?
Filing a Proposal Following a Bankruptcy
Filing a consumer proposal to your creditors can be a smart decision when you’re struggling with unmanageable debt.
Many people are able to use this method to get their finances back on track, but it’s hard to know exactly when you can file one for yourself.
The short answer to the question above is “Yes”.
Of course, though, it’s more complicated when you delve a little deeper.
What Is A Consumer Proposal?
A consumer proposal is covered under the Bankruptcy and Insolvency Act in Canada, and is a document which is designed to enable people to negotiate with their creditors to come to an agreement which works for both parties.
Filing a consumer proposal initiates a stay of proceedings, protecting you from threats of legal action and harassment from your creditors, while also halting any current court cases related to your debt in their tracks.
Bankruptcy Canada can help you to write a successful consumer proposal.
After Your Bankruptcy Discharge
Once you’ve been discharged from bankruptcy you will be free from the restrictions which it places on you.
This means that you will be able to file a consumer proposal like anyone else, no matter how long it’s taken you to get to this position.
If You’ve Not Been Discharged
For those who haven’t been discharged from their bankruptcy, this process is going to be a little more complicated.
To start, you won’t be able to file a consumer proposal without the approval of the creditors of your bankruptcy estate.
They may be willing to negotiate at this stage, but many lenders view the stability and guarantee of bankruptcy to be preferable to a less formal arrangement which doesn’t provide them with the same security.
You can’t file a consumer proposal towards any new debts you’ve incurred since filing for bankruptcy.
The process of requesting and filing a consumer proposal before being discharged from bankruptcy comes with several steps.
Your trustee will be able to handle much of the work for you, but it’s worth being aware of what they will be doing to ensure that you know what to expect from it.
- Your trustee will arrange a meeting with your creditors to work to get permission to file a consumer proposal during your bankruptcy.
- You will work with your trustee to draft your consumer proposal. Bankruptcy Canada can help you at this stage, having spent more than two decades working with clients as a trustee to write successful consumer proposals.
- The creditors have 45 days to review your consumer proposal, and they will usually use this entire window. There are three possible outcomes from this.
- If you receive no votes, it will be assumed that the consumer proposal has been accepted by the creditors.
- If less than 25% of the votes received are for “no”, the consumer proposal will have been accepted by the creditors.
- When more than 25% of the votes are “no”, you will have to have a meeting with your creditors and trustee to discuss what can be changed to have the proposal accepted. This will usually be done when the creditors want larger monthly payments, and they will have leverage here when the amount you’re offering is less than what you pay as the result of your bankruptcy
- Once your creditors have accepted your proposal, there will be a 15 day waiting period to give them a chance to have it reviewed by a court. If they do nothing during this time, your proposal will be accepted by the court and your bankruptcy will be annulled, providing you with a great deal more financial freedom.
Filing a consumer proposal at the right time can be a smart move during bankruptcy.
Some creditors will be more open to this than others, but having the right team behind you will often matter more than anything else.
Bankruptcy Canada is here to help with your consumer proposals, and we’re happy to offer confidential and obligation free advice.