Filing a Consumer Proposal with your creditors allows you to erase your debts and to keep your assets by making payments that you can afford, without filing bankruptcy. You could end up paying 50% of the debt or perhaps only 30%.
The advantages of a Consumer Proposal
One of the main reasons for filing a consumer proposal is that it allows a person to keep assets that might be lost in a bankruptcy.
A consumer proposal can be a very powerful alternative to filing bankruptcy. It allows you to keep assets that might be lost in a bankruptcy. You receive an immediate legal order protecting you from creditor collection action. You will also stop making payments on your unsecured debt. The trustee will handle all communications with your creditors on your behalf.
You will be able to keep assets that might be lost in a bankruptcy;
You will receive protection from all of your creditors, including your bank, credit card companies, and the Canada Revenue Agency (“CRA”);
Your trustee will deal with your creditors for you;
You will receive the “Stay of Proceedings” that is the legal order that prevents your creditors from making any collection attempts. Collection calls will stop. Wage garnishment orders contemplated or in place will cease;
You will be able to consolidate all of your debts into a single, easy to make payment, so you won’t have to keep track of different payment schedules on all of your different debts;
The consumer proposal administrator will be paid out of the single monthly payment that you make into the proposal;
You are able to make additional payments or add a large payment in the middle of the consumer proposal if your financial situation improves so you can have the proposal paid off earlier;
If you are a director of an incorporated company you can continue to act as the director while in a consumer proposal, which is not possible in bankruptcy;
You will no longer have to pay interest charges that could be 30% or higher;
A consumer proposal allows you to avoid bankruptcy!
Some of the rules in filing a consumer proposal are:
You must use the services of a Licensed Insolvency Trustee;
The creditors must end up better off than if filing bankruptcy; “Better off” can mean that payments are made over time or a third party agrees to pay a sum to the creditors only if the consumer proposal is accepted;
The debt must be consumer debt, so a business cannot file a consumer proposal. However, a person who has a sole proprietorship business can file one;
A person cannot owe more than $250,000, excluding home mortgages. If more than $250,000 is owed a Division I Proposal is available.
The consumer proposal cannot be for more than 5 years;
As soon as a consumer proposal is filed all actions against the debtor, by law, must cease. This includes collection calls, garnishment and any legal action to collect the debt. Interest also stops accruing;
Consumer proposals are considered accepted if, within 45 days of the filing, a creditor has not objected. If any creditor objects a creditors’ meeting is required;
Creditors vote at the meeting with a simple majority of the dollars voted deciding on acceptance or refusal;
If the consumer proposal is accepted all the creditors, including the ones who voted against the proposal and the ones who did not vote, are bound by the terms of the consumer proposal;
If the consumer proposal is not accepted, the debtor cannot make another consumer proposal;
The debtor is not automatically bankrupt if the consumer proposal is not accepted;
The debtor is required to take two counselling sessions.
Why would the creditors want someone to file a consumer proposal?
Creditors almost always support a consumer proposal because they do not want you to file bankruptcy as they would receive less money in a bankruptcy.
If you wish to set up a free consultation to discuss a consumer proposal, please contact us.
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