How to File a Successful Consumer Proposal in Ontario
If you are insolvent, i.e., unable to make debt payments, and you owe unsecured debt amounting to less than $250,000, filing a consumer proposal in Ontario is an alternative to bankruptcy.
Upon filing a consumer proposal, you are immediately protected against debt collectors, not at a risk of losing your assets, and able to pay unsecured creditors a lesser amount than what you owe them.
A consumer proposal is a legally binding debt settlement process available to Canadian individuals under the Bankruptcy and Insolvency Act.
It allows you the option to negotiate a deal to repay a part of the debt you owe creditors.
A consumer proposal is administered through a Licensed Insolvency Trustee (LIT).
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Steps to filing a consumer proposal in Ontario
1. Get a free debt assessment from a Licensed Insolvency Trustee
Contact a Licensed Insolvency Trustee: this link contains the office coordinates of all active LITs; add your location to find one near you.
LITs offer free debt assessment and ongoing support throughout the process.
During this consultation, your trustee will help you understand all the debt relief solutions available to you.
It is possible that, for your financial circumstances, there could be a more viable solution than a consumer proposal.
2. Determine an offer and a debt repayment plan
A consumer proposal may be an effective option if you’re earning income but cannot keep up with debts.
Your trustee will want to know how much you make, the amount you owe, and who your creditors are.
This information is necessary to plan an offer that creditors are likely to accept, and determine monthly payments that don’t burden you.
3. Get all the paperwork ready
Your trustee gets to work preparing the consumer proposal documents.
It will contain information on your current financial status, the amount of debt you propose to pay, the amount in monthly payments to creditors, and the duration of your consumer proposal.
A consumer proposal cannot last more than five years.
It stays for three years on your credit report after your final payment.
Asking for the full 60 months can be advantageous as it guarantees the lowest possible payment over this duration.
If your purpose for filing a consumer proposal in Ontario is to make debt more manageable, a longer term will allow you to meet your obligations more comfortably.
4. File the proposal
After you have signed the paperwork for the proposal, your trustee will file an electronic version of the documents with the Office of the Superintendent of Bankruptcy (OSB).
Upon filing, a Certificate of Filing Consumer Proposal is instantly generated, indicating that the OSB recognises your trustee as the administrator of your consumer proposal.
A ‘stay of proceedings’ comes into effect, legally requiring your creditors to stop contacting your directly and interact only with your trustee.
You can stop making payments towards your unsecured debts.
If your creditors have obtained a wage garnishment order from the court, your trustee will stop it.
5. Notify creditors
Your trustee will send a copy of your proposal to all unsecured creditors mentioned in the proposal.
They have 45 days to review your offer and decide if they are willing to accept your proposal.
A creditors meeting may also be called to discuss your proposal.
During this period, the stay of proceedings will be in effect.
6. 25% of creditors may request a meeting
Creditors who hold 25% of your debt can call for a meeting to discuss the details of your proposal.
A meeting is usually called if creditors are not open to the deal.
However, for the meeting to go ahead, creditors with a value of 25% of debts must request it.
The meeting must be held 21 days after it is requested.
At the meeting, creditors will vote to accept or reject your proposal.
They may also propose modifications to the offer.
Your trustee will provide the requested information and negotiate a deal with creditors.
7. The proposal is automatically accepted
If creditors don’t call for a meeting at the end of 45 days, your proposal is automatically passed.
When the meeting is held, creditors vote to pass or reject your proposal.
If over 50% of creditor claims vote ‘yes’, your proposal is legally binding on all creditors, even those didn’t vote in its favour.
8. Start making monthly payments
The new payment terms kick-in, and you start meeting monthly debt obligations.
You make payments to your trustee, who will deposit the amount in his/her trust account held for your creditors.
You will also need to attend two debt counselling sessions.
The first will be held around two months into your proposal.
At the session, a qualified counsellor will provide tips and guidance on money management, spending habits, acquiring and using credit, and noting signs of financial trouble.
The second session will take place about seven months into your proposal.
This is a follow-up meeting on helping you learn more about how you can improve your money management skills.
Attending both sessions is mandatory.
Failure to show up at both will render your proposal incomplete even if you have made all your proposed payments.
9. Receive your Certificate of Full Performance
A Certificate of Full Performance attests that you have satisfied all provisions of your consumer proposal, and the balance of debts owed has been discharged.
You are debt-free, and can focus on rebuilding your credit history.
10. Continue building credit points
Even during your proposal, you can accumulate points by taking out a secured credit card – a smaller limit initially, and larger amounts as your credit improves.
Any new credit that you’ve established since your consumer proposal will be viewed favourably by mortgage lenders.
A consumer proposal is worth your time and money
Filing a consumer proposal in Ontario is an excellent alternative to declaring bankruptcy.
If you have a stable income and your debts are less than $250,000, you should actively pursue this option.
Your trustee will support you throughout the process.
Trustee fees are included in the payment you negotiate with creditors.
It is paid out of the trust fund in adherence to an applicable tariff under bankruptcy and insolvency laws.
See if a consumer proposal is the best debt relief solution for your needs.
Book your free consultation with a Licensed Insolvency Trustee to make an informed decision.
Consumer Proposals in Ontario
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal