Applying For A Consumer Proposal In Ontario: A Comprehensive Guide
In Ontario, many citizens grapple with financial hardships, primarily due to accumulated debt. Filing for bankruptcy may appear to be the only solution, but there are other alternatives worth considering. One excellent option is a Consumer Proposal.
This article aims to provide a thorough understanding of the process involved in applying for a Consumer Proposal in Ontario and how it could be a viable solution to your financial troubles.
What Exactly is a Consumer Proposal?
A Consumer Proposal is a legally binding agreement between a debtor and creditors. It outlines strategies for settling debt payments and is filed by a Licensed Insolvency Trustee (LIT). A Consumer Proposal can significantly decrease your debt, saving you up to 80%. More importantly, it protects your assets, like your car or home, from being seized.
How is a Consumer Proposal Different from Bankruptcy?
There is often confusion between Consumer Proposals and bankruptcy. The primary distinction is that a Consumer Proposal doesn’t necessitate surrendering any assets or declaring bankruptcy. Hence, you don’t need to perform any steps associated with bankruptcy, such as reporting your monthly income or expenses.
Types of Debts Covered in a Consumer Proposal
A Consumer Proposal is an all-encompassing debt relief method. It can include all types of unsecured debts. However, certain specific debts like car payments, mortgages, and child support payments may not be incorporated into a Consumer Proposal. Generally, the following unsecured debts can be handled through this debt reduction method:
- Credit cards and lines of credit.
- Tax debt.
- Student loans (if you’ve been out of school for at least seven years).
- Payday loans.
- Personal debts.
- Department store cards.
- Overdraft fees.
How To Apply For A Consumer Proposal In Ontario: The Four Stages
The journey of filing a Consumer Proposal involves four crucial stages. Each step will guide you from determining your monthly creditor payments to repairing your credit.
Stage 1: Crafting the Payment Plan
The initial step in a Consumer Proposal is to decide how much you will pay your creditors every month. To figure this out, a trustee will estimate what your creditors would receive if you were to file for bankruptcy. The payment required by a Consumer Proposal is typically slightly higher than what the creditors would get in a bankruptcy scenario. Then, you can choose to spread payments across up to 60 months.
Stage 2: Engaging in the Creditor Vote
After filing your Consumer Proposal, it’s time to gather the creditors’ opinions. Your creditors will review the terms of the Consumer Proposal and vote either in favor or against it. In most cases, creditors accept the terms or request renegotiation.
Stage 3: Initiating the Payment Process
Once your plan secures approval, you can begin making payments. There is no need to report your income, but you must attend two credit counselling sessions. If you have the means, you may pay off your Consumer Proposal early.
Stage 4: The Credit Repair Process
After paying off your debts, you’ll receive a Certificate of Full Performance, which will be forwarded to government credit bureaus. The notice on your credit report will be removed three years after you complete the payments.
Contacting a Licensed Insolvency Trustee
To apply for a Consumer Proposal in Ontario, it’s crucial to consult with a Licensed Insolvency Trustee. These professionals can provide you with the necessary support, guidance, and legal expertise to navigate your financial troubles.
Filing a Consumer Proposal in Ontario: Step-by-Step Guide
The process of filing a Consumer Proposal requires careful planning. Here’s a step-by-step guide to help you understand the entire process.
Step 1: Qualification & Debt Assessment
The first step involves contacting a Licensed Bankruptcy Trustee to assess whether you qualify for a Consumer Proposal and whether it’s the most suitable option considering your income and total debt.
Step 2: Drafting a Proposal & Payment Terms
The next step is to draft a proposal. The payment terms should satisfy a couple of basic rules to increase the chances of being accepted by the creditors.
Step 3: Preparing Proposal Documents
A formal consumer proposal requires four documents that the administrator will file on your behalf. These include a Statement of Affairs, a Statement of Income and Expense, an Assessment Certificate, and a Consumer Proposal.
Step 4: Filing Your Consumer Proposal
Once the documents are prepared and the decision is made to proceed, the LIT will file your consumer proposal. This action protects you from collection efforts, including garnishments, lawsuits, and debt collector calls.
Step 5: Creditors are Contacted
Once your consumer proposal is filed, your administrator will send a notice to each creditor for their consideration.
Step 6: Meeting with Creditors
If more than 25% of your creditors object to your consumer proposal, they can request a meeting to vote on whether to accept or reject it.
Step 7: Creditors Vote on Your Proposal
The voting process is weighted such that each creditor receives one vote per $1 of debt you owe them.
Step 8: Fulfilling Your Consumer Proposal
Once your proposal is accepted, you begin making the monthly payments agreed upon.
Step 9: Rebuilding Your Credit
After completing your consumer proposal, the next step is to rebuild your credit. This process can begin even while you’re making monthly payments by obtaining a secured loan or credit line.
Wrapping Up
Applying for a Consumer Proposal in Ontario may seem like a daunting task, but with the right guidance and support, it can be a lifesaver for those struggling with debt. Remember, it’s essential to consult with a Licensed Insolvency Trustee to ensure you’re making the best decision for your financial situation.
