Filing a Consumer Proposal: A Comprehensive Guide
A Consumer Proposal is an effective debt management solution for individuals facing financial difficulties. This article provides an in-depth guide on how to file a Consumer Proposal, empowering you with knowledge to make informed decisions.
Introduction
A Consumer Proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). It offers an alternative to personal bankruptcy, allowing an individual to make a deal with their creditors to pay back a portion of their debts over a specified period of time, up to five years.
Understanding Consumer Proposals
Before diving into the process of filing a Consumer Proposal, it’s crucial to understand what it entails. A Consumer Proposal is designed for individuals who cannot meet their financial obligations but are capable of paying a portion of their unsecured debts. This solution helps you avoid bankruptcy and its associated consequences.
Criteria for Filing a Consumer Proposal
To qualify for a Consumer Proposal, you must meet certain criteria:
- You must be insolvent, meaning your debts are greater than your assets or you’re unable to meet financial obligations as they become due.
- Your total unsecured debts should not exceed $250,000 (excluding the mortgage on your principal residence).
Advantages of a Consumer Proposal
A Consumer Proposal offers numerous advantages over other debt relief solutions:
- You get to keep your assets.
- You avoid the issue of “surplus income” payments.
- The Consumer Proposal payments are lower than your combined debts.
- You receive protection from your creditors.
- You avoid bankruptcy, and the Consumer Proposal process is easier than bankruptcy.
- Upon successful completion of your Consumer Proposal, you will be debt-free (unsecured debts).
Filing a Consumer Proposal: Step-by-Step Guide
Initial Consultation with a Licensed Insolvency Trustee (LIT)
The first step in the process is to consult with a Licensed Insolvency Trustee (LIT). During this free, confidential meeting, the LIT will review your financial situation and discuss all available options with you.
Preparing Your Proposal
If a Consumer Proposal is deemed the best solution for your situation, you and your LIT will work together to develop a proposal for your creditors. This proposal will outline how much you can afford to repay and how long the repayment period will be.
Submission and Review of the Proposal
Once the proposal is prepared, your LIT will submit it to your creditors. The creditors then have 45 days to review the proposal and vote on whether or not to accept it. The creditors who are owed the most will exercise greater influence in this decision.
Fulfilling Your Duties
Once your Consumer Proposal is accepted, you are required to fulfill certain duties. These include making the agreed-upon payments to your LIT, completing two financial counselling sessions, and sticking to the budgeting plan you’ve developed with your LIT.
Completion of the Consumer Proposal
After fulfilling all your duties, your Consumer Proposal will be completed, and you will be legally released from the debts included in the proposal.
Troubleshooting: What If I Can’t Meet My Payments?
If you find yourself unable to meet your Consumer Proposal payments, you should immediately contact your LIT. They may be able to adjust the terms of your proposal or provide other options. However, if you miss three payments, your Consumer Proposal could be annulled, and you may need to consider other debt relief options.
Impact on Your Credit Rating
Filing a Consumer Proposal does have an impact on your credit rating. However, the impact is less severe than if you were to file for bankruptcy. The negative notation from a Consumer Proposal remains on your credit report for six years after you sign your proposal or three years after you complete your proposal terms — whichever is earlier.
Rebuilding Your Credit After a Consumer Proposal
After completing your Consumer Proposal, you can start rebuilding your credit. You can ask your bank about a secured credit card, which can help improve your credit score if used responsibly. Be careful never to miss a payment, and eventually, you may be able to switch to a standard credit card.
Alternatives to Consumer Proposals
While Consumer Proposals can be a great solution for many individuals, they are not the only option. Alternatives include bankruptcy, debt consolidation loans, credit counselling, and informal debt settlement. Your LIT can help you understand these options and guide you towards the best solution for your situation.
Conclusion
Filing a Consumer Proposal can be a complex process, but with the right guidance and information, it can be an effective way to manage and eliminate debt. If you’re struggling with debt, remember that you’re not alone and that there are options available to help you regain control of your finances. Always consult with a Licensed Insolvency Trustee to understand your options and make the best decision for your financial future.
