Understanding the Initial Consumer Proposal Assessment
In your search for other alternatives to manage your financial situation – which doesn’t involve filing for bankruptcy – you have stumbled upon the option to file a consumer proposal.
But, you still have questions, how does a consumer proposal work, what is an initial consumer proposal assessment, the role of a Licensed Insolvency Trustee, how to determine your plan and if you need to file a consumer proposal.
Here are answers to some of your queries.
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How does a consumer proposal work?
A consumer proposal is a legal settlement plan between you and your creditors under “Bankruptcy and Insolvency Act” which will be negotiated by a Licensed Insolvency Trustee.
Filing a proposal will give you immediate relief in the way of protection from your creditors by putting a stay on proceedings.
What will this mean for you?
A proposal could allow you to settle your debt by paying your creditors a percentage that is lower than what you owe them, or by extending the time to pay off debts, or both.
Of course this will depend on whether your creditors will accept the proposal.
Note that customer proposals have a 98% acceptance rate. It will also allow you to keep your assets like your home and your car.
The Initial Consumer Proposal Assessment
To file a consumer proposal, you will first have to meet with a Licensed Insolvency Trustee who will act as the consumer proposal administrator.
The administrator will conduct an initial assessment, wherein the trustee will look into what you own, your income, your basic expenses, what you owe, your liabilities and your family situation.
Do you need to file a consumer proposal?
Before filing a proposal, your administrator will talk about other alternatives with you for example; changing your spending and payment pattern or credit counselling and debt management plan, a debt consolidation loan, filing for personal bankruptcy or a consumer proposal.
Determining your payment plan
If you decide to file a proposal, your administrator will calculate an estimate of what your creditors might receive if you were to file for bankruptcy.
Through this exercise, your creditors will most likely prefer to go ahead with a consumer proposal plan.
Following this, your administrator will determine how much you can pay per month by reviewing your monthly income.
Your proposal payment can be paid up to 5 years depending on your situation.
The trustee will recommend a payment proposal that can be acceptable for you and your creditors.
In most cases, creditors usually consider an offer reasonable if it covers at least 50% of what you owe them.
However, your creditors might even accept less or demand more than 50%.
Filing a consumer proposal
After you determine a plan, you can file a proposal.
This will immediately secure you protection from your creditors.
The proposal will then be mailed to your creditors for review.
They will either accept, reject your terms or call for a creditors meeting.
If your terms are rejected, you can renegotiate an acceptable proposal plan.
Depending on your current financial situation, you can decide if filing for a consumer proposal is the best option for you.
Your Licensed Insolvency Trustee will help you come up with a reasonable plan so that you can come back on track.
Once you complete your payments, you will be able to repair your credit.
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