What Happens When I File a Consumer Proposal in Ontario?

Navigating the Process of Filing a Consumer Proposal in Ontario

A Consumer Proposal is an alternative to bankruptcy in Ontario, providing a legally-structured, negotiated agreement between you and your creditors. This article provides a comprehensive overview of what happens when you file a Consumer Proposal in Ontario, guiding you through the process step-by-step.

1. Initiating Contact with a Licensed Insolvency Trustee

The first step in the process is reaching out to a Licensed Insolvency Trustee (LIT). These professionals are federally licensed and are the only ones authorized to administer Consumer Proposals. They offer free initial consultations to assess your financial situation and evaluate if a Consumer Proposal is the suitable strategy for you.

2. Crafting the Proposal and Payment Plan

Once you’ve decided to proceed with a Consumer Proposal, the LIT will assist you in designing the proposal. They will take into account your income, assets, and debts. The goal is to come up with an offer to your creditors that you can afford and they will accept.

3. Preparing the Consumer Proposal Documents

All the necessary paperwork for the Consumer Proposal will be prepared by your LIT. This includes a detailed account of your current financial status, the amount you propose to repay, the duration of the proposal, and your monthly payment structure.

4. Filing the Proposal and Activating Creditor Protection

The proposal documents are then filed electronically with the federal government and the court. Upon filing, a ‘stay of proceedings’ is activated, instantly stopping your creditors from pursuing you for collection. You are now permitted to cease payments against your unsecured debts.

5. Informing the Creditors

Your LIT will forward a copy of your proposal to all creditors listed. They have 45 days to either review your proposal or request a creditors’ meeting. During this period, the ‘stay of proceedings’ remains active.

6. Potential Creditors Meeting

Creditors have the right to request a meeting to discuss your proposal and ask questions. If creditors, who make up at least 25% of your debts, request a meeting, it must be held within 21 days. At this meeting, creditors will vote to accept or reject your proposal or suggest a modified offer.

7. Creditors Vote on the Proposal

If no meeting is required, your proposal is automatically accepted after 45 days. If a meeting is held, creditors vote at the meeting. If creditors representing at least 51% of your debt value vote in favor, the proposal is accepted and is binding on all creditors.

8. Fulfilling the Proposal Terms

Once the proposal is accepted, you begin making the agreed-upon monthly payments. Additionally, you must attend two credit counseling sessions.

9. Receiving Certificate of Full Performance

Upon completion of payments, you will receive a certificate showing that you have fulfilled the terms of the Consumer Proposal, relieving you from any remaining debt balance.

10. Rebuilding Your Credit History

A Consumer Proposal will appear on your credit report, but you can start improving your credit score while in the proposal by getting a secured credit card. You can also build savings both during and after the proposal as you are no longer making high debt payments.

If you’re considering filing a Consumer Proposal, feel free to contact us at 1-877-879-4770 or request a free evaluation.

The Role of Your Consumer Proposal Administrator

A Consumer Proposal administrator, who is a Licensed Insolvency Trustee, is responsible for reviewing all your debt relief options, determining your eligibility for a Consumer Proposal, explaining how a Consumer Proposal works, helping you craft an affordable repayment plan, preparing necessary forms, filing your proposal agreement with the government, and liaising with your creditors.

Common Questions about the Consumer Proposal Process

Filing a Consumer Proposal can be a complex process, and you may have additional questions. Here are some commonly asked questions:

A sample proposal: Suppose you owe $45,000 in unsecured debts. You may propose to repay your creditors a total of $15,750, eliminating all your debt. You could offer to make payments over 36 months, resulting in a payment of $437.50 a month. Alternatively, you could extend your repayment plan to a maximum of 60 months (5 years), resulting in a monthly payment of $262.50. Either way, you save $29,250 plus interest.

What if the Consumer Proposal is rejected?

If your proposal is rejected, your LIT will contact your creditors to negotiate alternate terms. Often, a slight increase in your monthly payment can lead to acceptance of the proposal.

What happens if I default on the proposal payments?

If you fail to keep up with your proposal terms, the proposal will be annulled. Your creditors would then have a claim against you for the amount owed to them before the proposal, minus any amount you paid during the proposal.

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