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Canadian Consumer Proposals
Recent Changes to the Canadian Bankruptcy and Insolvency Act has made filing a Consumer Proposal a more appropriate course of action for many Canadians.
What is a Consumer Proposal?
A Consumer Proposal is a legally binding agreement between you and your unsecured creditors to pay back a portion of your unsecured debt over a period of up to five years – at the end of which, the debts covered in the Proposal will be considered legally paid in full. The amount to be paid back will be based on the amount you can reasonably be expected to pay based on guidelines set out by the BIA. A Consumer Proposal will put an immediate end to all the collection efforts of your current unsecured creditors – it will stop collection calls, remove garnishments, and stop legal actions.
If you are an individual with a total debt that does not exceed $250,000, not including debts secured by your principal residence, a consumer proposal might be the right choice for you.
- Set up a meeting with one of our trustees. To find a trustee in your area, fill in the autoform for immediate assistance or check out our directory of professional trustees. The trustee will work with you to develop a consumer proposal that works for both you and your creditors.
- The trustee will file the proposal with the Office of the Superintendent of Bankruptcy (OSB). Once your proposal is filed, you will stop making any payments directly to your unsecured creditors, any salary garnishments will stop and lawsuits against you by creditors will be stayed (stopped).
- The trustee will submit the proposal to your creditors, including a report on your personal situation and the causes of your financial difficulties.
- Creditors have 45 days to either accept or reject the proposal.Any creditor with a proven claim may assent to (accept) or dissent from (object to) the proposal. This can be done either prior to or at the meeting of creditors, if one is held. It can also be done within 45 days following the filing of the consumer proposal.Any acceptance of, or objection to, a proposal counts as a vote at the meeting of creditors, if one is held, provided it is received at or before the meeting.Any objection received is not considered a request for a meeting of creditors and will not count as a vote on the proposal unless there is an obligation to call a meeting of creditors.In the event that a meeting of creditors is called:A meeting of creditors will be called if one is requested by one or more creditors having at least 25% of the value of the proven claims. This request must be made within 45 days of the filing of the proposal. The OSBcan also direct the trustee to call a meeting of creditors at any time within this 45-day period. A meeting of creditors will be held within 21 days after being called.At the meeting of creditors, the creditors vote to either accept or refuse the proposal.The number of votes corresponds to the total dollar value of the proven claims. The vote is decided by a simple majority of this dollar value (i.e., 50% plus one). For example, if the proven claims total $150,000, and if the creditors voting “yes” to accepting the proposal are together claiming at least $75,001, then the proposal will be deemed accepted and all other unsecured creditors must accept it as well. (In the event there is no quorum of creditors at the meeting, the proposal will be deemed accepted by the creditors.)If no obligation has arisen to apply to court within 15 days after the acceptance or deemed acceptance by the creditors, the proposal will be deemed to have been approved by the court.In the event that a meeting of creditors is not called:If no meeting of creditors is requested within 45 days of the filing of the proposal, the proposal will be deemed to have been accepted by the creditors, regardless of any objections(s) received.If no obligation has arisen to apply to court within 15 days after the deemed acceptance, the proposal will be deemed to have been approved by the court.
- If your consumer proposal is accepted,
- you will be responsible for paying either a lump sum or periodic payments to the trustee and adhering to any other conditions in the proposal;
- you retain your assets so long as you make your payments to your secured creditors;
- you must attend two financial counselling sessions; and
- the proposal will be on your credit record for the duration of the term plus, depending on what province you live in, a few years thereafter.
- If your consumer proposal is not accepted, you can
- make changes to the proposal and resubmit it for consideration;
- consider other options for solving your financial problems; or
- declare bankruptcy.
- If you meet the conditions in the proposal in full, you will be legally released from the debts included in the proposal.However, if you are making monthly payments and miss three payments, or if your payment schedule is less frequent but your last payment is more than three months past due, the proposal will be deemed annulled. This means your creditors will be able take action to collect the money you owe them, unless the court has ordered otherwise, or unless an amendment to the consumer proposal has been filed. A consumer proposal that has been deemed annulled may be revived under certain conditions.