How To File A Consumer Proposal

Jan 10, 2023 | Consumer Proposal

Written by C. Buhler & Associates Ltd.

Written by C. Buhler & Associates Ltd.

The overwhelming stress associated with how much debt you have is never an easy thing to bear. No matter how hard you try to plan a course correction, things get in the way. But did you know there’s a way to solve your financial situation? Consider the help of a consumer proposal to take care of your debts. 

Not sure how to file a consumer proposal or what the process is? We’re here to tell you. 

What Is a Consumer Proposal?

A consumer proposal is a legally binding agreement between a debtor and their creditors that must be made by working together with an Licensed Insolvency Trustee (LIT). It’s important to note that a consumer proposal is not something you, as a debtor, can create on your own. Only Licensed Insolvency Trustees can arrange a Consumer Proposal on your behalf.

During the consumer proposal process, your LIT will work with you to create an offer to pay off a portion of the debts you owe your creditors. But it doesn’t stop there. Your Trustee can also arrange for you to keep your assets, such as RRSPs, GST credits, and tax refunds. From there on out, your creditors will decide whether they accept or reject the terms of the agreement. If accepted, you will go on to repay a portion of your debts with zero interest. 

Learning How To File a Consumer Proposal

Make an Appointment With a Professional

You can contact our team of professionals for a free consultation. During the consultation, our debt help professionals will go through your financial situation with you. You must be prepared to tell them how much you earn, what you owe, your monthly expenses, and how much debt you currently have. Our team of professionals, together with our Licensed Insolvency Trustee (LIT), will then calculate how much we feel that you should offer your creditors, based on your unique situation, and be sure that you understand all your financial options, such as bankruptcy, credit counselling and filing a consumer proposal, so that you can make an informed choice. Filing a consumer proposal might be the right move for you and your financial future. 

Prepare and File the Consumer Proposal 

Once you’ve decided to go through with a consumer proposal, our LIT will help prepare the proposal, detailing the amount of debt you’ll be required to repay and how much your monthly payments will be. The consumer proposal should also describe the number of months you’ll be making payments – you’ll have up to 5 years to make those payments. 

Your LIT will then file your consumer proposal with the court and send a notice to your creditors. Creditors will have 45 days to accept or reject the proposal, during which time you won’t have to make any payments on your debts – just start working on your proposal. Interest on your debts will stop accumulating immediately, and you’ll have complete protection from legal action against you, such as wage garnishments or frozen bank accounts. Creditors won’t be able to harass you as long as soon as you’ve filed a consumer proposal.

Meeting of Creditors 

If a creditor holds at least 25% of your debt, they may request a meeting of creditors within the first 45 days. If a meeting of creditors is called, your creditors will vote on whether they want to accept, modify, or reject the consumer proposal. 

Your creditors’ votes are based on how much of your debt they own. Your Licensed Insolvency Trustee will take care of this on your behalf, and explain each step during the process, and negotiate with your creditors on your behalf. 

If a majority of your creditors accept the proposal, it will be approved. Once approved by creditors, and where necessary by the Court, you’ll be legally bound to all of your creditors, and you can start making your monthly payments. 

Pay Your LIT

You’ll need to make the payment to your LIT, which is usually monthly, but you can also make payments bi-weekly, semi-monthly or whatever works for your budget, over the period of time stated in your proposal. Consumer proposals cannot exceed more than 5 years. During that time, you won’t have to make any additional payments for fees or service charges, as you would with many other debt settlement options. 

Attend Two Credit Counselling Sessions 

If you want your debt discharged by a consumer proposal, you must attend two credit counselling sessions, which cover topics such as budgeting and managing your finances. Our debt help team provides these sessions by video or in person, and is happy to answer your questions about your Consumer Proposal or any other money management topic. 

Become Debt Free

Once you’ve completed the terms of your consumer proposal and made all the monthly payments, your Trustee will file the necessary paperwork releasing you from your debt. Your LIT may also provide you with more information and resources to help you rebuild your credit to help with your future financial health. 

Why Consider a Consumer Proposal?

There are numerous advantages involved when you file a consumer proposal, such as the following:

  • A consumer proposal can decrease the amount of debt you owe, by stopping interest and reducing payments
  • You won’t have to declare bankruptcy
  • It may be a better alternative than debt consolidation 
  • Monthly payments will be affordable
  • You can complete consumer proposals in five years or less if you choose to prepay the total
  • A consumer proposal can freeze the amount of interest on your debts

What To Keep in Mind

Always remember that Licensed Insolvency Trustees are the only ones legally able to file and administer consumer proposals and the fees they charge are set by the federal government. You do not need a referral to speak with a Licensed Insolvency Trustee – your consultation is free!

Any other type of debt relief company that promises to connect you with an LIT to file your consumer proposal, and charges you a fee to do so is not to be trusted. 

Want to learn more about your debt solutions? Our LITs can explain how consumer proposals differ from bankruptcy and walk you through what to expect during the process. You don’t have to go through debt alone. Contact us today for a free consultation.

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