Consumer Proposal Info.

Financial difficulties can arise at any time. For most people, deciding between debt repayment programs, filing bankruptcy, or a Consumer Proposal is a serious and confusing decision. We recognize the need to understand the process and its associated risks. Please read on:

Repaying a portion of what you owe without resorting to bankruptcy is possible through a consumer proposal facilitated by a Licensed Insolvency Trustee (“LIT”), who is authorized by the Office of the Superintendent of Bankruptcy to administer the Consumer Proposal process under the Canadian Bankruptcy and Insolvency Act.

Unlike a LIT, Solutions Credit Counselling Service Inc. is a government-licensed debt repayment agency committed to assisting debtors in understanding their debt relief solutions and ensuring alignment with their financial goals and circumstances. We do not do consumer proposals. Should a consumer proposal emerge as the most suitable solution, Solutions will facilitate the introduction to a LIT.

Thousands of Canadians find a viable debt restructuring option through a Consumer Proposal each year, offering legal protection from creditors under the Federal Statute (Bankruptcy and Insolvency Act). Typically, debtors repay only a portion of what they owe interest-free.

The Bankruptcy and Insolvency Act deals with Consumer Proposals, which are intended to help reduce the number of bankruptcy filings by allowing debtors who owe less than $250,000 (excluding mortgages on their principal residences) to negotiate with their creditors for the reduction of their debt and for an extension of the time for payments of their debts.

A Consumer Proposal is a legal process that allows a debtor or bankrupt to modify his/her payments to creditors by extending the time for payment or reducing the amount to be paid, usually over a period of time.

The purpose of a Consumer Proposal is to allow a debtor or a bankrupt to make a settlement with his/her creditors while avoiding bankruptcy. Executions, garnishees, and other actions by creditors will be stopped once the Consumer Proposal is filed.

To qualify to make a Consumer Proposal, a debtor must owe between $1,000 and $250,000, and the Act has other provisions for dealing with these debts.

An individual who has filed an assignment in bankruptcy may make a Consumer Proposal if the Inspectors, if any, have given their approval.

The first step is to contact a LIT (licensed insolvency trustee), who will inform you of a consumer proposal’s effects and prepare the necessary documents to file a Proposal. 

The creditors vote on a Consumer Proposal, and it is not always accepted.

If the creditors reject the Consumer Proposal, the debtor will no longer be protected by the Act. The creditors will again be able to take steps to recover their debts. At that time, the debtor may wish to consider other available solutions.
Once the Consumer Proposal is accepted, the debtor will make the payments to the Trustee, as provided for in the Consumer Proposal. This may involve a one-time lump sum payment or monthly payments for a period of no more than five years or a combination of both.

The debtor is required to advise the Trustee of any changes in his/her circumstances that could jeopardize his/her ability to make the payments required under the Consumer Proposal. However, this will not change the amounts to be paid as agreed to in the Consumer Proposal.

A Consumer Proposal can be made for any period up to a maximum of five years.

Generally, a lawyer is not required. However, if the debtor feels the need for legal advice, he/she may retain a lawyer. Consumer Proposals only cover debts that are unsecured.

Consumer Proposals will not cancel the liability of anyone who has guaranteed or co-signed any loans. These guarantors will still be responsible for the debts minus any payments the creditor receives from the Consumer Proposal.