What is a Consumer Proposal? Typically, when a Canadian citizen experiences major financial problems and is unable to resolve his or her debts through monthly payments, filing for bankruptcy is the only solution. Opting for bankruptcy would mean that they will have to assign their assets to a licensed trustee. However, filing for bankruptcy can subject a citizen to surplus income penalties and they could lose valuable assets like their home or their car.

There is an alternative legal procedure that is available to Canadians in this precarious position, who wish to avoid filing for bankruptcy, and is known as “Consumer Proposals”. Instead of handing their assets over to the trustee, these citizens can discuss a new payment plan with an assigned Proposal Administrator, and then present this new plan as a proposal to their creditors. If the creditors agree to the proposal, it will become a binding legal settlement plan for the repayment of their debts.

Consumer proposals are applicable to those Canadian citizens with debts ranging from $5000 to $75,000, and are most beneficial to those who have good jobs and can afford to make some monthly payments. It is very useful when it is not possible for one to repay all their creditors in full with interest, and cannot get a debt consolidation loan because their debts are too high.

The proposal will allow a debtor the chance to negotiate the reduction of the amount of their debt, to cease the accumulation of interest, and also to prevent the loss of their home and/or car. The proposals have their limitations, however; opting to use consumer proposals does not entitle the debtor to select which debts are to be included, or to abandon support, alimony or student loan obligations. Neither will the proposal help them deal with secured debts such as house mortgage and car loans.

One of the most basic rules for filing a consumer proposal is to include all unsecured creditors, including friends and family. They must all be treated with equal importance in the proposal. Consumer proposals should be accepted or rejected by creditors within 45 days of filing. Most creditors will accept consumer proposals rather than have their debtors go bankrupt, because although they will not receive the full amount owed, they will get more than they would if the debtor opts to file for bankruptcy.
If the proposal is accepted, the debtor will have to make hi/her monthly payments to the Proposal Administrator, who will in turn pay the creditors.

The creditors therefore, will not be entitled to take any extra legal action against the debtor. If 25% or more creditors reject the consumer proposal, the Proposal Administrator can arrange a meeting of all the creditors and the debtor. In this meeting, the appointed Proposal Administrator will aid the debtor to discuss an alternate proposal, whose conditions are acceptable to both the creditors, as well as the debtor. However, if a customer proposal is still refused by creditors, the debtor will have no choice but to file for bankruptcy. What is a Consumer Proposal?

Add Your Comments:
Fields with * are required
Your Comment Below:
Enter Above Code
Note: Comments are moderated - Spam will be deleted

HOME | Contact | Disclaimer | About Us | Faqs | Discussion |