What is a Consumer Proposal?
A Consumer Proposal is a formal, legally binding agreement made between a debtor and their unsecured creditors, facilitated by a Licensed Insolvency Trustee (LIT). It is a process unique to Canada under the Bankruptcy and Insolvency Act (BIA) and is often viewed as an alternative to personal bankruptcy.
A Consumer Proposal allows an individual who owes a total of no more than $250,000 (excluding the mortgage on their principal residence) to offer their creditors a modified payment plan. This plan typically involves paying back a percentage of the debt, or extending the time they have to pay it back, or both. The proposal cannot exceed five years.
Key Features
- Formal and Legal: It is administered by an LIT and is legally binding on all unsecured creditors once accepted.
- Debt Reduction: It allows debtors to repay only a portion of the debt owed (often significantly less than 100%).
- Stay of Proceedings: Once filed, a “stay of proceedings” is immediately put in place, halting most creditor actions, including wage garnishments, collection calls, and lawsuits.
- Asset Protection: Unlike bankruptcy, the debtor retains all their assets, including equity in their home (subject to existing secured loans like mortgages) and investments.
- Credit Impact: While it negatively affects the credit score, it is generally viewed as less damaging than bankruptcy over the long term.
Eligibility Requirements
To file a Consumer Proposal in Ontario, you must meet the following criteria:
- Be insolvent (unable to meet your financial obligations as they become due).
- Your total debts (excluding the mortgage on your principal residence) must not exceed $250,000.
- Be a resident of Ontario, or carry on business in the province, or have property in the province.
The Consumer Proposal Process
Proposal Preparation and Filing
Our experts meticulously prepare and file your consumer proposal, ensuring compliance with all legal requirements.
Negotiation with Creditors
We negotiate with your creditors on your behalf to reach an agreement that is manageable and beneficial for you.
Ongoing Support and Guidance
Receive continuous support throughout the proposal process, with expert advice to help you stay on track.
Debts Covered
Credit card debt, Lines of credit, (unsecured), Payday loans, Bank loans (unsecured), Tax debts (CRA), and Overdue utility bills, Student loan (7+ years old)
Debts NOT Covered
Secured debts (e.g., mortgage, car loans – unless you voluntarily surrender the asset), Alimony or child support payments, Fines or penalties imposed by the court.
Dean Debt Solutions offers a range of services to assist you in navigating the complexities of bankruptcy with ease and confidence.
Consumer Proposal Assistance
Our experts will work with you to create a consumer proposal that suits your financial situation, allowing you to repay a portion of your debts while avoiding bankruptcy.
Personal Bankruptcy Filing
We guide you through the personal bankruptcy filing process, ensuring you understand your rights and obligations, and helping you achieve a fresh financial start.
Debt Counseling Services
Receive personalized advice and strategies to manage your debts effectively, helping you regain control over your financial health.
Credit Rebuilding Programs
Our credit rebuilding programs are designed to help you improve your credit score and regain financial stability after bankruptcy.
Common Questions About Consumer Proposals
Explore answers to the most common inquiries about consumer proposals to help you make informed decisions.
What is a consumer proposal?
A consumer proposal is a legally binding agreement between you and your creditors to repay a portion of your debts over a period of time.
How does a consumer proposal affect my credit score?
While a consumer proposal will impact your credit score, it is often less severe than a bankruptcy and can be a step towards financial recovery.
What debts can be included in a consumer proposal?
Most unsecured debts, such as credit card balances and personal loans, can be included in a consumer proposal.
How long does a consumer proposal last?
Consumer proposals typically last up to five years, but the duration can vary based on your agreement with creditors.
Can I pay off a consumer proposal early?
Yes, you can pay off your consumer proposal early without any penalties, which can help you rebuild your credit sooner.