Do I need a lawyer to file a consumer proposal?
No a lawyer is not required. However, the debtor may opt to retain a lawyer should they feel it necessary to obtain legal advice.
What length of time is permitted to complete a consumer proposal?
A consumer proposal can be made for any period of time that does not exceed five years. Keep in mind that the debtor also has the option to payout the proposal early should their financial situation permit them to do so.
What happens if the creditors turn down the consumer proposal?
Should the creditors turn down the consumer proposal, the debtor will no longer be protected by the Act, at which point the creditors will again be able to take the necessary steps to recover their debts. The debtor cannot file another consumer proposal and may want to discuss with the trustee other available options.
What happens to my assets in a consumer proposal?
Generally, the assets remain with the debtor. This would include any additional assets acquired during the term of the consumer proposal such as lottery winnings, inheritances and gifts.
How are secured creditors dealt with in a consumer proposal?
The debtor has the option to either surrender the asset or make arrangements to pay the secured creditor in order to keep it.
Does a consumer proposal affect my co-signers?
A consumer proposal does not cancel the liability of anyone who has guaranteed or co-signed any loan on your behalf.
What happens if my financial situation changes?
The debtor is required to advise the trustee of any change in their financial situation that could jeopardize their ability to make the required payments set out in the consumer proposal. Nonetheless, this will not affect the amounts to be paid as agreed to in the consumer proposal.
What happens if I stop making payments under the consumer proposal?
If a debtor fails to make the required payments under the consumer proposal or has missed three payments, it will be in default. At which point the creditors will again be able to take the necessary steps to recover their debts, less any dividend received during the consumer proposal.
How is my credit rating affected?
Whether the debtor chooses to file a bankruptcy or a consumer proposal, their credit rating is usually at it’s lowest. Once the consumer proposal is completed, it’s solely up to the debtor to convince a potential lender of their financial maturity and capability to repay new credit. It is also noted that the Canadian Bankers Association will look more favorably in reinstating a debtor’s credit more quickly if a consumer proposal is filed rather than bankruptcy.
Who pays the trustee for their services?
The trustee’s fees are based upon a set tariff under the Bankruptcy and Insolvency Act. The fees are deducted from the amounts paid by the debtor before dividends are issued to creditors.
Consumer Proposal vs Personal Bankruptcy – What’s the difference?
| ||Consumer Proposal ||Personal Bankruptcy |
|Who can claim ||The only requirements are, your total debt cannot exceed a $250,000 (excluding a mortgage) and you must have the ability to repay a portion of your debts. However, you are not guaranteed to be granted a proposal just by filing one. It must be accepted by your creditors. ||Any person, who owes more than $1,000 in debt, is eligible to file a personal bankruptcy in Canada. Ideal candidates are those who need rapid financial relief. |
|Costs ||Once you and your creditors agree to a proposal amount, your monthly payment is fixed and it will remain the same until your proposal is completed. ||Monthly payments vary as they are based on your income. The more you earn, the more you will be required to pay |
|Assets ||You will not lose any assets and you are not requirement to surrender anything. ||In order to be absolved of your debts you are required to surrender certain assets. |
|Credit Rating ||You will receive an R7 credit rating which indicates that you have made a settlement with your creditors. This is not a good credit rating, but it is better than a bankruptcy R9. ||You will receive an R9 credit rating, which is the worst rating you can have. Depending on your circumstances, it will remain on your credit report for 7 to 14 years. |
|Monthly Reporting ||You have no monthly tasks or reporting. ||You are required to complete a monthly budget for all income and expenses, as well as supply copies of your paystubs to your trustee. |
|Taxes ||You are still entitled to all tax refund(s) and/or credits which you are owed. ||You will lose all tax refund(s) and/or credits which you are owed. |