By Jillian Taylor- Mancusi
When debt becomes overwhelming, one of the options you can consider is a consumer proposal. This is a legal agreement between you and your creditors that allows you to settle your debts for less than you owe. More and more people are finding that a consumer proposal is an effective way to handle debt without filing bankruptcy—approximately 50,000 Canadians filed consumer proposals last year.
If you’re considering all of your options, you might be wondering what happens when you file a consumer proposal in Ontario. Here’s a quick overview:
Find out if you’re eligible.
In order to be eligible for a consumer proposal, you must:
- Have debts between $5,000 and $250,000 (not including your mortgage)
- Have a steady income that allows you to make monthly payments
Many people opt for a consumer proposal over a bankruptcy because they don’t want to lose their home or belongings and don’t want to make surplus income payments. They want a regular payment that they can budget for each month.
Meet with a licensed insolvency trustee.
Only licensed insolvency trustees can administer consumer proposals. Once you meet with a licensed insolvency trustee, he or she will sit down with you, go over your finances, and decide whether or not a consumer proposal is the best option for you.
If you decide that a consumer proposal is right for you, you and your trustee will determine a monthly payment that you can afford and draft a proposal to be given to your creditors.
The trustee files the proposal with the OSB.
Once your trustee has developed a proposal, he files it with the Office of the Superintendent of Bankruptcy (OSB). Once this happens, you will stop making payments to your creditors. Don’t worry—this is part of the process. Legally, once a proposal is filed, all collection activity against you stops. That means wage garnishment, phone calls, and other attempts to contact you regarding your debt are stopped.
The trustee informs creditors of the proposal.
Your proposal is then submitted to your creditors. It will also include background information for your creditors about your financial situation. At this point, they have 45 days to either accept or reject your proposal.
Keep in mind that most creditors will accept consumer proposals because they are likely to receive more money than if you should file for bankruptcy. A proposal is considered binding on all of your creditors if a majority of them vote to accept the proposal terms. If the proposal is not accepted, you may have to revise and resubmit your proposal or consider other options.
You begin making monthly payments to your trustee.
Once your consumer proposal is accepted, you make one monthly payment (the amount you and your trustee determined together) to your trustee. Your trustee then distributes it among your creditors until the proposal has been satisfied. You have the option of making greater monthly payments to pay the proposal off faster.
Consumer proposals have helped thousands of Canadians get out of crippling debt. If you have questions about filing a consumer proposal in Ontario, contact a licensed insolvency trustee for a free consultation.