What is a Consumer Proposal?
A consumer proposal is a written offer made by you, the debtor, to your existing creditors requesting a legally binding modification of your creditors total debt usually for a lesser amount.
A consumer proposal is a NEW LEGALLY BINDING AGREEMENT with your creditors.
✔ A consumer proposal is like a consolidation loan, but you don’t really have a
✔ A consumer proposal is like debt settlement, but you don’t need much cash
up front. You only need your first months consumer proposal payment.
✔ A consumer proposal is like credit counselling, but you will pay less to your
✔ A consumer proposal is like contacting your creditors to make different
arrangements to pay your debts, but you don’t contact your creditors, your
Licensed Consumer Proposal Administrator does.
A consumer proposal STOPS UNSECURED CREDITORS from taking any action to recover their debts. Once approved, a consumer proposal legally binds ALL unsecured creditors to the terms of your consumer proposal.
The major determining factor in your ability to make a consumer proposal to your creditors is your income expectations, which means you have a history of a steady monthly income with enough earnings to pay your monthly living costs, and enough surplus left over to make a steady payment to your creditors.
A consumer proposal must provide your creditors a better return than they would receive if you were to file bankruptcy.
People often ask “How much money will the creditors be willing to take?” This is not the appropriate question. It is not what your creditors will take, but instead, what you can afford to pay that matters.
If you have a history of good earnings and expect these earnings to continue, then a calculation can be made to determine what creditor payment structure would be reasonable in your family circumstances. On the other hand, if your income is periodic, or too low, then a proposal based on monthly payments to your creditors may not be possible.
If your unsecured creditors accept your consumer proposal, then you have a new legally binding arrangement with your unsecured creditors and you will only have to make one monthly payment to your Licensed Consumer Proposal Administrator.
Formal proposals under the Bankruptcy and Insolvency Act
If your debts are not more than $250,000.00 excluding your home mortgage, then you can make a Division II Consumer Proposal which is the simplest formal proposal process. The maximum time for a consumer proposal is 60 months, or 5 years. Most consumer proposals are filed for 36 to 60 months depending on your circumstances.
If your debts are greater than $250,000.00, you may file a Division I Proposal, or an Regular Proposal as it is called. There is no time limit if an ordinary proposal is filed.
You may also file either type of proposal while you are an undischarged bankrupt.
When you have completed your Consumer Proposal, made all your required payments on time, and attended your Counselling Sessions, you will receive a Certificate of Full Performance which is legal proof you have been released from all your unsecured debts.