A Fresh Financial Start
Residents of Ontario who find themselves insolvent – that is they lack the resources to repay their existing debts in a reasonable period of time – may be eligible for a federally-legislated debt relief program called a consumer proposal.
A consumer proposal is a legal agreement between a debtor and their unsecured creditors to repay a portion of their debt over a period of up to 5 years. Upon successful completion, they are released from their unsecured debt.
Because it is a legally-binding agreement that this covered by the Bankruptcy and Insolvency Act – a consumer proposal offers a number of features and protections that are simply not available through other non-regulated programs.
How Does It Work?
In Ontario, only bankruptcy trustees can file and present consumer proposals to creditors. Bankruptcy trustees are licensed by the Superintendent of Bankruptcy, undergo extensive training, and are bound by the law and regulated codes of conduct that ensure the process is fair to all parties.
To make certain that everyone who needs to speak to a trustee has access, the initial consultation is free. During the consultation, a person’s finances are reviewed in full and all of their viable options for getting out of debt are discussed.
While most unsecured debts such as credit cards, payday loans, income taxes, utility bills, rent, etc are covered in a proposal, there are a number of exceptions that the trustee will review in detail.
The trustee determines if a person is insolvent and eligible for a proposal – however it is up to the person to decide whether or not they wish to file.
If the person decides to file, a proposal is prepared, filed with the Office of the Superintendent of Bankruptcy and submitted to the unsecured creditors for approval. When over 50% of the voting unsecured creditors (by dollar amount) agree to the proposal, it becomes binding on all of the unsecured creditors. Note – most proposals are accepted by the creditors.
Protection from Unsecured Creditors
The consumer proposal provides protection from the all the unsecured creditors in the proposal, whether they voted for the proposal or not. By law these creditors must:
- Stop all collection calls
- Stop all legal action
- Stop charging interest
In exchange – the person who has filed the proposal must honour all the terms of the proposal including:
- Make all of the required monthly payments to their trustee for disbursal to creditors.
- Attend credit counselling sessions
Flexibility of Payment Scheduling
For people who do not have a traditional monthly income, but qualify for a proposal – the agreement may be structured to meet their non-standard payment requirements.
If a person’s income increases, or they experience a financial windfall during the proposal, they have the option of paying off the proposal early. Note – an increase in income does not affect the terms of the proposal.
If a person’s income decreases, and they are unable to make their payments, it may be possible for the trustee to renegotiate the proposal.
Find Out More
If you live in the Toronto area and are considering a consumer proposal you are welcome to call us at 416-498-9200 to book a free consultation at one of our 6 office locations. Our caring, licensed professionals will meet with you in a professional and supportive environment – and discuss all of your options for getting out of debt.
If you live outside the Toronto area, check with the Superintendent of Bankruptcy to find a licensed bankruptcy trustee in your area.