Reduce Debt and Avoid Bankruptcy with a Consumer Proposal
For those people who are unable to repay their debts in an orderly fashion for the foreseeable future – a consumer proposal may be their best option to reduce debt and avoid bankruptcy.
What is a Consumer Proposal?
A consumer proposal is a legally binding agreement governed by the Bankruptcy and Insolvency Act – between a debtor (the person who owes money) and their unsecured creditors.
Unsecured creditors include: credit card companies, utilities, payday loan firms and other types of creditors who do not have any of the debtor’s assets used as security.
Note: some unsecured debt such as child support, alimony, court imposed fines, and some student loans, may participate in the proposal terms, however, upon completion of the proposal terms, there may still be amounts owing after receiving dividends through the proposal terms. Your Trustee will provide further information in the regard at your first meeting.
What is the Consumer Proposal Process?
In Ontario – only federally licensed Trustees in Bankruptcy can file and administer consumer proposals.
Individuals seeking the protection of a consumer proposal, must meet with a Trustee and go over their finances in detail.
To proceed with a proposal, a Trustee must determine if an individual:
- is insolvent – unable to pay their debts as they become due;
- would be able to pay back a portion of their outstanding debt over a period of time (up to 5 years); and
- is willing to enter into and honour a legally binding agreement with their creditors.
Then the Trustee, working with the client, draws up a proposal offering to pay the client’s unsecured creditors a reduced portion of their outstanding debt, to be paid back over a period of time (up to 5 years).
The Trustee then files the proposal and submits it to the creditors for approval.
If a majority of the creditors accept the proposal, it becomes binding on all of the creditors.
All unsecured interest charges and collections efforts must, by law, stop once a proposal is filed. This includes the removal of garnishees.
Once the debtor successfully completes all the terms of the proposal, they are released from all the unsecured debt covered by the proposal, other than debts found to be within the meaning of Section 178 of the Bankruptcy and Insolvency Act, which your Trustee will review with you.
How Much Does a Consumer Proposal Reduce Unsecured Debt By?
The amount varies depending on the individual situation but will no doubt have a significant impact on your financial state.
How To Find Out if You Can Reduce Debt with a Consumer Proposal
Speak with a Licensed Insolvency Trustee.
If you live in the Toronto area, you can book a Free, confidential consultation with David Sklar & Associates Inc, Trustee in Bankruptcy – by calling 416-498-9200. During your consultation, our caring, supportive professionals will go over your finances in detail and discuss all of your options with you.
