A consumer proposal is a debt relief strategy designed to help people who are struggling with insolvency. It’s an agreement made between an insolvent person and their unsecured creditors, allowing the person to pay a significantly reduced portion of their debts.
A consumer proposal must be carried out by a consumer proposal administrator. Learn what a consumer proposal administrator is and what they can do for you.
Who Can Be a Consumer Proposal Administrator?
Only a licensed insolvency trustee (LIT) can be a consumer proposal administrator. No other professional is legally allowed to administer consumer proposals for Canadians. No lawyer, accountant, credit counsellor, financial advisor or debt consultant is able to fulfill this role.
Licensed insolvency trustees are able to fill this role because they are federally licensed debt professionals that provide advice and services for individuals and businesses struggling with debt. These services include consumer proposals, division one proposals and personal bankruptcy filings.
LITs are not just federally licensed. They are federally regulated, too. They are subject to oversight by the Office of the Superintendent of Bankruptcy (OSB) to ensure that they’re upholding the high standards of the job and not violating a strict code of ethics. These rules are in place to guarantee Canadians the support that they need when they’re at their most vulnerable.
Can Anyone File a Consumer Proposal?
It’s important for you to know that licensed insolvency trustees are the only professionals that can legally act as consumer proposal administrators. If you are approached by another debt solution company claiming to have the ability to file a Consumer Proposal on your behalf, it’s important that you ask to see their credentials or do some further research into the company. Unfortunately, there are illegitimate debt solutions companies out there that target people who are desperate. Before trusting these company’s do your research and ensure they are Licensed Insolvency Trustees.
How can you be sure that you’re working with a Licensed Insolvency Trustee?
- They clearly state that they are licensed insolvency trustees (LIT’s) on all of their advertising and their website (formerly known as bankruptcy trustees).
- The firm and its LITs are listed in the Licensed Insolvency Trustee Registry.
If you don’t see any of these clues, then you should steer clear from this company. They are not a licensed insolvency trustee and cannot file a consumer proposal for you.
Debt Consultants vs. Licensed Debt Professionals:
Debt settlement programs that are offered by unlicensed, unregulated for-profit organizations are risky at the best of times! Some debt settlement programs will claim to offer debt relief from creditors but without the added legal protection provided by a Consumer Proposal. Most debt settlement programs require all creditors to agree to the terms of repayment. However, a consumer proposal only requires 50% of your creditors to agree, forcing the remaining creditors to be bound by the consumer proposal.
If you do decide to move forward with an unlicensed debt settlement company, you will be asked to withhold your payments to your unsecured creditors and you will be asked to start making payments directly to the company. After enough of your funds have been collected, they will contact your creditors. They will attempt to strike a deal with the creditors, hoping that after receiving no payments for so long, they will be desperate enough to settle for a lump sum that is much lower than what you currently owe. You will repeat this practice for an extended period of time. It could take years.
However, one or more of the creditors could reject the offer, or worse, any one of your creditors could take legal collection action while waiting for an offer because stopping payments results in defaulting on the debt contract.
These are some warning signs that you’re dealing with a debt settlement program:
- You can’t see any specific mention that they are licensed insolvency trustees on their website.
- They ask for fees upfront.
- Debt settlement programs aren’t regulated, so they can charge you steep and excessive fees.
- If the organization is pushing you to make a decision quickly, then you should take a step back.
- A licensed insolvency trustee will assess your financial situation and advise you on your options. They won’t push you to sign onto a service that you don’t want or need.
- The website has no customer reviews, or they have customer reviews that look fabricated.
- They won’t let you see the full contract prior to signing and allow you sufficient time to read and understand the contract.
The biggest problem with debt settlements is that they’re offered by debt consultants. The difference between licensed insolvency trustees and debt consultants is debt consultants are not licensed, so you can’t be sure whether they have any education or experience relating to financial problems. Debt consultants aren’t regulated by a government body, so you can’t be confident that their practices are ethical or even legal. Most importantly, debt consultants don’t have any authority over creditors.
Your unsecured creditors do not have to listen to debt consultants. They don’t even have to answer their calls or emails. If a debt consultant tries to broker a deal with them, the creditor can break that deal at any moment because it’s not a legally binding agreement. This is what makes debt settlement programs so risky.
You could go through the entire debt settlement process, and your consultant could still fail to strike a deal with your creditors. If that happens, you’ll be in a much more financially precarious place than when you first consulted the organization. You’ll have a larger debt load. You’ll have accumulated interest, late fees and penalties. Your creditors could decide to take legal action against you in order to collect their funds.
What Does a Consumer Proposal Administrator Do?
A consumer proposal administrator is a professional that carries out consumer proposals. They determine whether a debtor qualifies for this service or whether they need to turn to another strategy for debt relief. These are some of the main responsibilities that come with this role:
Filing Your Proposal:
If a person qualifies for a proposal and wants to go through with it, the administrator helps the debtor calculate how much they can manage with proposal payments. Then, they will draft the proposal, file the paperwork and contact the unsecured creditors about the potential agreement.
If the majority of the creditors agree to the proposal, it goes into effect. Throughout the proposal, the administrator collects and makes payments, contacts creditors and arranges mandatory credit counselling sessions. They help the applicant through every step of the process, from the very beginning to the end.
Amending Your Proposal:
If the majority of the creditors don’t agree to the proposal, the administrator can help the applicant amend it so that it’s more appealing. If this amendment doesn’t work, your consumer proposal administrator may suggest filing for personal bankruptcy as an alternative. Consider the nuances of amending a consumer proposal and why creditors might reject your terms.
Acting as a Mediator:
Finally, one of the most important roles that a consumer proposal administrator plays is the mediator. They are the impartial boundary between the creditors and the applicant. So, if an applicant wants to change their proposal or has a complaint, they can talk to the administrator. If the creditors have an issue or want to question the applicant, they have to go through the administrator.
Debt repayment can be a tense and stressful experience. Having a seasoned mediator present ensures that the repayment process is smooth, successful and conflict-free.
David Sklar & Associates
Licensed insolvency trustees like David Sklar & Associates have the authority to contact creditors and hold them to agreements. So, when you sign onto a consumer proposal, and a creditor accepts it, that agreement is legally binding. The creditor has to adhere to the terms set in the proposal from that point forward.
If you are struggling financially and looking for relief, call David Sklar & Associates and book your consultation today. We offer consumer proposals in Toronto to help honest people who are drowning in unsecured debt and need an effective way out.
We also offer division one proposals and personal bankruptcy services for people who can’t meet the qualifications of a consumer proposal. You have options. We can help you pick the right ones and get the relief that you’re looking for.
