2017-12-12
When you are unable to meet your debts under the original terms you agreed to or even if you can repay your debts but not under the terms you originally agreed to, a Consumer Proposal may be a viable option.
A Consumer Proposal is a legislated option regulated by the federal government which allows you to make an offer to your creditors to repay at least part of your debts. It can only be filed through a Licensed Insolvency Trustee (LIT)/ administrator.
A Consumer Proposal is different from trying to make arrangements directly with your creditors in that it must be approved by the majority of your creditors, in dollar value. All creditors are bound by the approved proposal.
To be eligible to file a Consumer Proposal you must be a person (no corporations allowed). The debts you settle can include income taxes, business debts - if you are a sole proprietor or partner in a business - or debts that you guaranteed for a business.
You are eligible to file a Consumer Proposal if your debts, excluding claims secured by your principal residence (mortgages, property taxes. etc) do not exceed $250,000. If your debts exceed $250,000, you may still a proposal but it is called a Division 1 proposal.
The maximum time period to offer a proposal is for five years.
There are many different variations of Consumer Proposals but the most common is a monthly payment proposal.
If you don’t have funds to make a monthly payment but have a family member or friend who will help you, a one-time payment might still make a proposal viable for you. This family member / friend would only make the payment if your creditors agree to the settlement amount.
A Consumer Proposal may also be filed to allow you time to sell an asset and use these funds to repay your debts.
The first step in starting the process is meeting with an LITwho will complete a financial assessment of your personal situation and help you in making a formal offer to your creditors if a Consumer Proposal is the ideal debt relief option for your unique situation.
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