Five things to know about a Consumer Proposal
If you’re struggling with unmanageable debt and worry you’ll never break the cycle of living from one bill to another, a Consumer Proposal may help you get the financial fresh start you deserve.
This is the first in a five-part blog series about what Consumer Proposals are, how the process works, and whether they might be the right solution for you to get permanent relief from your unsecured debt.
- A Consumer Proposal is the only federally regulated debt settlement option
Like Bankruptcy, Consumer Proposals are provided through the Bankruptcy and Insolvency Act. The legislation sets clear guidelines for consumers, creditors, and the responsibilities of Licensed Insolvency Trustees. This offers peace of mind that the process will be fair, predictable, and equitable for all parties.
- A Consumer Proposal can eliminate most unsecured debts
Consumers must fully disclose all outstanding unsecured debts, including credit cards, personal loans, lines of credit, student loans, and income tax debt — as well as any monies owing to friends and family.
The only unsecured debts which cannot be eliminated in a Consumer Proposal are:
- Court fines, penalties, and restitution orders
- Alimony, child support, and maintenance
- Any award by the court for intentional bodily harm, sexual assault, or wrongful death
- Any debt or liability arising out of fraud, embezzlement, misappropriation, or misconduct while acting in a fiduciary capacity
- Any debt or liability for obtaining property under false pretences or fraudulent misrepresentation
- Liability for any dividend a creditor would have been entitled to receive when you fail to disclose the creditor to your Trustee
- Student loans in certain circumstances
- Only a Licensed Insolvency Trustee can administer a Consumer Proposal
Licensed Insolvency Trustees are licenced through the federal government via the Office of the Superintendent of Bankruptcy. They are the only professionals qualified to advise on a Consumer Proposal, draft a Proposal to creditors, administrate the process, and issue a Certificate of Full performance.
A Licensed Insolvency Trustee will assess whether you qualify for a Consumer Proposal and must provide an unbiased opinion on whether they believe it’s the right debt solution for your unique circumstances.
- Creditors cannot opt out of a Consumer Proposal
Once your Consumer Proposal is accepted, it is binding on all your unsecured creditors. Creditors cannot choose to stop participating in the process provided you continue to make your payments on time.
- A Consumer Proposal protects you from creditor action and court judgments
A Consumer Proposal places an immediate stay of proceedings on all your unsecured creditors. This halts all existing collections activity, court judgments, and garnishees. It also prohibits creditors from contacting or pursuing future actions against you as long as the Consumer Proposal is in place.
