Consumer Proposal Process
The consumer proposal process begins with recognizing you need help with your debt situation.
When you’re in debt and unable to make your monthly payments, your creditors will often harass you or seek other measures like obtaining a court order for wage garnishment or the seizure of some of your assets.
To avoid such an outcome, a possible solution is to file for a Consumer Proposal.
If you are interested in making a proposal it is important to know about the consumer proposal process.
What is a Consumer Proposal?
Signing a Consumer Proposal means that you’ve negotiated with your creditors to pay a portion of your debt while the remaining debt is forgiven by your creditors.
Just like filing for a bankruptcy, when you file for a Consumer Proposal, your creditors will stop harassing you for repayment of your debt, you also stop any action that might have started against you for the recovery of the loan such as wage garnishment or asset seizure court orders.
Interests on your debts also stops.
To file for a Consumer Proposal, you must, however, meet certain conditions.
The qualifications for a Consumer Proposal include:
- Debts between $1,000 and not exceeding $250,000;
- You have a regular income and able to make monthly payments;
- You cannot afford to pay your creditors in full and with interest;
- You’re not able to obtain a debt consolidation loan;
- You’re avoiding bankruptcy for fear of losing some of your assets or because you might be subject to surplus income payment.
How to file for a Consumer Proposal
The Consumer Proposal is a legal procedure regulated by the Bankruptcy and Insolvency Act.
Similarly, with a bankruptcy, you need to find a Licensed Insolvency Trustee (LIT) to file for a Consumer Proposal.
Your initial consultation with a trustee is free of charge.
During the initial consultation, the trustee will assess your financial situation and determine whether filing a Consumer Proposal is the correct step to follow.
If you decide to go ahead with a consumer proposal, he/she will provide you with a form to fill out.
Once you’ve filled the form and signed all the paperwork, your trustee will collect the paperwork.
They will then file the electronic version of these documents with the Office of the Superintendent of Bankruptcy.
Once sent, the trustee will immediately receive a Certificate of filing a Consumer Proposal.
This certificate indicates that you have legally filed a Consumer Proposal.
The next step is for the trustee to send to your creditors a notice of the proposal.
Upon receiving this notice, your creditors must stop any action they might have considered taking against you.
They also have 45 days to either accept or reject the proposal.
Consumer Proposal Counselling Sessions
You will be required to attend two counselling sessions.
The first session should take place within 2 months of filing your proposal.
During that session, the counsellor will give you advice on areas such as money management, spending and shopping habits, financial difficulties warning signs, and loans.
The second session should take place within 7 months of your proposal and is mostly as a follow-up on what you learned in the first session.
Consumer Proposal Creditors Meeting
In the meantime, if your creditors do not refuse your consumer proposal, but would like to make some amendments, they may seek a meeting.
Such a meeting with your creditors may also be requested either by your trustee or the Office of Superintendent and Bankruptcy Quebec.
If you do have such a meeting and your creditors are not willing to accept your proposal, then it may not be approved and the creditors are free to start any action they anticipate to collect their loan.
Your Obligations During a Consumer Proposal
If you come into agreement with your creditors and your Consumer Proposal is approved, then you must adhere to the terms of the agreement.
The payments you make will be collected by the trustee and then distributed to your creditors.
If you adhere to the conditions of the proposal, you will be discharged from your debt obligations.
This means you will no longer owe your creditors any money.
At such time, your trustee will issue you a Certificate of Completion.
With that, the remaining balance of your debt will be eliminated and you’ll be debt free.
When you file a Consumer Proposal, it is going to affect your credit score, but not as severe as bankruptcy.
You will receive a mention of R7 on your credit report which will remain there for at least three years after you’ve received the Certificate of Completion.
The R7 indicate that you have entered a Consumer Proposal and have come into agreement with your creditors.