How a Consumer Proposal Works
Consumer Proposal Quebec: How does it work?
What’s a consumer proposal and how does it work?
Is a consumer proposal worth it?
These are common questions Canadians ask when they are really struggling with debt.
When creditors are coming after you and you can’t pay, it is perhaps time to explore some legal options.
It could be time to think of filing bankruptcy in Quebec – but not so fast though.
There are other alternatives to filing bankruptcy in Quebec, including exploring a legal option known as a consumer proposal.
If you are wondering what a consumer proposal is all about, then read on as we will be telling you everything you ought to know before deciding if this is the right step to sorting your debt issues.
What’s a Consumer Proposal?
A consumer proposal is a legally binding agreement negotiated between you and your creditors via a licensed bankruptcy trustee whereby you agree on new repayment plans for your debts.
It could come in the form of adjusting the repayment period up to a maximum of 5 years, paying a percentage of what you owe or both.
It is an alternative to filing personal bankruptcy but you can only determine if it is the right option for you by visiting a bankruptcy trustee otherwise known as a Licensed Insolvency Trustee (LIT).
Once the bankruptcy trustee determines that filing a consumer proposal is appropriate, they will ask you to provide a list of your assets plus what you owe.
Using the data, the trustee will then be able to craft a tailored proposal based on your ability to pay.
The consumer proposal will be filed with the office of the Superintendent of Bankruptcy (OSB).
This is the office of the federal government tasked with ensuring that bankruptcies and Insolvencies in Quebec are administered in a fair and orderly fashion.
What are the qualifications to file a Consumer Proposal?
A bankruptcy trustee will negotiate a consumer proposal depending on your debt level.
In most cases, you will qualify for the proposal if:
- Your debts are more than $1,000, but not exceeding $250,000 (this doesn’t include debts like your home mortgage);
- You are a salaried employee with a good salary thus you are able to make periodic payments without defaulting the terms of the agreement;
- You are not able to repay all your creditors in a lump sum;
- Can’t acquire a debt consolidation loans since you have accumulated too much debt even though you might have a good job;
- Bankruptcy isn’t the best option for you, perhaps because you will be subjected to surplus income payments or you might even lose your assets.
What happens After You File a Consumer Proposal?
What next after the bankruptcy trustee has filed a consumer proposal with the OSB and your creditors?
For starters, you will stop making payments directly to your creditors.
Any legal actions against you will also stop.
This includes wage garnishments and those calls you have been getting from the creditors or collection companies.
After the bankruptcy trustee has submitted the consumer proposal to your creditors, they will have a maximum of 45 days to either accept or reject the proposal.
One important piece of legal information you need to know at this point is something known as the meeting of creditors.
Meeting of Creditors
As the name suggests, this is a meeting held between you, the trustee and the creditors.
It may be called by the OSB, the trustee or the creditors provided you owe them least 25% of the total value of the proven claims.
In most personal bankruptcy scenarios though, the meeting of creditors will not be called but legally speaking, the creditors have been given the chance to call for it within the 45 days.
If the meeting is requested, the bankruptcy trustee will tell you of the place and the time it will take place.
In most cases it will be held at the trustee’s office.
You will be required to prepare to answer queries and provide more info to the creditors regarding the directions of debt repayment.
Will Your Creditors Accept Your Consumer Proposal?
Can a consumer proposal be rejected by your creditors?
The answer is a definite yes but there is a slight catch.
Most creditors prefer if you go down this route rather than choosing bankruptcy.
The reason being that if you choose bankruptcy they are bound to lose more unlike if you file a consumer proposal whereby they will manage to recoup a good percentage of what you owe them.
If the consumer proposal is accepted you will be required to:
- Make payments to your creditors via the trustee under the agreed terms stipulated in the proposal;
- Attend two financial counselling sessions to help you get back to your feet and avoid sinking into debts going forward.
Again, the debt proposal can be rejected by your creditors.
If this happens your bankruptcy trustee will help you adjust the proposal and resubmit it.
If this doesn’t work the bankruptcy trustee might explore other options for solving your debt issues.
This could include filing for bankruptcy.
Speak to a licensed bankruptcy Trustee in Quebec
That’s pretty much the most important information you need to know about how a consumer proposal works in Quebec.
In simple words, a proposal is a relatively friendly option compared to filing bankruptcy.
Don’t know if filing bankruptcy or a consumer proposal is right for you?
Just speak to a licensed insolvency trustee for a proper assessment of your debt situation.
We’ll give you directions towards reducing your debt going forward.