Personal Debt Solutions Canada - Consumer Proposal Eligibility

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Who is Eligible to file a Consumer Proposal in Canada?

Who is Eligible to file a Consumer Proposal in Canada?

Who can file a Consumer Proposal in Canada?

In order to file a Consumer Proposal, you must

Am I able to file a consumer proposal with another person?

If you debts are shared with another person and both of you are insolvent, then it is possible to file a Joint Consumer Proposal. This is a good option for a couple, as it allows the family unit to deal with all of the debts at the same time and can be a cheaper option because you only have to pay one trustee fee. To be eligible to file a joint proposal all or the majority of the debts of the individuals involved must be similar in nature.

When a proposal is filed jointly the total debts must be less that $500,000 (excluding the mortgage on their principal residence), which is double the limit for a single person.

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Can a consumer proposal be filed if I am already bankrupt?

This is possible and may be something you want to consider if your personal situation has changed significantly after declaring bankruptcy. Your bankruptcy discharge can be delayed if you have excess income and some debtors find this as a disincentive to working hard. Or some debtors feel that cannot make the monthly bankruptcy payments as required by the trustee and thus look to a consumer proposal as a more flexible option. By converting to a consumer proposal you may be able to reduce your monthly payments by extending the term of repayment and help to make the payments more manageable.

If you feel that you can afford to make payments under a proposal and are currently bankrupt, the first step is to contact your trustee to discuss this option. The trustee will walk you through your decision and will put together a consumer proposal for your creditors to review. As with all proposals your trustee has to think that it is better for your creditors and a majority of your creditors have to agree to the terms to make it binding on all.

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Are consumer proposals ever rejected by creditors?

Rejection is uncommon. Creditors accept the vast majority of consumer proposals either as originally presented by the debtor, or with some increase in the payment terms. Generally the only proposals that are rejected outright occur where the creditors have concerns about the debtors' behavior prior to the date of the proposal. These concerns cover areas such as fraud, reckless behavior, gambling etc.

The big exception here is the Canada Revenue Agency. CRA is an active participant in many bankruptcies and proposals and their participation can vary significantly from file to file. CRA is not always motivated by "business decisions" and although a proposal may bring significantly more money to them than a bankruptcy would, they sometimes vote to "uphold the integrity of the Income Tax System". As well, if you have tax debts greater than $200,000 there is special legislation to deal with this amount of debt which may involve a Court appearance. A Proposal, either a Division 1 Proposal, or Consumer Proposal can work if you have CRA debt, but it can be more complicated. A Trustee will need to discuss your individual debts situation with you to decide what offer to CRA would be best.

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