Personal Debt Solutions Canada - Navigating Proposal Process

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Navigating the Consumer Proposal Process

Why do I file a Consumer Proposal with a Trustee in Bankruptcy?

A Trustee, who is generally also a Chartered Insolvency and Restructuring Professional, is the only person licensed in Canada to act as an administrator under the Bankruptcy and Insolvency Act (BIA) to oversee the Consumer Proposal process. The BIA is the only Act in Canada that outlines the procedures that both debtors and creditors must adhere to under a Proposal.

The fact that a Consumer Proposal and a Trustee are legislated by Canadian Federal Legislation means that all stakeholders including creditors and debtors can have confidence that the proposal agreement is fair and equitable given the individual circumstances of the debtor, and that the all terms, fees, disclosures, and time frames, adhere to a specific set of federal guidelines and principles.

Because a Trustee is involved, creditors have confidence in the information prepared by the debtor. Other credit counselors or debt poolers may advertise that they are "regulated" but they are usually referring to the regulations governing their collection of money from you for repayment to creditors. They are generally not regulated as to the fees they can charge, or subject to the same Code of Ethics or Standards of Practice and continuing educational requirements that a Trustee in Bankruptcy is, who is also a Canadian Insolvency and Restructuring Professional.

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Is a Consumer Proposal guaranteed to be accepted?

Although your trustee will assist you in drafting a consumer proposal that they believe to be acceptable to the creditors, there is no guarantee that your proposal will be accepted.

Each creditor has their own criteria for acceptance of consumer proposals.

An experienced trustees will have a good idea of the rules are and will be able to advise you of any unusual terms a particular creditor may require.

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What Documents are needed in Filing a Consumer Proposal?

Now that you have provided your trustee with all of your information about your liabilities, assets, and your budget, the assessment is done and you have decided to file a consumer proposal, have verified your eligibility and your proposal terms have been arranged, it is time to sign your official documents

Required Documents

It is time for your trustee to prepare the paperwork needed to file your consumer proposal. Some of the documents are:

The Statement of Affairs: one of the most important documents for the administration of the consumer proposal and is used by the Court, the trustee, the creditors, the inspectors and the Official Receiver, to base their decisions. The trustee prepares this document based on information provided by you. Your Statement of Affairs includes:

What are these documents for?

Your trustee will ask you to sign each of these forms. They each serve a specific purpose. Some of the documents are required by bankruptcy law, while others are designed to give your creditors sufficient information about your situation, to allow them to make a decision about your consumer proposal. The trustee also ensure that all of your duties and responsibilities during the proposal have been clearly explained to you.

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How does the voting work in a Consumer Proposal?

Once the consumer proposal is filed your creditors have 45 days to respond with their votes.

Your creditors may do one of the following:

Your trustee is permitted to contact your creditors to ask them to vote and to remind them to submit a proof of claim, but may not solicit votes on your behalf. Your trustee is an officer of the court and therefore must remain impartial

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What happens if my Creditors vote "No" in a Consumer Proposal?

At the end of the 45-day period, if your creditors agree to your proposal, and there are no objections within a further 15 days, it will be "deemed" accepted by the court and all terms are then binding on your creditors.

If a majority of your creditors want different terms included (usually more money over a longer period of time) and they represent a majority of your creditors, you may have to include these new terms if you would like the proposal to be passed. In the case where the creditors are asking for additional amount to be paid to them,

You could accept their amended terms, or you could allow the proposal to be rejected, which may mean you end up declaring bankruptcy.

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What happens if I can't keep up the payments terms that I agreed to under a Consumer Proposal?

Most proposals are put together so that you are required to make a minimum monthly payment to your creditors. If you are paying monthly then you have a 3 month grace period, so nothing would happen if you miss a couple of payments. However, if you miss more than 3 months of payments, then you are officially in "default" of your proposal terms and thus the proposal could be deemed "annulled" This means that your creditors could begin collection action against you like garnishing your income or assets.

It is best to let the trustee know ahead of time if you feel you need to vary the proposal payments. In this way you can amend your proposal terms if your creditors agree. The amendment may include that you have a longer time to pay or that you reduce your overall payments under the debt plan. At any time during the proposal if you feel that you simply cannot afford any payments, then you can always assign yourself into bankruptcy.

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Can I change my Proposal terms?

If there has been a change in your circumstances which adversely affects your ability to continue with the agreed payments, then you can file an amended proposal. As soon as you realize there is a problem, you need to immediately contact your trustee. The sooner your trustee knows about it, the sooner you can meet to review your options the easier it will be to work out a solution.

First you must determine if your problems are temporary or permanent. The loss of a job would be a permanent change and may inhibit your ability to afford the remaining payments completely. If however you are temporarily laid off, you can amend the proposal terms to be more in line with your adjusted income.

At this point your options would include:

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What happens when my Consumer Proposal is complete?

Once you have made your last payment and your proposal is complete your trustee will send you a Certificate of Full Performance. This is your proof that you have satisfied all of the terms of your consumer proposal. You will also receive a Statement of Receipts and Disbursements and a Notice of Taxation of the Administrator's Accounts and the Discharge of the Administrator. These documents are also sent to your creditors and the Office of the Superintendent of Bankruptcy who in turn notify the credit reporting agencies.

Find out today if a Consumer Proposal is the right choice for you by calling or emailing one of our member Trustees for your Free Consultation.

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