Personal Debt Solutions Canada - Consumer Proposal Filing Process
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What is the process of filing a Consumer Proposal?
What are the Steps in Filing a Consumer Proposal?
- Step #1: Confidential consultation with trustee
- Step #2: Sigh the Documents
- Step #3: Creditors consider the proposal
- Step #4: Creditors approve the proposal
- Step #5: Proposal is completed and eligible debts erased
- 1) Assess what you can pay to service your debts in an "average month"
After all of your living expenses are paid (utilities, rent, car loan, groceries etc.) say, you are left with $600 to pay bills. You leave yourself with an emergency fund, so you think a $400 payment towards a proposal is affordable.
- 2) Calculate your debt levels
Your total debts are $32,000. If you want to offer 50% of what you owe, then $16,000 is the amount you will put forward to your creditors.
- 3) Calculate how quickly you can pay the required amount taking into consideration your personal monthly family obligations.
With a payment of $400 a month, it would take 40 months to pay $16,000. The proposal to the creditors would then be 40 monthly payments of $400.
- 4) Wait for Creditor Acceptance
The creditors have 45 days to decide if your offer will work for them. Sometimes they can ask for a bit more each month or payments over a longer term. But if the majority of your creditors accept you original terms, then the proposal is binding on ALL of the creditors even if they voted NO!
The 5 Steps involved in a Consumer Proposal
Step #1 Consultation with a Federally Licensed Administrator (in Canada this is a Trustee)
Your consultation at the trustee's office is FREE. At this face-to-face meeting you trustee will look over your personal financial situation and provide you with information you will need when considering how much you can offer to repay to your creditors. The trustee will review with you a monthly family budget outlining your projected income and expenses (your best guess as to what an "average" month of expenses and income) as well as a list of your creditors and the amounts you owe. The trustee will help you assess your ability to make a proposal based on your family budget and help you determine how much you can afford to pay to your creditors each month.
Your trustee will also explain the proposal rules and work with you to draft your consumer proposal. The proposal must have payments that you can afford and that your creditors will accept. If you decide that a Consumer Proposal is the best option for you, the trustee will provide you with forms you will fill out in order to begin the process.
Rules of the proposal
Step #2 Sign the documents
Once you have gathered all the information that you need to make the right decision for you and had time to think over and digest the information you received at the trustee's office, if you want to proceed with the proposal, you submit your signed application documents to the trustee's office along with any deposit requested. From the information in your application the trustee will prepare the form Proposal to your creditors and, when ready, you must attend at the trustee's office to sign these documents in person and attest to the accuracy and completeness. The formal documents are called the "Statement of Affairs" and Consumer Proposal.
Step #3 Creditors consider the proposal
The trustee will send the creditors a signed copy of your Statement of Affairs (which includes the causes of your financial difficulties, a list of the creditors), a copy of the Consumer Proposal itself, along with the trustee's recommendations to the creditors regarding their acceptance of the proposal.
Your creditors have 45 days to consider the terms of the Proposal and if no objections to the proposal are received within 45 days of the filing, it is deemed to have been accepted by the creditors. If any of the creditors do not agree with the proposal a creditors' meeting may be required. However, as long as 50% of the creditors who vote accept the proposal, then it is binding on ALL of your creditors.
Step #4 Creditors approve the consumer proposal
The majority of consumer proposals area accepted by the creditors because, the creditors are generally better served financially by acceptance of the consumer proposal as opposed to a bankruptcy.
Sometimes one or more of your creditors will ask for more money to be paid into the Proposal by the debtor. The debtor can decide if they wish to make the additional payments or not. If the creditors (or the court) do not approve the consumer proposal, everything goes back to the beginning and creditors can begin collection action again etc. At any point the debtor is free to assign themselves into bankruptcy if they feel it is the better alternative, however, the debtor is not automatically bankrupt is the Consumer Proposal is not accepted
Step #5 Proposal is completed
You will be issued a Certificate of full Performance by the trustee. This certifies that your consumer proposal has been full performed and all of your eligible debts have been erased. The credit bureau is notified and three years later, the record of the proposal is removed from your credit report.
How does a Consumer Proposal Work?
This is a step-by-step example of what an "average" debtor may experience when deciding if a Consumer Proposal is the right choice to solve their debt situation.
The creditors may accept more or less than the 50% offered in this example and each consumer proposal must be considered based on its own merits.
What does a Consumer Proposal have to include?
Once you have met with a trustee to review your situation and determined your eligibility to file, you must figure out what portion of your debt to offer your creditors in your consumer proposal.
The basic rules that MUST be followed are: