Consumer Proposals are a part of the Bankruptcy & Insolvency Act

Do you need help with your debts but don’t want to file for bankruptcy? Have you considered a consumer proposal? It’s a good option for those with home equity or other assets they wish to protect. Moreover, it allows you to settle your debts for a fraction of what you owe while stopping interest and allowing you to pay in one convenient, monthly payment. Better yet, a consumer proposal offers immediate protection from your creditors the moment you file, meaning they cannot sue or garnish your wages.

Legally Binding Debt Settlement

A consumer proposal is a legal arrangement between you and your creditors, governed by federal legislation: the Bankruptcy and Insolvency Act (BIA). This means it is a legal procedure – not an informal agreement. It is an alternative to bankruptcy that allows you to keep your assets, while allowing the creditors to recover more money than they would receive if you filed bankruptcy. It’s a mutually beneficial arrangement for both you and your creditors. They get more money; you keep your assets and have a lower monthly payment. Thus, you have to offer your creditors more than they would receive if you file bankruptcy to make it worth their while to consider your proposal. However, the amount you offer is still significantly lower than what you owe, offering true debt relief.

Rules Make It Fair To All

As a legal process, there are rules and laws that govern a consumer proposal. One is that only a licensed insolvency trustee or a consumer proposal administrator can file your proposal. They do not charge any upfront fees. If you are meeting with someone who is charging an upfront fee, they are not a trustee or a consumer proposal administrator, and they cannot file a proposal on your behalf. Move on – the deal they are proposing may sound similar but it is not regulated by the government and will not offer you any protection from your creditors. In fact, there is no guarantee that your creditors will even agree to an informal arrangement.

The BIA also dictates that the trustee must be fair to all parties involved. This means they do not work for the creditors – they are licensed by the federal government. As it is their job to be fair, the trustee will try to find an amount that is satisfactory to your creditors while giving you a manageable, monthly payment that you can afford. All trustee fees are included in that monthly payment and the fees are regulated by the Bankruptcy and Insolvency Act.

Since a consumer proposal is part of the Bankruptcy & Insolvency Act, there are rules to follow – for everyone including you and your creditors. For example, you have to disclose all your debts and assets to the trustee or consumer proposal administrator, and give them all your credit cards. Moreover, you will have to attend two credit counselling sessions. Creditors are given 45 days to vote on whether they accept your proposal or not. Creditors receive a vote for every dollar you owe and you need the majority of votes to be in favour of your proposal to move forward. When your proposal is accepted, it is binding on all creditors, even those who voted no. This is just part of the legal process.

If your proposal is accepted then you will have to make monthly payments for the agreed length of the proposal, up to 60 months. There is however some flexibility in a proposal: if your financial situation improves, you can pay off your proposal sooner.

Once you’ve completed your proposal process, making all payments and attending your counselling sessions, you will receive a Certificate of Completion and all debts included in the proposal will be absolved – giving you a clean financial slate. Although the proposal will appear on your credit report for 3 years, you can start rebuilding your credit as soon as you file.

Find out if a consumer proposal is right for you. As a piece of legislation under the Bankruptcy and Insolvency Act, it is the only government regulated alternative to bankruptcy. Meet with a licensed insolvency trustee or consumer proposal administrator to discuss your options – the initial meeting is always free and you are under no obligation.