Consumer Proposal Ontario

Consumer Proposal Ontario

If you’re financially distressed, you may considered a number of options to deal with your debt including a debt consolidation loan or credit counselling. You may have even considered filing for personal bankruptcy.

A debt consolidation loan may seem like a good idea, however, you may not qualify for a loan if you have a low credit score.

If debt consolidation loan isn’t viable, you can consult with an accredited credit counsellor who will put you on a Debt Management Plan (DMP). A DMP will allow you to pay off your debts over a longer period of time – usually 60 months. The counselor may also be able to negotiate a reduction in the interest rate. Despite all these positives, a DMP will have a negative impact on your credit. Moreover, if you’re unable to pay off all your debts over a 60 month period, this won’t be a viable solution for you.

Filing for personal bankruptcy also has some major disadvantages:

    • Upon filing bankruptcy, a record of your bankruptcy will stay on your credit report for 7 years.
    • With certain exceptions, your assets become the property of the bankruptcy estate. This becomes a particularly important issue if you own a home with substantial equity.
    • Although attitudes are changing, there is still a stigma attached to the concept of filing for personal bankruptcy.

Given the above points, it would be prudent to consider another alternative to deal with your debts. The best alternative is called a “consumer proposal” to creditors.

How a Consumer Proposal Works

A consumer proposal is a formal repayment plan governed by the Bankruptcy and Insolvency Act. Assuming your debts do not exceed $250,000 (this threshold excludes debts secured by a residential property), the steps in filing a proposal in Ontario are as follows:

  • You would seek the assistance of a Licensed Insolvency Trustee who will assess your eligibility to file a consumer proposal by reviewing the following factors:
    • Your income and your contribution to the income of your household.
    • The amount of debt you owe.
    • Your assets.
    • Whether you’ve previously been bankrupt.
  • The Trustee will work with you in drafting a consumer proposal to your creditors.
  • The proposal is then filed with the Office of the Superintendent of Bankruptcy (a division of the federal government that monitors insolvency proceedings in Canada). Upon filing the proposal with the OSB, your creditors are legally stopped from taking any action against you.
  • The proposal is sent to your creditors for their review. A document called a voting letter, which allows a creditor to indicate its vote, is also sent. Creditors are required to file with the Trustee a proof of claim and completed voting letter before their claim can be registered for voting on the proposal.
  • At the end of the 45-day period after the proposal was filed with the OSB, the Trustee will compile and review the voting letters received. There are 3 possible scenarios:
    • If no voting letters were received, the creditors are “deemed” to have accepted the proposal.
    • If those creditors voting “no” comprise less than 25% of the value of claims filed, the creditors are deemed to have accepted the consumer proposal.
    • If those creditors voting “no” comprise more than 25 percent of the value of claims filed, the Trustee is required to hold a meeting of creditors. Creditors will usually vote “no” because they want more money. Therefore, a meeting of creditors would be held to discuss what the debtor would have to offer in a consumer proposal before it would be accepted by the dissenting creditor(s).
  • Once your creditors have accepted your proposal, there is a 15-day waiting period that allows any interested parties (e.g., creditors, the Trustee, or the OSB) to request that the Bankruptcy Court review the . Once that 15-day period expires, the is deemed to be accepted by court.
  • If your proposal is not approved by the creditors and the court, you’d essentially in the same position he was prior to filing – at the mercy of your creditors. In that event, you may want to consider filing for bankruptcy.

Consumer Proposal Ontario FAQs: Answers to Frequently Asked Questions

  1. How much does a consumer proposal cost?
  2. Will a consumer proposal affect my credit?
  3. Who can file a consumer proposal?
  4. Can a consumer proposal be rejected?
  5. Why would a consumer proposal be rejected?
  6. Will a consumer proposal affect my employment?
  7. Will a consumer proposal affect my spouse?
  8. Will a consumer proposal affect my mortgage?
  9. Will a consumer proposal affect my sponsorship?
  10. How can I rebuild credit after a consumer proposal?

1. How much does a consumer proposal cost?

We shall calculate your consumer proposal payments based on the following factors: (1) the income of your household and your contribution to it; (2) your assets; (3) the amount of debt you owe; and (4) whether you’ve previously filed for bankruptcy.

Our fees are paid out of your consumer proposal payments according to a tariff under the Bankruptcy and Insolvency Act. To be more specific – you do not pay a separate fee for our services – your proposal payments include our fees as well as the settlement payment to your creditors.

Also, at Fong and Partners Inc., the only up front cost you’ll pay to start the consumer proposal process is a $100 filing fee. You needn’t pay anything else until your consumer proposal is approved.

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2. Will a consumer proposal affect my credit?

A consumer proposal will affect your credit. A record of your consumer proposal will be on your credit file from the day you file your proposal until it’s paid in full and a further 3 years thereafter. For example, if you file your consumer proposal on November 2019 and it’s paid in full by November 2022, a record of your proposal stays on your credit file until November 2025. The more quickly you pay off your proposal, the more quickly you can rebuild your credit.

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3. Who can file a consumer proposal?

Any person who is unable to pay her debts as they become due can file a consumer proposal so long as the total debts do not exceed $250,000. This $250,000 threshold excludes debts secured on a principal residence (e.g., mortgage or home equity line of credit).

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4. Can a consumer proposal be rejected?

Yes, a consumer proposal can be rejected by creditors. A consumer proposal will be rejected by creditors if those creditors holding the majority of dollars owed vote against the proposal at a meeting of creditors. However, what often happens is that rather than outright rejecting a proposal, creditors will make a counteroffer to you (i.e., they’ll ask for more money). If you agree to accept the creditors’ counter, an amended consumer proposal will be tabled at the meeting of creditors and it will be accepted at that meeting. On the other hand, if both you and the creditors cannot come to an agreement of terms, the proposal will be rejected at the meeting of creditors. If that happens, you can always file another consumer proposal that provides more favourable terms to the creditors. Or alternatively, you can file for personal bankruptcy.

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5. Why would a consumer proposal be rejected?

Aside from requesting more money from your consumer proposal (as described in Point 4), another reason why a consumer proposal might be rejected by your creditors is that they found evidence of questionable conduct with respect to your financial affairs

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6. Will a consumer proposal affect my employment?

Generally speaking, it will not. The Bankruptcy & Insolvency Act, which is the law that governs consumer proposals, states that “no employer shall dismiss, suspend, lay off or otherwise discipline a consumer debtor on the sole ground that a consumer proposal has been filed in respect of that consumer debtor.”

With that being said, if you happen to be a licensed professional, you should inquire with your licensing body if filing a consumer proposal would affect your ability to be licensed.

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7. Will a consumer proposal affect my spouse?

It will not. However, if your spouse co-signed your debts, the completion of your proposal won’t release your spouse’s liability if he or she was a co-signer or guarantor of your debts.

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8. Will a consumer proposal affect my mortgage?

The answer is “no” – so long as your payments are being made on time, a consumer proposal will not affect your mortgage. The Bankruptcy & Insolvency Act states that “no person may terminate or amend any agreement, including a security agreement, with the consumer debtor, or claim an accelerated payment, or the forfeiture of the term, under any agreement, including a security agreement, with the consumer debtor, by reason only that the consumer debtor is insolvent or a consumer proposal has been filed in respect of the consumer debtor“.

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9. Will a consumer proposal affect my sponsorship?

The answer is no. Your ability to sponsor is only affected if you are an undischarged bankrupt. A consumer proposal is not a bankruptcy.

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10. How can I rebuild credit after a consumer proposal?

You can start rebuilding credit as soon as your consumer proposal is approved by your creditors. The easiest way to do so is by obtaining a secured credit card.

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Contact us!

If you have any questions about consumer proposals or you are thinking about it as an option to resolve your financial difficulties, please contact us at:

Phone: (416) 260-3264

Email: help@startingovertoronto.com

We can meet with you for a FREE, no obligation consultation at one our offices in Toronto, Scarborough, Don Mills, Mississauga or Brampton.