How to file a consumer proposal in Canada
In Canada, a consumer proposal is a legally backed form of debt settlement, where a manageable monthly payment is negotiated with creditors. The only professionals who are licensed by the Canadian government and able to file consumer proposals are Licensed Insolvency Trustees.
At Spergel, our experienced Licensed Insolvency Trustees offer a free consultation to review your personal financial circumstances and offer advice on the best pathway for you to take.
How to find a Licensed Insolvency Trustee
The first step in filing a consumer proposal in Ontario is to find a reputable Licensed Insolvency Trustee. Their role is to work with you to review your financial circumstances and to look at your debt relief options, from debt consolidation to bankruptcy. They will determine if you are eligible for a consumer proposal, and will explain to you what a consumer proposal is and exactly how it works. If eligible, they will collaborate with you to agree on an affordable repayment plan on your outstanding debts. They will then negotiate with creditors on your behalf to reduce your debt, and file your consumer proposal with the government. Spergel’s team of Licensed Insolvency Trustees has helped over 100,000 Canadians become debt free – unlike other firms, you will receive your own dedicated trustee to walk you through each step of filing a consumer proposal.
How to file a consumer proposal in Ontario
There are some key steps in filing a consumer proposal. Here is how to file a consumer proposal in Ontario:
Book a free consultation with a Licensed Insolvency Trustee
This session is a complimentary debt assessment with an experienced trustee. They will be able to review your financial circumstances, explore your debt relief options, and advise as to whether or not filing a consumer proposal is right for you.
Discuss your repayment plan
With your Licensed Insolvency Trustee, you will discuss your income, assets, and debts. Based on this information, together you will agree on how much to offer your creditors and what would constitute an affordable monthly repayment plan.
Filing your consumer proposal
Your trustee will take care of the administration of the relevant paperwork to go across to your creditors, including your proposed repayments and the payback period. These documents are then filed electronically with the government, and a stay of proceedings is put in place. Put simply, this means you no longer need to pay your unsecured debts, and you are protected from creditors contacting you or pursuing lawsuits against you.
Your creditors are contacted
At this stage, your trustee will share your consumer proposal with all creditors listed. Each creditor is given 45 days to review your proposal and to ask for a creditors meeting to discuss your proposal in further detail if required. They are still unable to contact you directly.
Creditors make a decision
Creditors may ask for a meeting to ask questions if they are owed a minimum of 25% of your debts within 21 days of their request. They will decide to accept or reject your proposal, and can suggest a new offer. Your trustee will be there to support you and negotiate a deal that works for both you and your creditors. If no meeting is requested, your consumer proposal is considered accepted.
Your proposal is agreed
Once your consumer proposal has been accepted, the rest is simple – you must make your monthly payments as agreed. The only other obligation of filing a consumer proposal is that you will need to attend two credit counselling sessions to learn more about debt management.
Start a fresh financial future
When your payments have been completed, you will receive a Certificate of Full Performance to reflect that the terms of your consumer proposal have been met. You will also receive clearance of any remaining debts owed from the proposal. Now, free from overwhelming debt, you will be able to begin saving money and rebuilding your credit as part of a fresh financial start.
How much does a consumer proposal cost in Ontario?
As a consumer proposal is a negotiated debt settlement, in most scenarios you will have a huge reduction in debt – typically saving up to 80%. The cost of a consumer proposal depends on your unique circumstances. Naturally, it must mean a middle ground between affordable payments for you, and an amount that the creditor accepts is more than they would receive should you file bankruptcy instead. Your dedicated Licensed Insolvency Trustee will work with you to determine the true cost of a consumer proposal. It is dependent on your income, any assets you have, and who your creditors are and what they expect. The cost of filing a consumer proposal is set by legislation, and is included in your single manageable monthly payment. Use our debt calculator to see what your repayments could look like when filing a consumer proposal.
What happens if you miss payments and default on a consumer proposal in Ontario?
If for any reason your financial situation changes, you are able to defer two payments on your consumer proposal (which you must make up before the end of your proposal). After this, on the date a third late monthly payment occurs, your consumer proposal will fail. At this point, your full debts will return and your creditors are entitled to pursue action against you. This is why it is so important to ensure you work with your Licensed Insolvency Trustee to ensure your monthly payments are affordable and manageable. If you feel you may have to miss a payment, your trustee can help you to negotiate your payment terms with your creditors to something more suitable. You also have the option of filing bankruptcy.
What happens if a consumer proposal is rejected?
At Spergel, your Licensed Insolvency Trustee is there to support you through the entire process of filing a consumer proposal. Should your consumer proposal be rejected by your creditors, your trustee will be able to contact them to see if there is any room for negotiation. In most scenarios, increasing your monthly payments slightly is enough for your creditors to accept your proposal. An alternative option is to file bankruptcy instead. Ultimately, creditors would always rather receive a greater payment from a consumer proposal than should you file bankruptcy.
Eli’s Path to Debt Freedom
After cashing out an RRSP to pay for his wedding. Eli received an unexpected tax bill. With his other debts he could not afford to pay and eventually the debt grew. CRA decided to initiate a wage garnishment. We helped Eli avoid bankruptcy with a Consumer Proposal. Debt consolidation saved Eli’s pay cheque and his Consumer Proposal taught him to plan for unexpected expenses in the future.