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Filing a consumer proposal in Ontario

Posted on 30 November 2021

Written by Graeme Hamilton

If you have discovered this article, you may well be considering filing a consumer proposal in Ontario. You are certainly not alone – in Q1 2021, a whopping 6,133 consumer proposals were filed in Ontario. Consumer proposals are an increasingly popular form of debt relief for Canadians. A popular bankruptcy alternative, many individuals are choosing to file a consumer proposal as a result of a rising number of insolvencies. Growing debt problems are little surprise across Ontario, with a rising cost of living in already expensive cities like Toronto and Ottawa. This is compounded by easily accessible credit like payday loans and credit card debt. This means Canadians owe more now than they ever have, without necessarily having a plan for repayment in place. So, why are so many people filing a consumer proposal in Ontario?

What is a consumer proposal in Ontario?

If you are considering filing a consumer proposal in Ontario, you may already be familiar with what a consumer proposal is. Simply put, a consumer proposal is a legal form of debt relief. It is a debt repayment pathway that reduces your overall unsecured debt by up to 80%. A popular bankruptcy alternative, it is the process of proposing an affordable and manageable monthly repayment figure to your creditors. In Canada, you need to file a consumer proposal through a Licensed Insolvency Trustee. They will negotiate with your creditors on your behalf to get a reduction on your debt. Once agreed, you simply make one affordable monthly interest-free payment for a fixed period of time. This is usually up to five years. Often, creditors are inclined to accept your consumer proposal as it will likely give them back more repayment than a bankruptcy ever would. As well as hugely reducing your overall debt, there are a number of other advantages of filing a consumer proposal in Ontario over other forms of debt relief.

What are the advantages of filing a consumer proposal in Ontario?

There are many advantages of filing a consumer proposal in Ontario. Key benefits include:

  • A legally backed form of debt relief that reduces your overall unsecured debt by up to 80%
  • Allows you to avoid bankruptcy – learn more about filing a consumer proposal vs bankruptcy
  • The ability to keep your assets, unlike bankruptcy where you are required to surrender any non-exempt assets
  • Just one affordable monthly payment
  • Guaranteed unsecured debt relief after a maximum of five years
  • Any interest or penalties are frozen
  • Protection from creditors including collection calls and wage garnishment via a stay of proceedings
  • Avoids any surplus income, which comparatively must be paid back via bankruptcy

Despite the many benefits of filing a consumer proposal, there are some disadvantages which should be considered before filing. Learn more about filing a consumer proposal vs bankruptcy.

How do you file a consumer proposal in Ontario?

Now you are interested, you may be wondering how to file a consumer proposal in Ontario. There are a number of simple steps to follow in order to do so:

Find a Licensed Insolvency Trustee

As a consumer proposal is a legal form of debt relief, it must be filed by a Licensed Insolvency Trustee. They are the only professionals in Canada legally able to file consumer proposals in Ontario. At Spergel, we have offices throughout Ontario for you to choose from.

Undergo a debt assessment

At Spergel, a debt assessment is carried out for free by one of our experienced Licensed Insolvency Trustees. During this meeting, they will work with you to fully understand your financial situation and to determine if filing a consumer proposal is the best form of debt relief for you, or if an alternative may be better.

Work to propose an offer

If you and your Licensed Insolvency Trustee agree that a consumer proposal in Ontario is the best form of debt relief for you, the next step is to work together to determine what to offer your creditors. Your trustee will work with you to establish what you can realistically – and manageably – afford to repay each month.

Prepare the consumer proposal

Your Licensed Insolvency Trustee will arrange all of the necessary paperwork for your consumer proposal to be shared with your creditors. This includes full details of your proposed repayment plan, your current financial situation, the length of the consumer proposal, and so on.

Filing a consumer proposal in Ontario

The next step is for your Licensed Insolvency Trustee to file your consumer proposal in Ontario. Often this is done online, and you will immediately receive a stay of proceedings. This offers you protection from your creditors, stops wage garnishments, and means you no longer need to make debt payments.

Notifying your creditors

Next, your Licensed Insolvency Trustee will inform all of your creditors of your proposal, and share a copy with each of them. If they try to contact you, you can simply redirect them to your trustee and let them know that you are filing a consumer proposal. Your creditors then have 45 days to review your consumer proposal, or request a creditors meeting. If creditors owed 25% of your debts ask for a meeting, one must be held within three weeks.

Creditors meeting

A meeting of creditors may or may not take place, depending on the decision of your creditors. It is an opportunity for your creditors to discuss your consumer proposal, challenge it, and ask questions. Your creditors will vote to either accept or reject your consumer proposal, or indeed suggest a new offer. You do not need to panic – your Licensed Insolvency Trustee will be with you in the meeting to try and negotiate an offer that works well for you and your creditors.

Voting on your consumer proposal

If no creditors’ meeting is requested before 45 days, your consumer proposal is considered accepted. If there is a meeting of creditors, they will vote during the meeting. Should a majority of the value of your debts vote in favour of the proposal, it is accepted and binding on all creditors, including any who voted no.

Complete your consumer proposal

Once your consumer proposal is accepted, all you need to do is make your agreed monthly payments. Part of the obligation of filing a consumer proposal is also needing to attend two credit counselling sessions. Once you have completed your payments, you will receive a Certificate of Full Performance. This will share the terms of the consumer proposal and you will be cleared of any remaining unsecured debts that were filed.

Enjoy life after consumer proposal in Ontario

Now, you are free to begin a fresh financial future, free from any unsecured debt you originally filed, including credit card debt, payday loans, and so on. It is now that you can begin to rebuild your credit score and even begin some savings now that there are no longer any debt repayments to make.

If you are interested in filing a consumer proposal in Ontario, book a free consultation with Spergel. Our reputable Licensed Insolvency Trustees will review your financial situation and create a personalized consumer proposal that works for you. We will also help to protect you from your creditors, stop any wage garnishments, and get you on the path to a fresh financial future.

Graeme Hamilton

Graeme Hamilton is a Chartered Insolvency and Restructuring Professional with over 10 years’ experience as an LIT (Licensed Insolvency Trustee). He is also Spergel's resident expert on bankruptcy and debt relief in the Ontario region. Prior to establishing his career in the insolvency industry, Graeme lived in Cambodia doing volunteer work with NGO's.

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