Consumer Proposal: A Solution Made for Whom?

Financial problems are no easy matter. Nevertheless, it’s possible to put your finances in order with the help of professionals in the field. Among the many solutions available to overcome debt is the consumer proposal.

A consumer proposal is a legal and regulated process in Canada. Filing a proposal enables an over-indebted individual (the debtor) to negotiate an arrangement with his or her creditors. The goal is to avoid personal bankruptcy and offer an accessible debt settlement solution.

A Solution for Individual

The consumer proposal is available to individuals or consumers living in Canada who are in a situation of over-indebtedness. It is not intended for businesses. However, certain conditions must be met to qualify for this solution. Here are the main requirements to take into account:

1. The Amount of Debts

To be eligible, the total amount of your unsecured debt must be between $1,000 and $250,000. Unsecured debts are debts that are not tied to specific assets, such as a mortgage. Asset-related debts cannot be included in your debt calculation, as your lender is a secured creditor. This limit is set under Canada’s Bankruptcy and Insolvency Act.

2. The Inability to Pay

You must demonstrate that you are unable to repay your debts within a reasonable period of time. Your financial situation must reflect a genuine difficulty in meeting your payment obligations.

3. Good Intentions

You must also be able to demonstrate that you are acting in good faith toward your creditor. Similarly, you must demonstrate that you are willing to honor your obligations to them to the best of your ability.

4. Canadian Resident

You must reside or own property in Canada to be eligible for a consumer proposal.

5. Payment Capacity

You must have a sufficient income to make regular payments in accordance with the consumer proposal plan you are proposing. If you do not currently have sufficient income, you will need to demonstrate that you will eventually be able to generate the appropriate revenue in the weeks or months following the deposition. A family member or a friend can also commit to making the monthly payment on your behalf.

It’s important to note that each situation is different. That’s why we strongly recommend consulting a licensed insolvency trustee (LIT). These professionals will be able to assess your eligibility and give you personalized advice based on your financial situation.

Your trustee can help you determine whether a consumer proposal is the best option for you. If not, he or she will guide you toward other solutions that might better meet your needs.

Can Only a Licensed Insolvency Trustee Help You Make a Consumer Proposal?

Licensed insolvency trustees are professionals who specialize in insolvency. They are trained to guide you through the process of preparing a consumer proposal and submitting it to your creditors.

Here are the general steps for making a consumer proposal:

1. Find a Licensed Insolvency Trustee

Find a trustee in your area and book an appointment to discuss your financial situation. At M. Roy Associés, your first meeting with one of our advisors is free and confidential. You can benefit from the advice of our professionals in person at one of our offices, by telephone or by videoconference.

2. Assessment of Your Financial Situation

When you meet with your trustee, you’ll be asked to provide full details of your debts, income, expenses and assets. This will enable the trustee to understand your situation and determine whether a consumer proposal is appropriate for you.

3. Preparation of the Consumer Proposal

If your trustee feels that a consumer proposal is the appropriate option, he or she will help you prepare a detailed proposal. This proposal will include a repayment plan over a fixed period that suits both you and your creditors. In general, the repayment period can extend up to five years.

4. Approval From the Creditors

Once everything has been prepared, your trustee files the consumer proposal with the Office of the Superintendent of Bankruptcy (OSB). He or she will then submit the proposal to your creditors for approval. Creditors have 45 days to accept the proposal or request a meeting to discuss it with the creditors’ assembly. To be accepted, the proposal must be approved by a majority of your creditors (50% +1 of dollar amounts).

5. Implementation of the Proposal

If the proposal is accepted, you will have to comply with the repayment plan and monthly payments set out in the consumer proposal. The trustee will collect the payments from you and distribute them to the creditors in accordance with the plan.

6. Completion

The proposal ends when you have complied with all its conditions and all payments have been made. You will then be released from your debts covered by the proposal.

It’s important to note that the consumer proposal process can vary depending on a number of factors. Among these are your personal situation and the current laws in force, both of which can play a determining role. It is therefore strongly recommended to consult a professional specialized in insolvency for personalized and precise advice.

It’s essential to get the right advice before making important decisions about your debts and financial situation. It will help you make an informed decision. The professionals at M. Roy Associés can help you regain your peace of mind and get out of over-indebtedness. Talk to them today to start living a life free of financial constraints.