Choosing the Consumer Proposal

Yes. It is possible to have a personal bank account even if you are in a consumer proposal. It is possible even if you have no job or money to deposit into your account.

If your income decreases while your proposal is in progress, there is no automatic change to your proposal. Indeed, the accepted proposal is a contract between your creditors and you. As a general principle, one must adhere to and respect this contract like any contract.

You may want to explore the possibility of filing a lowered proposal with your M. Roy & Associés advisor. If you are unable to reduce certain expenses in your monthly budget to continue making regular payments to your proposal. However, it is better to be careful. In such a case, the process starts all over again and your creditors may not accept this lowered proposal.

Another possibility would be to slightly reduce the monthly payments of your consumer proposal without reaching three (3) months of arrears. This period is the deadline within which your proposal will be considered canceled.

As an illustration, let us examine a situation where your monthly payments under the consumer proposal amount to $200. In this scenario, you could agree with your advisor to make payments of $100 per month for a few months. This arrangement allows you to make reduced payments until your financial situation improves.

In more serious cases, such as a long-term illness, personal bankruptcy may be the only alternative. Before reaching that point, all other options will have been considered. Do not hesitate to consult your advisor. He or she will evaluate your situation if a significant change in your financial situation occurs during your proposal.

For a proposal, the rating is R-9 during the proposal period and R-7 once you have been discharged. The registration remains on your credit report for 3 years from the date of discharge.

However, did you know that the R-9 rating is also recorded in the following circumstances?:

• Bad debts;
• Debts placed in collection;
• Moving without leaving a new address.

Depending on these circumstances, you may already have one or more R-9 ratings on your credit report. If this is the case, your credit history is already affected.

Second, a creditor extends new credit based on the following 4 criteria (all must be met):

1. A good credit rating (R-1 or R-2) for each debt;
2. A medium to high overall score;
3. A debt-to-income ratio of less than 40%;
4. Stable employment.

Even if you have a good credit rating, having debts may make it impossible to obtain new credit.

In these cases, getting out of debt through a proposal may help you get back on your feet faster. Remember, paying only the minimum payments in hopes of becoming debt-free one day will make the next step more challenging.

Furthermore, any negative mention remains on your credit report for 6 years, even if you have paid off your debts. This 6 year period starts from the date of the last mention by the creditor. Thus, let us analyze a situation where you take 7 years to pay off arrears of a debt. Here, your R-9 rating could affect your credit report for a total of 13 years (7 years to pay + 6 years).

Yes. Filing a consumer proposal protects you from foreclosure, with some exceptions (see below). The legalities of these issues can sometimes be complex. Our advisors have the experience and expertise to guide you through these issues. 

The main exceptions to foreclosure are:

• A secured creditor could undertake or pursue legal action if you are unable to honor the payments agreed in your contract. However, this action is limited to the repossession of the asset. The creditor cannot hold you responsible for any monetary loss resulting from the repossession.

As an example, consider a case where you stopped paying your mortgage or chose to return the keys to your car. You chose this course of action because the monthly payments were too high. In this case, the creditor can repossess the asset. However, they will not have the opportunity to pursue you for the loss they have suffered;

• A seizure for child support that you owe will not be suspended;
• If a creditor obtains permission from the court (after the filing of the consumer proposal), they can continue their legal action. This case only occurs very rarely and generally arises when it is a debt of a fraudulent nature.

You are not required to turn in your credit cards to the trustee when you file a consumer proposal. However, in some cases, a financial institution can (and almost always does) cancel your credit card. For example, if you have a balance owing on a credit card or with the financial institution that issued the card.

There is no obligation to disclose if you make a proposal. You also have the right to be a shareholder and director of an incorporated company, even if you are in the proposal process. This is actually one of the reasons why most business men and women opt for consumer proposals.

No. If you file a proposal, it is for all of your debts. The only exceptions are for secured debt. These are debts bound to an asset you wish to keep, such as your house or your car. However, nothing prevents you after completing your proposal, from repaying a creditor for a debt that you consider to be “moral”. 

Nevertheless, be careful not to compromise your financial stability.

No. The favorable vote of a simple majority of your creditors is sufficient to automatically bound them to it. The simple majority represents 50% plus one. Therefore, it is not necessary to convince all of them. 

However, if a majority of your creditors did not accept your proposal, your trustee could negotiate on your behalf. With your consent, your trustee can propose changes that would be suitable for all parties, by proposing a bonus, for example. The acceptance rate of consumer proposals is generally high.

If your ex-partner files for a consumer proposal, it does not release them from the obligation to continue paying you spousal support and any arrears owed.

No. Neither a consumer proposal nor bankruptcy allows you to be released from debts related to spousal support.

No. Neither a consumer proposal nor bankruptcy allows you to be released from debts related to spousal support.

Student loans are not dischargeable by a consumer proposal if the end of your studies for which the loans were taken out is less than 7 years before the filing of your proposal. The end of your studies is considered by the Ministry to be the date on which the educational institution certifies that you have stopped studying for the last time.

For example, you file for a consumer proposal less than 7 years after the end of your studies. In this case, your trustee could include a clause in the proposal. This close could state that the vote in favour of the proposal by the creditor releases you from your student debts. Do not hesitate to ask M. Roy & Associés about how consumer proposal affects student loans.

Your file is confidential and unique. Whether you are a common-law partner or married, there is no impact on your loved ones. However, if someone has guaranteed some of your debts, your consumer proposal will have an impact on that person. 

Your proposal will not relieve the person who guaranteed your debt from paying it. The guarantor will be responsible for paying off the entire balance of the debt.

In other words, each person has their own credit report, their own assets, their own debts (unless they are joint debts). This is the reason why one person’s consumer proposal doesn’t show up on the other person’s file.

We also recommend separating purchases between spouses as much as possible. This way, the other is not prejudiced in the event of financial problems. Also, it is preferable that spouses have individual credit cards and bank accounts.

Furthermore, consider that you have incurred debts with your spouse (joint credit card) or if your spouse has endorsed your loan. In this situation, your proposal means that you no longer have to pay this debt. However, your spouse remains responsible for the debt and will have to repay it in full.

To avoid the debt being immediately repayable, we recommend that the spouse inform the creditor of your proposal. This can help ensure they will be able to continue to benefit from monthly payment terms. For example, if you co-own a house or car, your spouse will remain the owner of their share. The trustee cannot force its sale.

Yes, the proposal is the ideal option if you wish to keep all your assets. During the first meeting, the advisor will do a budget with you to validate if your monthly income allows you to keep your assets. 

The consumer proposal allows you to free up funds from your budget. However, it is important to take a look at all your expenses to maintain a balanced budget in the long term. An expensive vehicle that does not fit into your monthly budget could be turned over to the creditor. This would balance your budget and clear the debt under the proposal.

If you have an expensive vehicle that does not fit into your monthly budget, it would be appropriate to turn it over to the creditor. This would balance your budget and clear the debt under the proposal.

For a proposal to be interesting, the amount you offer to your creditors must take into account the net value of your assets and your income. Therefore, the higher the value of your assets, the more attractive your offer will be to your creditors. A licensed insolvency trustee can advise and guide you through this process.

No, the money you receive from child support will never be seized.

The purpose of the bankruptcy and insolvency act is to help you with your financial rehabilitation. Yes, but some debts with a “moral” component are excluded. The following debts are excluded:

• Fines and penalties imposed by a court (e.g. traffic tickets);
• Legal compensation for intentional physical injury (e.g., injuries caused as a result of a fight);
• A debt or obligation for child support;
• Any debt or obligation resulting from fraud, embezzlement or breach of trust while acting as a fiduciary (e.g. theft);
• A debt resulting from obtaining goods or services by false representations (e.g. if you obtained credit based on a false statement);
• A student loan if you file a proposal before seven (7) years after the end of your last studies (however, the court may release you upon request if you meet the criteria);
• A dividend to which a creditor would have been entitled if not notified of the proposal;
• Interest due on any of the above amounts.