In Ontario, consumer proposals are a type of debt relief available to individuals who cannot pay their debts as they become due. This process can be initiated by the individual or by a creditor. If you are considering filing a consumer proposal in Ontario, there are some things you should know first.
A Consumer Proposal is a legal proceeding filed under the Bankruptcy and Insolvency Act (BIA). In Ontario, only a Licensed Insolvency Trustee (LIT) can file a Consumer Proposal on behalf of an individual or sole proprietorship. The LIT will also be responsible for counseling the debtor throughout the process and negotiating with creditors to reach a settlement proposal that is acceptable to all parties involved.
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How to File a Consumer Proposal
If you're struggling with debt and don't see a way out, you may want to consider filing a consumer proposal. This legal process can help you get relief from your debts and start fresh. Here’s a complete guide in filing a consumer proposal in Ontario:
1. Contact A Licensed Insolvency Trustee For A Debt Assessment
To file a consumer proposal in Ontario, you'll need to contact a trustee. This is an individual or company that will help you through the process. The Trustee will discuss the details of your debt relief option and work with your creditors to come up with a payment plan that you can afford. You'll then make monthly payments to the Trustee, who will distribute the money among your creditors.
2. Determine The Offer And Payment Plan
Afer deciding to go ahead with filing a consumer proposal the trustee will collect information from you, regarding your income, assets, debts, and creditors. Your offer is based on your total debts, resources, and disposable income. Disposable income is the money you have left over each month after you've paid your essential expenses.
3. Prepare The Consumer Proposal Documents
The Trustee will take care of compiling all of the relevant information that will be needed to file a proposal. They will handle the important documents and paperwork containing information such as the amount the debtor proposed to repay, the duration of this repayment process which will be needed by creditors to assess a settlement acceptable to all parties involved.
4. File the proposal & creditor protection
A Licensed Insolvency Trustee will work with you to develop a proposal that is tailored to your specific financial situation. Once the proposal has been finalized, the Trustee will file it with the appropriate provincial regulator, and you will receive a formal document know as ‘stay of proceedings. This prevents your creditors from taking any legal action against you to collect on your debt. If you receive a wage garnishment order, the Trustee will work to make the order stop.
5. Creditors are notified
Licensed Insolvency Trustee (LIT) like Risman Zyzman Inc. will be responsible for informing your creditors of your proposal. In most cases, your LIT will send out an information package to each of your creditors advising them of the terms of your proposal and asking them to vote on whether or not to accept it. This package includes a copy of the proposal itself and a letter from the Licensed Insolvency Trustee, which explains how the proposal works and how each creditor can benefit from it. Creditors then have 45 days to vote on whether or not to accept the proposal.
6. Potential Meeting Of Creditors
Your creditors can request a meeting that should be held within 21 days after they are notified. If a meeting of creditors is called, it is very important to have legal representation. A Licensed Insolvency Trustee can provide representation and guidance during a potential meeting of creditors. The Trustee can ensure that your rights are protected and work to negotiate the best possible outcome for you. During a meeting of creditors, the Trustee will be able to answer any questions or concerns that creditors may have.
7. Creditors Vote On The Proposal
After you have filed your consumer proposal, the creditors will vote on it. If more than half of the creditors agree to the proposal, it will be accepted, and you will start making payments to your Trustee. If less than half of the creditors agree to the proposal, it will be rejected, and you will have to come up with a new plan to repay your debts. Your proposal is automatically accepted if a meeting isn’t called after the 45-day mark with your creditors. However, if a meeting was held, the creditors will assess your proposal and vote to accept or deny them.
8. Complete Your Proposal Terms
When your proposal is approved, it's important to complete all proposal terms. This includes making your monthly payments on time and abiding by the repayment schedule. If you don't follow the proposal terms, your bankruptcy trustee can cancel the agreement, and you'll be back where you started.
9. Obtain Your Certificate Of Full Performance
Once you’ve completed the payment, you’ll receive a Certificate of Full Performance from the Office of the Superintendent of Bankruptcy. This document is proof that you have completed your consumer proposal and fulfilled all of your obligations. Once you have received this certificate, you are officially debt-free! Congratulations!
10. Rebuild Your Credit History
If you complete the consumer proposal, you have all the possibilities to rebuild your credit score. However, your credit score may take some time to return to its pre-consumer proposal level. You can improve your credit score by following good financial habits, such as paying your bills on time and maintaining a good credit history.
What Is The Role Of Your Consumer Proposal Administrator?
A consumer proposal administrator is a professional who helps people with their debt. They work with you to develop a plan that allows you to repay your debt in a manageable way for you. In addition, they can help negotiate lower interest rates and payments and work with your creditors to try and get them to agree to the proposal. If you have any questions or concerns about your consumer proposal, your administrator is the best person to talk to.
- Assess your debt relief options
- Review if you are qualified for a consumer proposal
- Provide necessary information on how a consumer proposal works
- Develop the best payment plan for your unique case
- Prepare the necessary documents and paperwork
- File the proposal
- Negotiate with your creditors
If you have any questions about your consumer proposal or the role of your consumer proposal administrator, don't hesitate to get in touch with us at Risman Zysman Inc. today. We will gladly help you through this process.
Questions about the Consumer Proposal Process
Check out these frequently asked questions about consumer proposals in Ontario:
- What happens if a consumer proposal is rejected?
If a consumer proposal is rejected, the creditors may take legal action to recover what they are owed. This could include wage garnishment, asset seizure, and bankruptcy. In most cases, it is best to speak with a trustee or lawyer to understand your options and protect your rights.
If you are unable to pay your debts due to a rejected proposal, your credit rating will be ruined, and it will be very difficult to borrow money in the future. You may also have to file for bankruptcy if the legal actions taken by your creditors leave you with no other option.
- What if I stop making the payments and default on the performance of the proposal?
If you stop making the payments, or if you default on the performance of your consumer proposal, the Trustee may take steps to terminate the consumer proposal. This could lead to legal action being taken by your creditors. If this happens, you will likely have to go through bankruptcy proceedings. Speak with a Licensed Insolvency Trustee to learn more about the consequences of defaulting on a consumer proposal.
If you are experiencing financial difficulty and cannot make the payments on the performance of your consumer proposal, it is important to speak with your Trustee immediately so that arrangements can be made. It may be possible to revise the terms of your proposal or extend payment terms. Failing to make payments on a consumer proposal can have serious consequences, including bankruptcy.
Are you considering a consumer proposal in Ontario? Talk to our experts at Risman Zysman Inc!