What is a Consumer Proposal?

An insight into the Consumer Proposal Process in Toronto

A consumer proposal is a legally binding contract that alters your repayment terms. Consumer Proposal enables you to negotiate your debt with creditors, extend the timeframe you must pay off your debt, or lower the interest payments. According to Government regulations, Licensed Insolvency Trustees are the only persons allowed to create Consumer Proposals for security reasons.

Consumer Proposal Process

Understanding the consumer proposal process in Toronto

The process for a consumer proposal in Toronto and across Ontario involves the below steps:- 

• The Licensed Insolvency Trustee files the proposal with the Office of the Superintendent of Bankruptcy (OSB).
• After you file the proposal, you stop paying your creditors.

Your actions get suspended if you have garnished wages or pending lawsuits. The Licensed Insolvency Trustee submits the proposal to the creditors. This report contains your current situation and the causes of the financial hardship. 

Meeting of Creditors

A meeting is instantly arranged without hesitation whenever one or more creditors owe more than 25% of the total proven claims. Creditors have up to 45 days to either accept or reject the proposal or, if a conference of creditors is held, before or during the meeting. The Superintendent of Bankruptcy can also request the Licensed Insolvency Trustee to call a session within those 45 days. Upon being called, the creditors’ meeting is within 21 days. At the meeting, the creditors vote to accept or reject the proposal. Regardless of any objections, the proposal is automatically approved if no meeting is summoned.

Votes

Consumers vote on whether to accept or reject the proposal in the meeting. Here are the steps:- 

• A creditor’s acceptance or rejection counts as a vote.
• A simple majority (over 50%) decides the final call. The number of votes should be the same as the proven claims’ total value. For example, if the proven claims total $150,000 and the votes represent $75,001 of the shares, the simple majority governs the final call. All unsecured creditors must accept that vote.
• If there is no quorum of creditors present, the proposal is accepted automatically.

If the proposal is accepted, any interested party has 15 days to ask the Licensed Insolvency Trustee at Toronto for a review by the court. The court approves the proposal if there is no request. 

Acceptance of a Consumer Proposal

If the consumer proposal is accepted in Toronto, you:

• Are liable for paying the LIT either a lump sum or periodic payments. 
• Will be required to conform to any other conditions in the proposal.
• Retain all properties and investments as long as you continue payments.
• Must attend two financial accounting sessions.

Rejection of a Consumer Proposal

If the consumer proposal is rejected in Toronto, you:

• Make changes and resubmit during the creditor consideration period or at the creditor’s meeting
• Think about other alternate options
• Declare bankruptcy

Meeting the Conditions

You would be legally discharged from the debts listed upon meeting all conditions in the proposal. There are occasions in which you can revive a proposal if it is canceled. If you miss three payments, or if they are above three months past due, the proposal gets withdrawn automatically. Your creditors are free to take action to collect the money they are owed, including accrued interest, unless the court ordered otherwise or the consumer proposal has been amended.

If you have questions or concerns, our staff at Toronto Insolvency Trustee, Dana MacRae, is here to support you. We help you make the best decision regarding your financial straits. Call today (647) 812-6405 to learn more about our services and find your financial solution.

Bankruptcy is not your only option

Bankruptcy is not the only solution when you face financial struggles. Canada offers several options; one among them is the Consumer Proposal. However, that is not the only alternative.

To determine the best course of action, you should arrange an appointment with one of our accredited debt counselors. You can handle this over the phone, via video conference, or in person.

It is free, and you are under no obligation to proceed. All our meetings are confidential, and we in no way judge your actions.