Consumer Proposal and Other Debt Solutions

A consumer proposal administrator at one of our offices will assist you in putting the proposal together. Upon receipt of your proposal, your creditors have 45 days to accept the proposal as filed or request a meeting of creditors to vote on the proposal. If a simple majority (50.1%) of your creditors in dollar value who have proven their claim by the end of the 45 day period accept the proposal, all of your unsecured creditors are bound by the terms of the consumer proposal.

According to the Bankruptcy and Insolvency Act, a person with $1,000 in debts can declare bankruptcy if they are unable to pay their debts on time. In practice, when someone has less than $5,000 in debts other solutions may be considered such as a proposal to creditors.

To be eligible for a consumer proposal your unsecured debts must not exceed $250,000, excluding your mortgage. Further, you must also be able to prove to your creditors that you can reasonably meet the terms you are presenting to them which the administrator of the proposal will assist in demonstrating.

For a consumer proposal to be acceptable to your creditors, it must generally give the creditors a greater return or repayment of their outstanding accounts than they would receive in a bankruptcy.

The co-signer is still responsible for the original terms of the loan. The co-signor’s obligation will be reduced by the amount of any dividend received by the creditor from the consumer proposal. If the co-signor pays the debt which they guaranteed then the co-signor assumes the status of the creditor in your proposal after proving to the administrator of the consumer proposal that the debt had been paid.

Most debts, but not all are discharged through the filing and completion of a consumer proposal.

• Examples of debts not discharged are:
• Secured debts (e.g. Mortgage or car loan);
• Child support, maintenance, alimony
• Court fines, penalties and traffic offences
• Debts obtained by fraud or fraudulent misrepresentation
• Student loans, if less than seven years since leaving university or college
• Civil claims arising from personal or sexual assault

What is a secured creditor?

A secured creditor is a lender to whom you have pledged one of your assets as collateral to obtain a loan or mortgage. For example, when you purchase a home, it is used as collateral for the mortgage. Or if you obtain a loan, the vehicle you own may be taken as collateral against the loan.

Quite often, when you obtain a loan directly from a secondary lender (high risk) such as Citifinancial or Easy Financial they will grant the loan but also take collateral on a vehicle, if you have one, and your household furnishings.

Generally, secured creditors are excluded from a consumer proposal and if you wish to retain the collateral for the loan they provided then you will continue to make payments according to the original terms of the loan. Other terms may be offered in a consumer proposal but the secured creditor is not obliged to accept the terms offered if they are prepared to recover the collateral for the loan.

One word of caution: If you decide to retain financed assets and then decide later, after filing the consumer proposal, that you would like to return the asset, the creditor may have to be repaid all amounts due. Finally, no debtor should make arrangements to reaffirm a loan and retain an asset until the secured creditor has filed a claim with the Administrator of the consumer proposal and the security is valid. If you are unsure whether a creditor has collateral against your assets you can do a Personal Property Registry search (available online) or contact our office for assistance.

Bankruptcy and consumer proposals are two ways of stopping seizure proceedings. Contact us to discuss the specifics and for advice.