For many people, a consumer proposal as a solution to financial difficulties is preferable to declaring bankruptcy because it causes a little less damage to their credit scores and/or lets them keep their assets. It also lets people honor their debts by repaying them over time, but has the added benefit of generally requiring them to repay only a small percentage of what they actually owe.
You can file a consumer proposal that includes all your unsecured debts through a trustee. From the date your proposal is filed, you stop making payments on your debts directly to your creditors, and any actions in effect against you such as a garnishee of wages or a lawsuit also stop.
From the date of filing with the Office of the Superintendent of Bankruptcy (OSB), your creditors have 45 days to respond. If a majority of your creditors by dollar amount accept the terms (i.e. 50% of your debt, plus $1), the proposal is accepted and all creditors must abide by its terms.
If creditors totaling at least 25% of your debt request one, a meeting of creditors may be held within 21 days of filing. A Trustee office can also call a meeting if desired. Your creditors will then vote at the meeting. If a quorum of creditors fail to show, the proposal is accepted.
Most reasonable consumer proposals don’t require a meeting of creditors. Although it usually means only some part of the total debt will be repaid, creditors know that if they don’t accept a proposal, it could drive the debtor to bankruptcy, in which case they get nothing.
If your proposal is approved, you will then make agreed-upon payments through your trustee to your creditors over a period not longer than five years.
If you think you may be headed for financial trouble, talk to a qualified credit counsellor about your options as soon as possible. The sooner you act, the sooner you can put those troubles behind you.