For many people who find themselves insolvent (unable to repay their debts), a consumer proposal provides a workable solution without necessitating filing for bankruptcy.
In Ontario, anyone who is insolvent and owes between $1,000 and $250,000 (not including a mortgage) is eligible to file a consumer proposal. Essentially, a consumer proposal is an offer you make to your creditors to modify your payments, made through an administrator appointed by the Office of the Superintendent of Bankrupcy (OSB) to administer consumer proposals. You propose to either make a lower regular payment or to repay a percentage of what you owe, to be completed within five years.
A consumer proposal is a legally binding agreement that prevents your unsecured creditors from taking any further legal action to recover the amount you owe, such as seizing property or garnisheeing wages.
Your administrator will meet with you about your financial situation, and help you decide on the details of your proposal; he or she will then file the proper documents with the OSB. Within 10 days, the administrator will also send the OSB a report a report listing your assets, debts, and creditors, and their professional opinion on the fairness of the proposal and your ability to meet its terms.
The proposal and the report are also sent to each of your creditors for review. Your creditors have 45 days to accept or reject the terms of your proposal. Non-response is considered an acceptance. A creditor may reject your proposal in writing to your administrator or at a meeting of your creditors, which is not mandatory but may be requested by the OSB. Any creditor who is owed 25% or more of your debt can also request a meeting.
A majority of your creditors (by amount owed) must accept the proposal to proceed, and it must then be approved by the court, at which time it becomes binding. The court may reject the proposal if they decide the terms are unfair, but if no request for review is made by the OSB within 15 days of acceptance by your creditors, it is considered approved. It can still be annulled if you fail to comply with the terms of your proposal, which also allows your creditors to renew their efforts to recover the full amount of your debt.
To learn more about the terms of a consumer proposal, and what your obligations are likely to be, contact a professional at GTA Credit Solutions today.