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Consumer Proposal Frequently Asked Questions & Answers
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Consumer Proposal FAQs
Why do I want to file a formal Consumer Proposal where I could just enter into a payment plan myself with my creditors?
If you have the financial means to pay your creditors under a plan that works for you and your creditors, then that is always the best solution. However, many debtors find that they simply cannot get the creditors to agree to a repayment plan and the harassing phone calls and letters continue. Under a Consumer Proposal, once excepted, it is binding on all creditors and thus you don’t have the problem of one hold out creditor refusing to take partial payments or harassing you at home or work with phone calls.
Who will look after my Consumer Proposal?
A Trustee in Bankruptcy will oversee or “administer” will your Consumer Proposal. This process is also part of the Bankruptcy and Insolvency Act and a licensed trustee is the only one who can administer this process which involves determining how much you can afford to pay to your creditors each month and then contacting each creditor with your repayment offer.
Can I keep some debts out of my bankruptcy or Proposal?
All debts anywhere in the world must be part or your Bankruptcy or Proposal disclosure Statement. You cannot pick and choose which creditors your Trustee will notify. However, if you have a car loan and want to keep the car, as long as you continue to make your car payment under the terms of your secured agreement with the creditor, then you can keep you vehicle. Secured creditors, like a creditor who has loaned you money to purchase an asset such as a car and has registered the debt against that asset under the PPSA, they do not have their rights under their security affected by you filing for bankruptcy. So, if you keep making your payment, then you can keep your assets. If you fail to make your payments, then the secured creditor can come and take the asset (car) back if it is allowed under their security agreement.
Will I lose my house if I declare bankruptcy or file a Proposal?
As with other contracts (car leases, cell phone contracts etc), you must keep your payments up to date to keep your house and avoid any foreclosure action by your bank or mortgage company.
However, if your mortgage comes up for renewal and you remain in Bankruptcy or under a Proposal, it has been our experience that your best bet is to renew your mortgage without causing a review of its terms or of your personal credit situation. Generally the banks/mortgage companies will simply send you a form to renew your mortgage without reviewing your current credit report if you have been in good standing and made your payments on time during the course of the mortgage term. As such, it is in your best interest generally to sign and renew where requested.
If you have to “re-qualify” for a new mortgage, it may be more difficult if you remain un-discharged from either a Bankruptcy or a Proposal.
If I change my mind, can I stop the process?
Once you have declared bankruptcy you must follow the process through to the end or you will remain un-discharged. Being un-discharged means that any interest you subsequently acquire in assets (house, cars, inheritances etc.) would belong to the Trustee. As well, if the Trustee is discharged, then your creditors can begin collection action against you again i.e. garnish your wages.
If you have filed a Proposal you can decide to stop your payments at any time if it is no longer something you can manage. If you stop your payments for more than 3 months worth of payments, then your Proposal is automatically over which means that your creditors can begin to collect against you again. There is some limited ability to start your Proposal over again, but it is not guaranteed that your creditors will agree to the process. As well, if you have filed a Proposal and defaulted on your payments, you cannot attempt to file a different or new Proposal for 6 months.
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