Filing a Consumer Proposal

If you just can’t seem to balance your monthly budget, and you are falling behind on all of your debt obligations, a Consumer Proposal to your creditors may be the solution to your financial woes.

A Consumer Proposal allows you to make payments to your creditors based on your ability to pay after your basic living expenses have been covered. This option also stops interest charges and allows you to pay only a portion of your total debt.

So, you may be asking yourself- is a Consumer Proposal the right choice for me?

If you are struggling with consumer debt, and only able to pay minimal amounts each month, then a consumer proposal may be an option. This is especially true if you are able to make some payments each month towards your debt, but the interest charges are keeping you from making real headway.

A consumer proposal is a legally binding agreement put forth to your creditors in which they agree to take less than the full amount that you owe them. It also means that they stop charging interest completely. It is an agreement between you and your creditors stating that you are only required to pay back a portion of your debts based on what you can afford over a maximum of five years.

A consumer proposal must be arranged with your creditors by a Licensed Insolvency Trustee (formerly bankruptcy trustee) under what’s called the Bankruptcy and Insolvency Act, which is an alternative to bankruptcy. This can be a great alternative for consumers who are struggling under high interest rates, but do not want to declare bankruptcy.

The best way to determine if a consumer proposal is the right option for you, is to set up a meeting with a LIT bankruptcy trustee. The LIT bankruptcy trustee at CE Craig & Associates will sit down with you and review personal financial situation and outline your options. There is no charge for an initial consultation, and no obligation to file.

If you decide that a consumer proposal is your best option to deal with your debts, a summary of the process is as follows:

How do I file a Consumer Proposal?

  1. Meet with your local Victoria trustee at C.E. Craig & Associates Inc and we will help you prepare a family budget. This will determine how much money you can afford to offer your creditors on a monthly basis under any repayment plan.
  2. You will provide information to the trustee that outlines all of your creditors, as well as the nature of your income, expenses and the value of any assets you own. This information allows the trustee to prepare a statement of your personal financial affairs, which will be reviewed by your creditors when they consider your repayment offer under a consumer proposal. Your trustee will assist you in preparing these formal documents. The trustee will also include a comparison between what a bankruptcy would look like, and what you’re offering under the proposal.
  3. The trustee will prepare your formal proposal and have you sign these documents. These will in turn be forwarded to the Office of the Superintendent the bankruptcy and on to your creditors. Once your proposal is filed, you stop making payments towards any of your unsecured debts. The creditors will now have 45 days to consider your offer.
  4. Your creditors will consider your offer under the consumer proposal and have 45 days to either accept the proposal, or make any counter offers. However, if 50% of your creditors accept the offer, it becomes a binding agreement for all creditors involved.

Advantages of filing a consumer proposal in BC

A Consumer Proposal can be a very efficient way to manager debts. In British Columbia, if you want to try to consolidate your debts, you may qualify for a consumer proposal. If your situation meets these criteria, then a consumer proposal may be the right option for you:

  • If you are able to make some payments towards your debt each month, but can’t make any real headway due to the high debt burden and the ongoing interest charges.
  • Your income each month is reasonably predictable.
  • Your income is expected to rise significantly in the next couple of years.
  • You do not qualify for a debt consolidation loan.
  • You have been bankrupt before, and don’t want to have to go bankrupt a second time.
  • You feel that you don’t want to declare bankruptcy due to the emotional toll.
  • You have professional qualifications or security clearances that could be in jeopardy if you declare personal bankruptcy.

A Consumer Proposal will pause any active collection actions on every debt including:

  • student loan debts (if you have been out of school for over seven years).
  • CRA tax debts.
  • Wage garnishments.

Once you have considered your options carefully with the assistance of a LIT bankruptcy trustee, you can decide if a consumer proposal will work for you and if it is the best fit for your current situation. For instance, if you only have enough income each month to pay your basic living expenses, then Personal Bankruptcy may be your best option.

Call our credit counselors at C.E. Craig & Associates for a free, confidential consultation to explore your options and find the best fit for you.