Personal Consumer Proposals At C.E. Craig & Associates Inc. we offer local, personal and confidential debt solutions such as Consumer Proposals. Many Canadians are finding themselves in a frustrating predicament when it comes to getting out of debt. Does it seem impossible for you to make a dent in your debt because you can only afford to make the minimum payments each month? Are you only paying interest and never paying down the principal? If this is your situation, a Consumer Proposal may be right for you. What Is A Consumer Proposal? Governed by the Bankruptcy and Insolvency Act, a Personal or Consumer Proposal allows a person to renegotiate most of their debt payments in a way that matches their ability to pay. If you are not able to pay all of your debts back in full, especially while interest continues to accrue each month, but are able to pay at least a portion your debts back on a monthly basis, then you are eligible to make a proposal. Under a Consumer Proposal you make an offer, or a proposal, to your creditors by offering to pay them an agreed upon amount per month based on your ability to pay. One of the best things about filing a consumer proposal is that as soon as you file your offer, interest STOPS immediately. Most proposals that are filed are accepted by the creditors, because it is often mutually beneficial. Creditors know that a Consumer Proposal offers more to them than they would get in a personal bankruptcy. Once a majority of your creditors accept the proposal, your offer of reduced payments outlined in your consumer proposal becomes binding on all of your creditors, anywhere in the world. This means that not all creditors have to agree to accept your offer, just a simple majority. Once you make all your payments to the trustee as outlined in your offer, you will be released from the balance of all debts which will be considered legally paid in full. Can A Secured Creditor Be Included In My Consumer Proposal? Generally, Consumer Proposals are not made to secured creditors. Secured creditors include debts such as the mortgage on your house or the loan on your car. This means that these debts will continue as though you never filed a consumer proposal. As long as you continue to make your payments to these creditors, you can keep the asset (you’re your house or car). If you can’t afford to continue with the secured payments, then you can include these debts in your consumer proposal if there is a shortfall. Can I File A Consumer Proposal If My Wages Are Being Garnished? Unsecured creditors will not be able to enforce any judgments or garnishment orders to recover their debts unless or until the proposal is rejected or annulled. That means if your creditors are garnishing your salary or bank accounts, this will stop immediately if you file a proposal and it is accepted by the majority of your creditors. Who Can Make A Consumer Or Personal Proposal? If you cannot meet payment obligations as they become due, and if all indebtedness is less than $250,000 (not including a mortgage on your principal residence) a Consumer Proposal is an option. In order to file a consumer proposal in Canada, you must be: Insolvent A resident of Canada Not a corporation Age of Majority If your debts are above $250,000, or if the debts are related to a business, you can still file a Proposal, but it is not a Consumer Proposal. This is called a Division 1 Proposal, and it is slightly different then a Consumer Proposal. Division 1 Proposals are also what businesses can use to shed some of their debt without declaring bankruptcy. What If My Spouse And I Have The Same Debt? If you and your spouse’s debts are significantly similar, then you may be able to file a joint consumer proposal. As the administrator of the proposal, a Licensed Insolvency Trustee will review your offer to determine if you and your spouse share a majority of your debts, and if filing a joint proposal is the best option for you. Fees for a joint Consumer Proposal would be the same as if there had only been one person who had filed, so filing a proposal together can be a good financial alternative. Filing a joint Consumer Proposal will also prevent creditors from going after your partner. What Does A Consumer or Personal Proposal Cost? The first consultation is free with C.E. Craig & Associates. We will sit down with you to go over your family budget and your debts to determine if a Consumer Proposal is the right option for you. If you decide to file a proposal, we will take a deposit of a few hundred dollars to start the process and prepare the formal documents outlining your legal offer to your creditors. The creditors have 45 days to consider your offer, and in the meantime, you do not have to make any payments to them and interest on your debts stops accruing. Every situation is different, and must be considered on its own merits. Consider that you have $35,000 in consumer debt. Your Licensed Insolvency Trustee can help you prepare an offer to your creditor of $250 per month for 40 months, totaling $10,000. You make a deposit of $250 in the first month, and then $250 in the second month. By the end of 45 days you will know if your creditors have accepted your offer or not. If they say yes, which is the case 90% of the time, then you have already made your first two payments under the proposal. What Fees Are Associated With Filing A Consumer Proposal? The following fees as outlined under the Bankruptcy and Insolvency Act (BIA), will be incorporated into your Consumer Proposal payments. $750 initial fees, payable upon filing a copy of the proposal with the Official Receiver. $750 payable on the approval by your creditors and The Court (usually 60 days after filing the proposal) Of the 20% of the money distributed to creditors under the Consumer Proposal, the Trustee takes a portion of the dividends paid to creditors. This is not an additional payment by the debtor. two mandatory counselling session fees – $85 each $100 administrative charge. Generally, when C.E. Craig & Associates acts as an administrator under a Consumer Proposal we structure the above payments so that we request a small deposit from you before we file the proposal. Once your proposal is accepted by your creditors, you will only have to make one monthly payment to the trustee. We use that payment to cover our fees and the balance goes to your creditors. When And How Is The Proposal Approved? Your trustee will put a proposal together for you and send it to your creditors. The creditors have 45 days to look over the proposal and to vote on whether or not they will accept it. The creditors may request that a meeting be held to discuss the proposal in more detail. If a majority of the creditors who vote on the proposal accept within the 45-day period, then it is deemed accepted. If after another 15 days have elapsed, and no one has objected, then the proposal is deemed accepted by The Court and is binding on all creditors. How Do I Deal With My Creditors After The Proposal Is Accepted? After your proposal has been filed, you no should no longer be dealing with your creditors or making payments to them. Your creditors should be dealing directly with your administrator. If you are contacted directly by a creditor, you should refer them immediately to C.E Craig & Associates to ensure that they have been made aware of the proposal. We can direct them as to their rights as creditors under the BIA. What About Creditors Who Are Suing Me? The court action against you is stopped once a proposal is filed. The creditor is treated like any other creditor in the proposal. What If My Wages Are Being Garnished? Garnishment of your wages, another type of court action against you, is also stopped immediately once you file a Consumer Proposal. The Trustee will notify the creditor, the court and instruct your employer to cease the deduction from your wages. This is true even for Revenue Canada debts owed for taxes. Can I Keep Making Payments on My Car or Mortgage? You may choose to include your secured creditors in your proposal if you no longer want to make payments to them. Alternatively, if you want to keep a secured asset, such as your house, you can continue to make payments to that creditor outside of the proposal. Usually, if you can afford it, we recommend that you continue to make your regular car or mortgage payments. When making a proposal you are encouraged to look at all your debts and determine if it is in your best interest to continue to make these payments. What If My Financial Circumstances Change And I Can No Longer Afford The Payments? The Trustee can ask your creditors to accept an amended proposal or the Trustee may have the proposal annulled. Your payments must always be an amount that you can afford. What About Utility Companies? A utility company cannot cut off service if a Consumer Proposal is filed even if you owe them at the time of filing. They could elect, however, not to supply further services unless an arrangement is made for payment for future services. How Is My Credit Rating Affected? A Consumer Proposal is usually a matter of record at a credit bureau. This information is available to credit grantors and may affect your ability to get credit in the future. However, if you have currently missed payments to your creditors or find yourself in collections already, this information is most likely already reflected on your credit rating. Filing a Consumer Proposal is generally reported on your credit rating for shorter period of time, (usually 3 years) and usually considered a better rating than if you file for bankruptcy (reported for 6 years under a bankruptcy). What Are My Duties Under A Consumer Proposal? You must provide the trustee with accurate financial information so that a realistic and feasible proposal may be filed on your behalf. You need to comply with the proposed payments or your proposal may be annulled. If your proposal is annulled, your creditors will have a claim against you for the amount owed to them, minus the payment received in the Proposal. Your creditors may be able to continue their legal actions against you. 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