A Consumer Proposal is for Canadian residents only who are looking for an alternative to bankruptcy. The equivalent to this proposal in the U.S is a Chapter 13 Wage Earner Plan.
A Consumer Proposal is a legally binding contract between a debtor and their creditors that will allow the debtor to continue repaying their debts at a lower monthly rate. In addition to being an alternative to bankruptcy, this also helps avoid creditors taking you to court and placing wage garnishments. These plans are figured on a three to five year repayment plan. The great thing about these proposals is that a lot of times the creditor will agree to accept less than the amount you actually owe. This is a legal contract; therefore creditors cannot demand more money later on.
There are a few eligibility requirements for filing a Consumer Proposal. Your finances must allow you to pay at least a portion of the debts you owe and your debts must be more than the assets you own. Also, your unsecured debt must be less than $250,000.
In order to get the ball rolling on filing a Consumer Proposal, the debtor must acquire the help of a consumer proposal administrator (trustee). This trustee will sit down and help you figure out how much you can pay per month and how long you would have to make those payments in order to satisfy your debts. Then, he or she will file this proposal with your creditors. Once the proposal is filed, the creditors have 45 days to respond. It takes 51% of the creditors to agree to accept your agreement before it becomes binding. There is an additional 15 day period for any objections to be filed. If 25% or more of the creditors decide not to accept your proposal, you and your trustee must meet with the creditors to try to amend the agreement.
If any creditors have placed wage garnishments, they will be removed as soon as the Consumer Proposal is filed. There is also a freeze placed on the interest. During the negotiation period, creditors must cease all types of contact with the debtor.
If your primary residence is in Canada and you are facing financial hardships and looking for an alternative to bankruptcy, consider the advantage of filing a Consumer Proposal to satisfy your debts. In most cases an agreement can be reached between you and your creditors.
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