What is a Consumer Proposal?

IMAGINE THE FREEDOM OF ONE PAYMENT PER MONTH TO ALL YOUR CREDITORS THAT YOU CAN AFFORD ON YOUR BUDGET. DO YOU QUALIFY?  YES, YOU DO. 

We see many people in our Toronto downtown office located at 8 King Street East.  Many have done extensive research on their options for dealing with their debts, but there are also many that have done very little research but do have an idea of what they want to do.  For most people, they do not want to file for personal bankruptcy.  There are many reasons given for this, but many people  simply do not like the idea of being bankrupt.  We understand, and if possible we work on a solution that does not involve bankruptcy.  We review all the available options, but the one that catches most people’s attention is a Consumer Proposal. 

So to help you out on your journey and research, we have put together this general information regarding a consumer proposal. 

WHAT IS A CONSUMER PROPOSAL?

By definition a consumer proposal is a legally binding contract or plan of repayment that you are making with your creditors – the people you owe money too – to repay a portion of the debt you owe to them.  This plan or contract must be completed within 5 years or 60 months.   The payment plan is geared toward your budget (your household income less your expenses and what do you have left over each month to do a payment plan to your creditors). Your creditors get to vote on the contract or proposal and they vote every dollar of debt.  So the more debt you have with a creditor the more votes they have.  The must be 50% plus $1.00 voting in favour of the contract for it to pass.  Your creditors have 45 days to vote on the contract you are offering them. Once the contract or payment plan is agreed to the contract is in place.  You get to keep you assets.  Once you have made the last payment you get a certificate of completion indicating you have completed the contract in full and are relieved from the debts. 

HOW TO START A CONUMER PROPOSAL

For  most people, the starting point is a free consultation with a trustee who will discuss all options but will also look at your financial situation and can then discuss the options in the context of your financial picture.  We typically have  people  bring in a list of their debts, a typical pay stub and most importantly, a budget as to what they spend on rent, food etc. 

We will review your financial situation and find that for most who are working and have an income, they will have funds left over on their budget (as they are not paying for debts ) to do a consumer proposal or payment plan. 

For your creditors, they want to know that at the end of the day they are going to get more money from the consumer proposal then will get from a bankruptcy and this typically gives them the incentive to vote in favour of proposal you are making 

HOW MUCH WILL THE PROPOSAL COST?

As the expression goes, cash is king and if your creditors see they are making more money over all then they are typically happy to vote in favour of the proposal.  The other good thing is the proposal is one payment, typically per month.  The amount you pay will include all our fees and expenses so there is nothing extra billed. 

For creditors to determine how to vote they will look at your budget and also what assets you have.  In combination, your proposal in total must offer more money than they would make if we liquidated or sold all your assets in a bankruptcy.  If there are any assets like a house, we will typically need to know the market value of the asset and confirmation of any debt like a mortgage against the asset.  We often refer to this as the cash surrender value of any assets.  This value is what we to need to consider in a proposal.  Most people want to keep their home and do not want to sell it.  This is possible in a proposal but we must know the asset value or equity value in order to determine the amount in the proposal to be paid. 

Once we have had our free consultation there may be some homework you need to do like open up a new bank account and stop using any banks that you owe money to.  Once all the homework is done, we may have a final meeting to finalize the information.  You can also fax or email the information to us.  It will be up to you.  However once complied we can prepare the paperwork for you to sign to start the consumer proposal process. 

PROPOSAL START DATE

Once you sign the proposal paperwork which will take only 45 minutes, we are required to send a copy of the paperwork including the contract to your creditors.  We legally have 10 days to get the paperwork to them but they have 45 days to vote from the day you sign the paperwork.  So there is a legal stay of proceedings in the proposal that starts or is effective from the day you sign the paperwork.   This means that if there are any garnishments against you they can be stopped from the day you sign the paperwork even though the vote is in 45 days.

NEGOTIATIONS

During the 45 days your creditors can ask for alternate terms (meaning more money and in some cases more time) and you can counter offer to them.  Once we come to a final agreement then the contract is binding or legal for all involved including creditors who voted no or did not vote.  The key is getting the majority to vote in favour, not all.  This is an important factor in a consumer proposal.  Unlike a debt management plan or the like which are informal processes, the consumer proposal is a legally binding contract on all.  It stops all creditors.  There is no cherry picking or opting out. 

PAYMENT PLAN

Once we have a plan you continue with the payment terms as set out in the contract until it is completed.  You can also accelerate the payments to get the payment plan done sooner but that is up to you.  You can also win the lottery, have 5 jobs, a pay increase or inherit money and it has no effect on the contract as it was agreed to. 

Imagine, keeping your assets and being able to continue with your life with a one stop shopping payment plan to your creditors.  For most it is the best solution to their debts. 

NEXT STEPS…

If you think a consumer proposal may be the right option for you, contact us today to book your free consultation to discuss your options for a fresh start. You can email us or call us at 310-PLAN.