How to File a Consumer Proposal
The process to file a consumer proposal is fairly straightforward. Although every situation is different, here is a guide to the consumer proposal process.
1. Obtain the Services of a Trustee:
Consumer proposals can only be administered by a licensed trustee in bankruptcy. Find a trustee in your area who you have a good rapport with. Initial consultations are free so be sure to find one you are comfortable with – you will be working together for some time. Proposals usually last for a period of three to five years.
Your trustee will first determine if you are eligible for a consumer proposal. The determination is made by assessing your current financial situation with a focus on what you owe in unsecured debt and how much you make.
2. The Financial Evaluation and Recommendations:
Come prepared to your meeting with all of your financial records, including a list of your:
- Any other items that may affect your financial status.
Your trustee will look at your current monthly payments – reviewing not only your unsecured debt, but also your secured debt such as car loans and home mortgage loans. This is done to determine a monthly payment amount you can afford to make towards unsecured debt.
Next, the trustee will look at your total unsecured debt to determine how much could be paid off by making those single monthly payments up to a 5 year time period. You may not be able to pay it all back, but how about 50% percent of what you owe; or even as little as 20% of what you owe? If the numbers add up – if you could pay back half of what you owe with an affordable payment – the trustee will prepare a formal proposal. You should know that trustee fees are included in the proposal terms and will be payable within your monthly proposal payments.
3. Proposal is Filed with the OSB:
Once the proposal is complete, your trustee files the proposal and the required documents with the Office of the Superintendent of Bankruptcy (OSB).
4. Stop Making Payments to Creditors
Once a proposal is filed with the OSB, you cease to make payments to your creditors. In addition, any attempts by your creditors to collect must be stopped.
5. Submission of “Fairness Report” and Notification to Creditors
Within 10 days your trustee will file a report with the OSB explaining his or her perception in regards to the fairness of the proposal, and the ability of the debtor to follow the established terms of the proposal. The report will include a list of your debts, assets and creditors. At this time, your trustee will also send a copy of the proposal to your creditors for review, asking them to either accept or reject the terms of the proposal.
6. Creditors Accept or Reject the Proposal:
Creditors are given forty-five days to either accept or reject the proposal. The proposal is considered as accepted if none of the creditors provide dissenting feedback. The agreement becomes legally binding if the majority of creditors vote to accept the proposal.
If your proposal is accepted, you are required to make all agreed-upon payments. You must observe all terms of the proposal and attend two financial counseling sessions.
If your proposal is denied, your trustee can further negotiate the terms. Typically, if your creditors realize they will receive more than if you file for bankruptcy, the proposal is likely to be accepted. If your trustee is not successful in devising acceptable terms for a proposal, you will then need to evaluate alternative options and potentially file for bankruptcy.
7. Begin Fulfilling the Terms of the Proposal
Once your proposal is accepted by creditors, monthly payments are made to the trustee. The trustee disperses the payments to creditors.
Payments cannot be more than three months late. If payments are made later than three months, your proposal will be annulled and you will lose legal protection from creditor action.
8. Final Statement of Receipts and Disbursements
When you make the final payment at the end of the proposal period, your trustee will send a final statement of receipts, disbursements, and a dividend sheet to the OSB.
Once approved by the OSB, your trustee will send a notice of discharge to each creditor.
A consumer proposal is a great way to get financial relief, while still fulfilling your obligations to creditors. During a free consultation, your trustee will determine if you’re eligible, if it’s the right solution for you, and ultimately help you decide if you should file a consumer proposal.