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Are you struggling to pay your debts and your total debts (excluding debts like mortgage secured by principal residence) are below $250,000? If so, a consumer proposal may be what you need to get some relief. All you need is to meet with a Licensed Insolvency Trustee (LIT) to evaluate your financial situation and discuss your options.
What is a consumer proposal?
In simple terms, a consumer proposal is a formal, legally binding process administered by a Licensed Insolvency Trustee. The LIT works with you to come up with a ‘proposal’ on how to pay your creditors a percentage of the amount you owe them. The proposal may be about or include extending the time for paying off the debts. The proposal can, however, not exceed 5 years. Payments to the creditors will be paid through the LIT.
When is the consumer proposal appropriate?
You need to set an appointment with a LIT to determine if a consumer proposal is ideal for you. The LIT evaluates your financial situation and informs you of the advantages and disadvantages of the available options for solving your financial hitches. If you opt for the consumer proposal the LIT will help develop a proposal that is tailored to your unique situation and one that works for the creditors.
After filing the consumer proposal you will be required to do the following:
- Provide the LIT with a list of all your assets and liabilities
- If requested attend the first meeting with your creditors
- Attend at least 2 financial counseling sessions
- Eradicate the hassle of dealing with debt collectors. Debt collectors deal with us, your credit counseling agency, and not with you directly
- Inform the LIT in writing of any address change
- Assist the LIT to administer the proposal
What happens after filing the consumer proposal?
The Licensed Insolvency Trustee will file your consumer proposal with the OSB (Office of the Superintendent of Bankruptcy). After the filing, you will stop making direct payments to unsecured creditors. Moreover, if your creditors have filed lawsuits or are collecting your salary their actions will be stopped.
The consumer proposal will then be submitted to creditors. It includes a detailed report on your situation and the cause of your financial hardships. Creditors will have a maximum of 45 days to accept or reject your proposal.
When is the meeting with creditors held?
The meeting with creditors is requested by a creditor or creditors owned more than 25% of the total debt value. The meeting has to be held within the 45 days of filing the consumer proposal. The meeting may also be requested by the OSB within the 45 days. After being called, the meeting has to be held within 21 days. Creditors will, during the meeting, vote to accept or reject the proposal.
If the OSB or creditors don’t request a meeting in 45 days after filing it is deemed that the proposal was accepted. This is irrespective of objections that are received.
Understanding the vote to accept or reject the proposal
If the consumer proposal is accepted
Once the proposal is accepted you will:
- Be responsible for making periodic or lump sum payments to the Licensed Insolvency Trustee.
- Have to attend a minimum of 2 financial counseling sessions
- Adhere to the conditions in the proposal
- Retain your assets so long as you make payments to the secured creditors
If the consumer proposal is rejected
If the proposal isn’t accepted you can do the following:
- Declare bankruptcy
- Amend the proposal and resubmit it to creditors
- Consider alternative methods of solving your financial difficulties
How the consumer proposal will affect your credit rating
A person who submits the consumer proposal or declares bankruptcy gets assigned to the lowest credit score possible. The information that affects your credit score will be removed after a certain period of time depending on the information and where you live.
Obtaining credit from consumers after filing a consumer proposal will depend on how well you can convince lenders of your ability to repay and your financial maturity. There is no guarantee of getting credit and nobody is required to extend you credit.
Upon fulfilling terms of the consumer proposal you will get the ‘certificate of full performance’. Send a copy of the certificate to all major credit-reporting agencies so that your credit record can be updated. For reference, you need to keep all documents related to the proposal.
If you meet the conditions of the proposal
Once you meet all the conditions in the proposal you will be released legally from the debts detailed in the consumer proposal. However, if you miss 3 monthly payments or your schedule is not frequent and your last payment is three months past due then the proposal will be annulled. Thereafter creditors will take action to recover their money unless the proposal is amended and re-filed or there is a court order stopping them. In certain conditions, the annulled consumer proposals can be revived.
Are you thinking of getting a consumer proposal in Toronto, need some questions answered, have any complaint or there is a problem with your Licensed Insolvency Trustee? At York Credit, we are here to help. Give us a call now. We are happy to help in any way we can.