Outlining the basic procedure of filing a consumer proposal and what happens when individuals can no longer meet its conditions.
A consumer proposal is not a magic wand that can be waved to banish your debt forever. While working with a licensed insolvency trustee to file a consumer proposal will help you resolve your debts and get a hold of your financial obligations, you’ll still need to pay back a portion of what you owe. You may be unsure of what happens if your financial situation changes and you can’t keep up with the payments. Here’s what you should know about meeting the conditions of your consumer proposal.
SUBMITTING A CONSUMER PROPOSAL IN ONTARIO
A licensed insolvency trustee (LIT) submits the consumer proposal to the Office of the Superintendent of Bankruptcy (OSB) on your behalf. Once this is done, you stop making direct payments to unsecured creditors and wage garnishment stops, and any legal action against you is ceased.
ACCEPTANCE AND REJECTION
YOUR CREDITORS THEN HAVE 45 DAYS TO ACCEPT OR REJECT THE PROPOSAL. A CREDITOR MEETING MAY OCCUR. FOR THE PROPOSAL TO BE ACCEPTED, CREDITORS REPRESENTING A SIMPLE MAJORITY OF THE TOTAL AMOUNT COVERED UNDER THE PROPOSAL MUST VOTE TO ACCEPT IT. ALTERNATIVELY, IF NO CREDITOR REFUSES OR CALLS A MEETING WITHIN 45 DAYS, THE PROPOSAL IS ACCEPTED.
If the proposal is accepted: you’ll retain your assets and need to make payments to your LIT in addition to meeting any other conditions outlined therein.
If the proposal is rejected: you’ll need to modify and resubmit it or consider other options.
MEETING CONDITIONS
A CONSUMER PROPOSAL IS PREDICATED ON YOU MEETING CERTAIN CONDITIONS WHICH TYPICALLY INCLUDE MONTHLY PAYMENTS TO YOUR LIT. IF YOU FAIL TO MEET THESE CONDITIONS, YOUR PROPOSAL IS ANNULLED. THIS MEANS YOUR CREDITORS CAN THEN TAKE ACTION TO RECOVER THE MONEY YOU OWE THEM, INCLUDING TAKING LEGAL ACTION BY SUING YOU.
IF YOU CAN’T MEET THE CONDITIONS...
A change in your financial situation could make it impossible for you to keep up with payments. If you anticipate lasting financial issues, you should contact your LIT as soon as possible, ideally before missing a payment. At this point, your options include:
Leaving the proposal as-is and taking steps to avoid missing further payments.
Amending the proposal to change the monthly payments. This requires creditor approval.
Missing a payment or payments on purpose to annul the proposal. Speak to your LIT before doing this, but it can sometimes be advantageous.
Filing for personal bankruptcy.
The most important thing to do is to seek help at the first signs of trouble. This will allow you to review your options, and work with a professional who will help you make the best decision you can for your situation.
DO YOU THINK YOU SHOULD FILE A CONSUMER PROPOSAL?
If you think you might benefit from a consumer proposal, visit D. & A. MacLeod Company Ltd. in Ottawa. We can help you with everything from credit counselling to bankruptcy, so contact us today to set up a free consultation.