Facing Debt Problems? Will Filing A Consumer Proposal Help?

Debt problems can happen to anyone. Challenges to managing debt may creep up on you over time, or may arise from sudden job loss or some other unforeseeable situation. Whatever the cause, you may think your only debt solution is bankruptcy. However, there is an alternative: filing a consumer proposal.

If you want to resolve your debts and avoid bankruptcy, a Canadian consumer proposal may be the right debt relief option for your financial situation.

A consumer proposal is a debt relief program developed by the government of Canada made available through the Bankruptcy & Insolvency Act as an alternative to bankruptcy.

A consumer proposal has the advantage of allowing to keep your assets like equity in your home or a car, yet eliminate your unsecured debt. It must be filed through a Licensed Insolvency Trustee.

Understanding the Consumer Proposal Process in Ontario

A consumer proposal in Ontario is a legally binding, negotiated settlement process made between you and your creditors. Understanding the consumer proposal process and its associated risks is the first step to getting a fresh financial start.

Consumer Proposal Steps

  1. Contact a trustee and determine payment plan
  2. File proposal, creditors vote to accept, amend or reject the proposal
  3. Make payments and attend credit counselling sessions
  4. Obtain your Certificate of Full Performance and rebuild credit

How to File a Consumer Proposal

The procedure begins when you seek the help of a Consumer Proposal Administrator. Hoyes, Michalos & Associates are licensed by the federal government to administer consumer proposals for residents of Ontario.

Our trustees will help develop a plan to present to your creditors. They will review your financial situation and give you advice about what kind of debt proposal may be the best option for you. We will then

  • prepare the necessary forms for you to sign,
  • file the proposal to creditors with the government (to make it legally binding), and
  • talk to your creditors (so you don't have to).

Who Qualifies for a Consumer Proposal?

To file a consumer proposal you must owe between $1,000 and $250,000 (not including your mortgage), and you must be unable to pay your debts in full. If you are having debt problems, a consumer proposal is a viable alternative.

How Much Does A Consumer Proposal Cost?

The cost of filing a consumer proposal is paid out of your monthly payment. For example, if you propose to pay $300 per month for 48 months, that's what you pay. There is no fee or charge in addition to that amount. Hoyes, Michalos & Associates Inc., the administrator of the proposal, is paid out of that $300 per month, so in effect the creditors are absorbing the cost of the proposal.

Each situation is different, so we recommend that you contact us to review your situation and help you calculate the potential cost of a consumer proposal given your specific circumstances.

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How the Voting Process Works

Acceptance of a debt proposal is determined when your creditors vote whether to accept or reject the consumer proposal. Each creditor gets one vote for every dollar owed, and if more than half of the creditors (based on dollar value) vote “yes”, your proposal is accepted. If accepted, you make payments to Hoyes, Michalos (the Consumer Proposal Administrator) who in turn makes payments to the creditors according to the terms of the consumer proposal. If not accepted, we will help you with other alternatives.

At what moment of the consumer proposal process is a proposal accepted?

By law, your creditors have 45 days to consider whether to accept or reject your proposal. We will count the votes at the end of day number 45, and if a majority of the dollar value of the creditors have voted in favour, your proposal is accepted. If 25% of your creditors request a meeting, or if more than half of the dollar value of creditors’ votes against your proposal, a creditor’s meeting is called, and your Hoyes, Michalos representative will work with you and your creditors to attempt to negotiate alternate terms that are acceptable to you and the creditors.

What happens if the proposal is rejected?

If the proposal is rejected, we will contact your creditors to determine if they would accept alternate terms. In many cases increasing your payment by $50 or $100 per month may be enough to get your creditors to accept the proposal. You also have the option of filing bankruptcy. Creditors realize that if they don't accept your proposal you may file bankruptcy, and that often encourages creditors to accept all reasonable offers.

Making Consumer Proposal Payments

At Hoyes, Michalos we offer convenient pre-authorized payment plans, and you can select the payment frequency that works for you; weekly, bi-weekly, semi-monthly or monthly.

What if I stop making the payments and default on the performance of the proposal?

If you fail to keep the terms of your debt proposal then the proposal will be annulled. Your creditors would have a claim against you for the amount owed to them before the proposal, minus any amount you paid them during the proposal.

Credit Counselling During Your Proposal

At Hoyes, Michalos & Associates we want your proposal to be a fresh start, so you will have two budgeting sessions with an accredited credit counsellor to help you manage your money in the future. Our commitment to making your credit counselling sessions work includes access to free budgeting and money management web pages offered to our clients. We want your consumer proposal to be a fresh start!

Completion of Your Consumer Proposal

Once payments are completed you will receive a certificate showing the terms of the consumer proposal have been completed and you will be relieved of any balance still owed from the debts that were in the proposal.

For more information about consumer proposals see our Consumer Proposal FAQ page.

If you feel making a consumer proposal in Ontario is the right debt solution for your debt problems your next step is to speak with a bankruptcy trustee. Contact us at 1-866-747-0660 or fill out a free evaluation form and get started towards total debt freedom.

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