Understanding the Consumer Proposal Process
in Ontario

Financial difficulties can happen to anyone. They may creep up on you over time, or they may arise from sudden job loss or some other unforeseeable situation. Whatever the cause, you may think your only solution is bankruptcy. However, there is an alternative; filing a Consumer Proposal.

If you want to resolve your debts and avoid bankruptcy, a Consumer Proposal may be the right solution to your financial situation.

A Consumer Proposal in Ontario is a legally binding, negotiated settlement 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.  

Explaining the Process

Who can make 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.

What is the Consumer Proposal process?

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. We will go over your financial situation with you and give you advice about what kind of proposal may be the best option for you. We will then prepare the necessary forms for you to sign, file the proposal with the government (to make it legally binding), and we will talk to your creditors (so you don’t have to).

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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. For your proposal to be accepted, creditors representing a majority of the dollar value of your debt must accept the proposal. For example; if your total debts are $50,000, creditors representing $25,001 of your debts are required for approval.

Payment

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.

Counselling

At Hoyes Michalos 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.

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. Of course your creditors know that if they don’t accept your proposal you may file bankruptcy, and that encourages your creditors to accept all reasonable offers.

What if my proposal is accepted, and I fully meet the terms?

If, after filing a Consumer Proposal, the proposal is accepted and then fully performed, the administrator must give a certificate of full performance to you and the Official Receiver and you will be relieved of the debts that were in the proposal.

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

If you fail to keep the terms of your proposal then the proposal may 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.

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Does it cost anything when filing a Consumer Proposal?

Yes, but 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 your 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.

Can all my debts be included in a Consumer Proposal?

Yes, Consumer Proposals deal with most unsecured debts. An unsecured debt is simply a debt with no security against it.

Some examples of unsecured debts are:

If you have secured debts then your debts are guaranteed by an asset. If you stop making payments on a secured debt, then the creditor has the legal right to take possession of the agreed asset and can resell it to recover their loan.

Some examples of secured debts are:

Secured creditors are notified if you file a Consumer Proposal, but they do not receive any money from the actual proposal. If you file a Consumer Proposal you can choose to either continue paying your secured creditors, and can keep the asset, or stop paying the secured creditor and the asset will be seized. The professionals at Hoyes Michalos can explain all of your debt management options, and review your secured and unsecured debts, to help you decide if a Consumer Proposal is the correct choice for you.

Will a Consumer Proposal affect my credit rating?

Yes. Most credit reporting agencies in Canada will place a note on your file indicating that you have filed a Consumer Proposal, and that note will remain for three years after you finish making all proposal payments. You will be coded as an R7 (perfect credit is an R1, and bankruptcy is an R9, so a proposal is slightly better than a bankruptcy). At Hoyes Michalos we will show you the steps to take to rebuild your credit after you have completed your proposal.

If you feel making a Consumer Proposal in Ontario is the right decision for your financial situation your next step is to speak with a Bankruptcy Trustee or fill out a free evaluation form and get started towards a fresh financial start.

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