Who Can File a Consumer Proposal: Eligibility and Process

Many Canadians struggle with overwhelming debt and seek effective solutions to regain financial stability. One such solution is a consumer proposal. Understanding who can file a consumer proposal and the process involved is crucial for those seeking debt relief.

Eligibility for Filing a Consumer Proposal

A consumer proposal is a legally binding agreement arranged through a Licensed Insolvency Trustee (LIT) to settle debts with creditors for a portion of what is owed. Here’s who can file a consumer proposal:

Residents of Canada: Only individuals residing in Canada can file a consumer proposal. Residency is a fundamental requirement.
Debt Amount: The total amount of unsecured debt should be less than $250,000 (excluding any mortgage secured by your principal residence). This limit applies to personal consumer proposals; those with higher debt levels may need to consider other solutions like bankruptcy.
Able to Make Payments: The individual must demonstrate the ability to make regular payments under the terms of the proposal. This requirement ensures that the offered settlement is feasible and realistic.
Seeking Debt Relief: A consumer proposal is suitable for individuals who are unable to meet their debt obligations but wish to avoid bankruptcy. This legal option allows debtors to retain assets while negotiating manageable repayment terms.

The Process of Filing a Consumer Proposal

The process of filing a consumer proposal involves several steps, overseen by a Licensed Insolvency Trustee. Here’s a detailed breakdown:

1. Initial Consultation

The first step is to meet with a Licensed Insolvency Trustee (LIT). During this consultation, the LIT will review your financial situation, including your debts, assets, income, and expenses. This assessment helps determine if a consumer proposal is a viable option for you.

2. Proposal Development

If you qualify, the LIT will help formulate a proposal offered to your creditors. This proposal typically outlines reduced debt repayment amounts and an extended payment period, making the repayment plan more manageable for you.

3. Filing the Proposal

The LIT will file the consumer proposal with the Office of the Superintendent of Bankruptcy (OSB) and present it to your creditors. Once filed, you receive immediate protection from creditor actions such as wage garnishments or collection calls.

4. Creditor Voting

Creditors have 45 days to review and vote on the proposal. For the proposal to be accepted, a majority of creditors (by dollar value) must agree to the terms. If accepted, the proposal becomes a legally binding agreement.

5. Making Payments

Once accepted, you’ll make regular payments to the LIT, who will distribute the funds to your creditors. It’s crucial to adhere to the payment schedule outlined in the proposal to maintain its benefits.

6. Completion and Discharge

Upon successfully fulfilling the terms of the consumer proposal, you will be officially discharged from the unpaid portion of your debts. This marks your journey towards financial recovery and improved creditworthiness.

Benefits of Filing a Consumer Proposal

Filing a consumer proposal offers numerous advantages:

Debt Relief: Reduces the total amount of debt owed, providing significant financial relief.
Asset Protection: Allows you to keep assets like your home or car, which may be at risk in bankruptcy.
Creditor Protection: Provides immediate protection from creditor actions, including legal proceedings and wage garnishments.
Customizable Terms: Offers flexible and negotiable repayment terms that suit your financial capabilities.

Conclusion

Understanding who can file a consumer proposal and the associated process can guide Canadians towards a viable path for debt relief. By meeting the eligibility criteria and working with a Licensed Insolvency Trustee, you can effectively manage your debts and rebuild your financial future. If you’re considering a consumer proposal, seek professional advice to explore this proactive and structured route to financial stability.

See if you qualify for debt relief

Who Can File a Consumer Proposal: Eligibility and Process