The consumer proposal is an alternative to bankruptcy that allows you to make partial restitution to your creditors. The main stipulation to a consumer proposal is that your creditors must be better off with the consumer proposal than if you filed a bankruptcy.
There are several advantages the consumer proposal has over bankruptcy. First of all, it allows you to pay your creditors back more than they would get through a bankruptcy, and in return it reflects more positively on your credit rating. A bankruptcy puts an R9 or equivalent on all of the affected accounts and that rating will stay there for a period of 6 years past the date of discharge. A consumer proposal puts an R7 or equivalent on all of the affected accounts and that rating will stay there for a period of 3 years past the date of full performance (completion).
If this option is right for you, the process starts by filing a statement of affairs with a credit counsellor or a trustee. The statement of affairs tells the creditors exactly what your finances are like at this particular time and shows them what you can reasonably afford to pay them back.
From the day that you file a consumer proposal, there is a stay of proceedings put into effect that stops your creditors from actively pursuing the debts. You may still receive a few phone calls, but all you have to do is tell the creditor that you have filed a consumer proposal and give them the name of the trustee or administrator that you have used. The stay of proceedings is in effect for 45 days while your creditors are given time to consider your proposal. At the end of this time, if your creditors have voted in favor of the proposal, there will be a further 15 day period where your creditors may ask for court approval. If the creditors do not request this action it is simply deemed court approved at the end of this period of time.
Your creditors all have the right to vote on your proposal. In order for your proposal to pass, the majority of the creditors in dollar value must vote in favor of the proposal. For example, if you owe a total of $10 000.00, then a minimum of $5000.01 must vote in favor of the proposal in order for it to pass. A creditor who does not vote on the proposal is deemed to have voted in favor of it. If your creditors vote against your proposal, there is usually something you can add to it to make it more acceptable to the creditors.
If 25% of your creditors vote against the proposal, a creditors meeting will be called. This is a meeting that you must attend. The purpose of the creditors meeting is to vote on the proposal. A creditors meeting is also required if the proposal is changed after it is filed.
If it appears that the majority of your creditors are going to vote against your proposal you have a couple of choices in front of you. You can either walk away from the whole thing and look at alternative solutions, or you can amend your proposal to the satisfaction of your creditors. This is done simply by asking the creditors why they are voting against it, and then finding out what they feel would be an acceptable offer. If what they want is something you can afford, then you can amend the proposal. When you amend a proposal, it should be noted that a creditors meeting is required.
Some of the other benefits to filing a consumer proposal are that the interest rates are stayed to 0% unless otherwise stipulated in the proposal, and that once the proposal is accepted, the only thing that can make it fail is you. During the course of the proposal you must attend 2 counselling sessions, make your payments and be in compliance with the income tax act. Most of the time you can insert a clause in the proposal that allows you to pay it off earlier if you are able to do so. If you do this, there will be no penalty for paying the amount of the proposal, and your credit history will be cleared up that much faster.
Once again, this is only intended as a brief overview of the consumer proposal process and should not be considered complete.
If you think that this may be the right program for you, you should contact a counsellor and set up an appointment to review your finances. This can be done either by e-mailing us at firstname.lastname@example.org with your request or call us at 488-3328 in Edmonton or toll free at 1-800-890-9612 if you are elsewhere in Alberta.
It is always best to look at all your options before making any decisions.