Although you may be experiencing financial difficulty, bankruptcy may not be the only solution. A consumer proposal is an increasingly popular alternative to filing bankruptcy.
A proposal is a mechanism under the Bankruptcy and Insolvency Act (hereafter referred to as the “Act”) that allows individuals to make a formal “proposal” to one’s creditors. The proposal typically provides for a reduction of debt and/or extension of time with a lump sum or stream of payments made to the Trustee or administrator under the proposal. The Trustee or administrator will thereafter distribute the payments to your creditors as per a defined schedule. Successful completion of a proposal will discharge those debts included under the proposal (with the exception of those debts which survive the process under section 178 of the Act).
Deleted: Below is a list of the most frequently asked questions concerning the proposal process:
There are two types of proposals. You are eligible to file a “consumer proposal” if you are insolvent and your total debts, excluding the mortgage on your principle residence, are less than $250,000. The terms of the proposal must be completed within five years and offer the creditors a greater return than what they would receive through a bankruptcy administration.
If your total debts, excluding the mortgage on your principal residence are in excess of $250,000, you can still file a “commercial proposal”. The legislation governing commercial proposals is somewhat different from that of consumer proposals and you should discuss this further with a licensed insolvency professional. The term “commercial” proposal should not be construed as only applying to “business” debts, but can be filed for individuals having personal debts of in excess of $250,000 (excluding the mortgage on the principal residence).
The first step in considering a consumer or commercial proposal is to meet with a licensed Trustee, such as the firm of Cameron • Okolita Inc. for an assessment which includes a complete review of your financial information. If the proposal process is the best or preferred course of action, the Trustee or administrator will prepare the proposal and other necessary documents under your direction, which are then filed with the Official Receiver and thereafter, your creditors.
The proposal will include the following three (3) documents:
At Cameron Okolita Inc. we require a nominal deposit to pay registration and court fees, necessary disbursements and a small portion of our professional time commitment to file the proposal. If the proposal is accepted, the creditors will indirectly pay our compensation for undertaking the proposal process. You do not have to advance a separate payment. If the proposal is rejected, there is no further cost to you.
After the consumer proposal has been filed, the Trustee will notify the creditors and provide them with a copy of the proposal and other material. After the expiry of 45 days, the trustee will review the claims and votes filed. If unsecured creditors having 25% or more of the debt in dollar value either request a meeting or reject the proposal, a meeting of creditors must be held to consider the proposal. To be accepted at the meeting of creditors, creditors having more than 50% of the unsecured debt in dollar value have to approve the proposal. If no meeting is held, your proposal is automatically deemed accepted.
The voting structure for a commercial proposal is somewhat different. In order for a commercial proposal to be approved, it must be supported by a majority in number of unsecured creditors and that majority in number must hold two-thirds of the dollar value in debt outstanding.
For consumer proposals, if requested by the Official Receiver or any other interested party (within 15 days after acceptance or deemed acceptance of the proposal), the administrator shall forward the consumer proposal to court for review. If no request is received to forward the proposal to court, the consumer proposal shall be deemed to be approved by the court.
All commercial proposals must be forwarded to court for approval.
The advantages to filing a proposal are as follows:
The consequences of a consumer proposal not being accepted or going into a subsequent default are as follows:
The consequences of a commercial proposal not being accepted or going into a subsequent default are substantially different from that of a consumer proposal and should be discussed with a trustee.
No. An employer cannot dismiss, suspend, layoff or otherwise discipline you solely because you filed a proposal.
Those unsecured debts included under either a consumer or commercial proposal will be extinguished once the proposal is completed. The administrator shall issue a Certificate of Full Performance to you and the Official Receiver to confirm its successful completion.
Typically, most people who are experiencing financial difficulty already have a poor credit rating and encounter difficulty in obtaining further credit. For an individual filing a proposal, the credit bureau will report an R7-debt settlement rating for 3 years after the proposal completion date, or 6 years from the date of filing, whichever is earlier.
However, after your proposal has been completed, with the exception of those debts not discharged under section 178 of the Act and secured debts that you may have chosen to retain, you will be debt free and should therefore be considered a better credit risk. You may wish to discuss how to rebuild your credit rating with your trustee’s office.