How to File a Consumer Proposal in Toronto

Filing a consumer proposal in Toronto is one way to meet your debt obligations and avoid harassment from those to whom you owe money. This debt solution is a legal process that allows an individual to make a plan to repay creditors over three to five years, and avoid bankruptcy.

Primarily, it gives consumers the ability to pay off their unsecured debts in easy, affordable payments. Moreover, it may be an alternative to bankruptcy for those who want to keep their assets.

The benefits of consumer proposals are that they offer debt relief, give you time to repay your debts, and allow you to keep some of your assets. This process can also help rebuild your credit rating and give you peace of mind knowing that there is a plan in place for repaying what you owe.

Advantages of a Consumer Proposal

A consumer proposal in Toronto can be used as an alternative to bankruptcy, and it has many benefits that make it worth considering.

The main benefits are:

• You will avoid the stigma of bankruptcy, which can have long-term impact on your credit rating, employment prospects and ability to travel abroad;

• You will avoid the risk of losing assets such as property or vehicles if they are not protected by a charge or lien;

• You will have more control over the timing and amount of payments, which means you could potentially pay off debts sooner than you would with a bankruptcy;

• It is cheaper than bankruptcy and can result in savings of thousands of dollars per year.
  
  

Steps For Filing A Consumer Proposal in Toronto 

A Toronto consumer proposal can be filed at the Office of the Superintendent of Bankruptcy or through a licensed insolvency trustee.

There are three main requirements for filing a consumer proposal:

• You must have at least $100 in debt or $5000 in equity (or both).

• You must be able to make monthly payments of at least $50 for five years.

• You must be able to make monthly payments of at least $150 for 12 months.

If you meet these requirements, then you can file a consumer proposal in Toronto and get out of debt faster! 

The length of the proposal is up to you, but it typically lasts between 18 months and three years. You must also provide financial information to the trustee during this process. Based on the information you provide, the trustee will draft a proposal with an offer that’s most likely to be accepted by your creditors.

Next, your trustee will be responsible for preparing and filing the Proposal Documents on your behalf. These documents include:

• A Statement of Affairs - This document lists all your assets, the estimated value of each, the names and addresses of each creditor, and the amount payable to each, so they can see what they could hope to receive.

• A Statement of Income and Expense - This will show the amount of disposable income you currently have after deducting your necessary expenses. This will support the monthly payment amount you are proposing to pay to your creditors.

• An Assessment Certificate - To prove that your administrator gathered all the necessary information relating to your financial situation and that he has informed you regarding your rights and alternative options.

• A Consumer Proposal - the formal document summarizing your offer and terms of repayment of your unsecured debts to your creditors.
  
  

When the above documents are ready, the LIT will proceed with filing your consumer proposal with the Official Receiver and then send a notice to each creditor for their consideration. Once the proposal is filed, the automatic stay of proceedings is activated and will give you legal protection from collection activities, including garnishments, lawsuits, and debt collector calls, until the proposal is either accepted or rejected.

Once your creditors are informed of your filing, they have 45 days to respond. If they do not respond, the proposal is deemed accepted by the Official Receiver.

Creditors can request meetings with you before the 45 period is up. Meetings are requested for further negotiations to attempt to reach an agreement with the majority of your creditors. Your trustee will negotiate with your creditors on your behalf 

If the creditors accept your proposal, you will make monthly payments to your trustee, who will be responsible for distributing the payments to each creditor until the agreement is fulfilled. This means that you won’t have any more out-of-pocket expenses during this time period.

If the creditors reject your proposal, they will send out a notice of rejection letter with an explanation as to why they rejected it. It’s possible to renegotiate. The notice of rejection letter will give you the opportunity to respond to the decision, provide additional information that may have influenced their decision, or clarify your proposal. 

After receiving notification of rejection, you will have a few days to respond. You can do this by filling out a request for reconsideration form within the time frame specified.

When you have made the final payment and completed all the conditions of the proposal,  your administrator or LIT will send a Certificate of Full Performance as well as other documents, including a Statement of Receipts and Disbursements, a Notice of Taxation of the Administrator’s Accounts, and the Discharge of the Administrator, to you and the Official Receiver. This will signify that the balance of your original debts has been forgiven. The government will then notify the two main credit bureaus, Equifax and TransUnion, about the end of your consumer proposal and the debts that were forgiven.

What If My Consumer Proposal Gets Rejected?

A consumer proposal is one of the last ways to avoid bankruptcy. If your proposal is rejected by the majority of your creditors, the reason for the rejection may be that they deem your finances not stable enough to sustain a consumer proposal. If this is the case,a bankruptcy filing may be more appropriate for your situation.

You are allowed a maximum of two missed payments once your consumer proposal is in force. If you fall three payments behind at any time, the proposal will be annulled. At this point, the full  amount of your original debt balances will be reinstated, and your creditors will again have the right to pursue collection efforts. If you miss two or more payments on your consumer proposal, you may have to file for bankruptcy as a last resort.

If you’re thinking about filing a consumer proposal in Toronto, your first step should be to talk to a licensed insolvency trustee to find out if it is the best solution to help you get out of debt.