MAJOR STEPS TO FILE A CONSUMER PROPOSAL
The following outlines a summary of the steps in the consumer proposal. Below the summary is a detailed explanation of the individual steps. Be confident that your BDO Trustee and team will guide you through this process with respect, support and dignity.
- Contact the Trustee and file the consumer proposal.
- Creditors are notified of the consumer proposal and may request a meeting.
- The creditors vote on the acceptance of the consumer proposal.
- Once the consumer proposal is accepted, the debtor makes payments to the Trustee, who in turn makes payments to the creditors according to the terms of the consumer proposal.
- If the consumer proposal is not accepted, the debtor will have to consider other alternatives.
- If the debtor defaults in their payments, the consumer proposal will be annulled after 3 missed payments.
- Attend two mandatory counselling sessions.
- Once the payments are completed, the Trustee issues a Certificate of Full Performance of consumer proposal.
Contact a Trustee
The first step in the process is to contact BDO Newmarket to speak with a Trustee. A Trustee is an individual or corporation who is licensed by the Government to administer bankruptcies and consumer proposals. The Trustee will inform you of the effects of a consumer proposal and will prepare the necessary documents to file the consumer proposal with the Office of the Superintendent of Bankruptcy (the “Superintendent”).
Upon filing of the consumer proposal with the Superintendent, the Trustee will send a notice, together with a copy of the consumer proposal and some relevant personal and financial information to all of your creditors. At the time of filing a consumer proposal, a creditor is prevented from starting or continuing any legal action unless they obtain permission (leave) from the Bankruptcy Court. Interest on the amounts owing to the unsecured creditors stops at the time of filing the consumer proposal.
At the meeting, if a majority in value of the unsecured creditors who are voting accept the consumer proposal, it will become binding on the debtor and ALL creditors. This allows your BDO trustee to negotiate on your behalf with creditors, in order to reach an agreement regarding an acceptable payment – often at an amount LESS than what you owe. When a consumer proposal is accepted by the creditors, it is deemed approved by the Court after fifteen days have expired, unless a court hearing to approve the consumer proposal is requested.
In rare circumstances the Court may be requested to review the consumer proposal after the creditors have approved it. In circumstances where the Court rules that the consumer proposal is not approved, the effect is the same as creditors not approving the consumer proposal.
What happens if the Consumer Proposal is Rejected?
If the consumer proposal is rejected, you do not have a proposal with your creditors; it’s a “no-deal” situation. Your creditors will be able to start collection activities again and you will have to consider whether or not to file a bankruptcy. Your BDO trustee will support you through this process and present you with all options to solve your debt problems.
What happens if the Consumer Proposal goes into Default?
The consumer proposal will be in default:
- If you are required to make monthly payments and the sum of three of the monthly payments under the consumer proposal are missed, or
- If you are required to make the payments less frequently than monthly and you miss any payment for more than three months,
- The consumer proposal will be deemed to be annulled and creditors will again be able to take steps to recover their debts, less any payments paid to them during the consumer proposal. Your BDO specialists will work with you throughout the process to employ budgetary and personal financial management strategies to prevent such defaults from occurring.
- If the debtor was bankrupt at the time of filing the consumer proposal, they again become bankrupt.
Revival of Annulled Consumer Proposal
If a consumer proposal (other than a consumer proposal filed by a bankrupt) is annulled, it may be possible for it to be revived if the debtor has made up all of the missed payments and the administrator considers it appropriate.
The process for revival involves notification to creditors within thirty days of annulment by your BDO specialist. If there is an objection by any creditor to the revival, then there is no automatic revival. In the event there are no objections, the revival is effective sixty days after notice is sent.
It may be possible for there to be a court application if there is an objection to a revival.
What happens if the debtor’s circumstances change?
The debtor is required to advise the Trustee of any changes in his/her circumstances that could jeopardize their ability to make the payments required under the consumer proposal. BDO is here to help you reach financial stability and can provide solutions if your circumstances change. However, this will not change the amounts to be paid as agreed to in the consumer proposal.
It may be possible to amend the consumer proposal. In this case a debtor should talk to their Trustee before they have defaulted on payments. BDO knows how to help you, so consider your Trustee your coach to financial stability.
How long will the Consumer Proposal last?
A consumer proposal can be made for any period up to a maximum of 60 months.
Does the debtor require a lawyer?
Generally, a lawyer is not required. However, if the debtor feels the need for legal advice, they may retain a lawyer. A Trustee is not a lawyer and is not able to give legal advice, but our BDO team can provide a referral to a lawyer to ease your stress and concerns.
How are secured creditors dealt with?
If a creditor has a lien on any assets (known as a secured creditor), the chose one of several options. As always, your BDO Trustee will walk you through the options and ease your stress. Such options include:
- Surrender the asset to the secured creditor and obtain a receipt. Any balance left owing after the asset has been sold by the creditor may or may not be a claim in the consumer proposal, depending on Provincial legislation, or
- Continue to pay the secured creditor in order to keep the asset.
- If payments are up to date and you wish to continue to make payments to keep the asset you may do so.
How does a Consumer Proposal affect co-signers?
Consumer proposals will not cancel the liability of anyone who has guaranteed or co-signed any loans. These guarantors will still be responsible for the debts less any payments the creditor receives from the consumer proposal. Your BDO Trustee can meet with those who have co-signed, or guaranteed, your loan to ensure the needs of all parties are met.
What happens to the debtor’s assets?
Unless otherwise provided in the consumer proposal, the assets generally remain with the debtor.
What happens to the debtor’s credit cards ?
It may be possible for the credit cards to remain with the debtor if there is no balance owing. However, one should recognize that the granting of the credit cards is a privilege provided at the option of the credit company. When the credit card company learns about the consumer proposal they may suspend this privilege. As well, a debtor should carefully consider whether the use of credit cards will be of benefit as they try to set your financial house in order.
What happens to the debtor’s credit rating?
Once the level of debt has become so great that a consumer proposal is required, the credit rating is usually at its lowest. After a consumer proposal is completed by a debtor, credit reporting agencies generally report the fact of the consumer proposal as a “R7? occurrence for the length of the consumer proposal and an additional 3 years. The ability to obtain and use credit after completion of the consumer proposal will depend upon the debtor’s ability to convince a potential lender of their ability to repay new credit.
Who pays the Trustee?
The Trustee’s fee is based on a tariff set in the Bankruptcy and Insolvency Act. It is deducted from the amounts paid by the debtor and before payments are made to the creditor.