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Eligibility to File Consumer Proposals
Step 2 – Eligibility to file
Do I qualify to file a consumer proposal?
While you must be insolvent, there is actually much more to it.
In order to be eligible to file a consumer proposal you must:
- Be a person (businesses may not file consumer proposals).
- Be insolvent with regard to your debts in Canada.
(For U.S. debts, the similar solution is called a Chapter 13 Wage Earner Plan.) - Have total debts less than $250,000 (excluding the mortgage on your principal residence). With greater debts, see Proposal to Creditors.
- Have a stable source of income, to ensure that you will be able to make the payments each month.
- Have no prior proposal proceedings still open:
- The trustee handling any previous filing must have been discharged. That is, the matter must have been closed. You can’t have two filings open at once. Examples of previous filings are a Notice of Intention and a Proposal to Creditors.
- If you have previously filed a consumer proposal which was annulled, you may not file another consumer proposal until all of the claims filed in your prior proposal have been paid in full or extinguished by operation of Section 178 of the Act.
Can I file a consumer proposal jointly with another person?
Many of your debts may be shared with another person. That is, you are jointly responsible, through co-signing or guaranteeing a loan. Usually, but not always, this occurs with a couple who are living together.
It is possible for more than one person to file a consumer proposal together – this is called a joint filing. To be eligible to file a joint proposal:
- All or substantially all the debts of the different individuals involved must be similar
When two people file together, a husband and wife for example, the total debts must be less than $500,000 (excluding the mortgage on their principal residence) instead of the $250,000 limit for a single person.
Can I file a consumer proposal if I am bankrupt already?
Yes, this is possible. Section 66.11 of the Act sets out the eligibility criteria to file a consumer proposal:
"consumer debtor" means a natural person who is bankrupt or insolvent and whose aggregate debts, excluding any debts secured by the person’s principal residence, do not exceed seventy-five thousand dollars or such other maximum as is prescribed;”
You might want to consider this if your situation changes after declaring bankruptcy. For example, if you start a new job after you file bankruptcy and end up earning a lot more income, the resulting surplus income could make you liable for much greater payments. Changing to a consumer proposal might reduce your monthly payment (by extending the repayment term) and therefore make the payments more manageable. This is better for you as the payments are easier. It is better for your creditors because you will end up repaying a greater portion of your debt. Everyone wins!
If you are currently bankrupt and considering a consumer proposal, we strongly suggest you contact your trustee to discuss this further. In order to file a consumer proposal when you are bankrupt, your trustee must consent to the procedure – you may not file a consumer proposal without your trustee’s cooperation.
Go to Step 3 – Decide your proposal’s terms
We hope your find this step-by-step guide helpful. For a free consultation on whether a consumer proposal is right for you, contact a bankruptcy trustee near you.
