Consumer Proposal: Initial Assessment
In order to file a consumer proposal you need to attend at the office of a Licensed Insolvency Trustee, where they will complete an assessment with you.
The purpose of the assessment is to review your situation, to determine if filing a consumer proposal is right for you.
What’s your situation?
The administrator will ask you to provide information about the amounts you owe to people, your liabilities, the things that you own (assets), your family situation, and your household income and expenses (your budget).
Depending on your answers, the administrator may review a number of different options with you before suggesting that you proceed with a consumer proposal.
The administrator may discuss some or all of the following alternatives:
- Changes to your spending and payment patterns – maybe you can find your own way out of trouble
- A debt consolidation loan
- Credit counselling and a debt management plan
- A consumer proposal
- Personal bankruptcy
Deciding on a consumer proposal: initial assessment
The administrator will compare your total unsecured debts to how much you can afford to pay each month, to find how many months you will be required to pay. He/she will recommend a consumer proposal if the amounts look reasonable for both you and your creditors.
After you pay all of your living expenses (rent, utilities, groceries, etc.), you have $500 left to pay bills. You want to leave yourself a bit of a “buffer” for unexpected expenses (like car repairs), so you think you can afford to make a payment of $350/month towards a proposal.
Your total debts are $25,000. Creditors usually consider your offer reasonable if it covers at least 50% of what you owe. In this example, that would be $12,500. With a payment of $350 per month it would take you 36 months to pay that amount, so that’s probably the proposal to creditors that you would offer (36 monthly payments of $350/month).
If you could only pay $250 a month, then it would take you 50 months to pay $12,500. If you could pay $400 per month, then if would take you 32 months to pay $12,500.
Keep in mind that this is only an example. Your creditors might accept less than 50% or they may ask for more. Each consumer proposal is different and has to be considered on its own merits.
It is only after you have considered each of these alternatives that you can make an informed decision that a consumer proposal is the right choice for you.
If you decide to proceed with a consumer proposal or bankruptcy, the administrator will prepare an initial Assessment Certificate, to record the fact that your relevant information was gathered, the fact that you were informed of your alternatives, and your decision.