Consumer Proposal Ontario: Your Path to Debt Relief
Consumer Proposals in Ontario Introduction
Are you overwhelmed by debt in Ontario? A consumer proposal might be the solution you need to regain control of your finances and start fresh. This government-approved program allows you to negotiate a reduced debt repayment plan with your creditors, offering a viable alternative to bankruptcy or struggling with unmanageable debt.
What is a Consumer Proposal in Ontario?
If you’re struggling to keep up with debt payments and seeking a way to avoid bankruptcy, a consumer proposal may be the right solution for you. It’s a formal, legally binding agreement, administered by a Licensed Insolvency Trustee (LIT), where you propose to repay a portion of your debt to your unsecured creditors over a period of up to five years. Your LIT, a federally licensed professional, acts as an intermediary, working with you and your creditors to develop and implement a manageable repayment plan.
Contact a Licensed Insolvency Trustee today for a free consultation and learn more about how a consumer proposal can help you.
Who is Eligible for a Consumer Proposal in Ontario?
You might be eligible for a consumer proposal in Ontario if you meet the following criteria:
- You are an individual (not a business).
- You are a Canadian resident or own property in Canada.
- Your total unsecured debts are less than $250,000 (excluding a mortgage on your principal residence).
- You are insolvent, meaning you cannot pay your debts as they come due.
- You have the ability to make regular payments towards a portion of your debt.
- You have completed any previous consumer proposals.
Most Licensed Insolvency Trustees recommend considering a consumer proposal when you have at least $10,000 in unsecured debt.
Contact a Licensed Insolvency Trustee today for a free consultation and learn more about your eligibility for a consumer proposal.
How Does a Consumer Proposal Work in Ontario?
Here’s a step-by-step guide to the consumer proposal process in Ontario:
- Contact a Licensed Insolvency Trustee: Reach out to a Licensed Insolvency Trustee in Ontario. They will review your financial situation, explain the consumer proposal process, and help you determine if it’s the right option for you.
- Develop a Proposal: Your LIT will work with you to develop a proposal that outlines the terms of your repayment plan, including the percentage of debt you’ll repay and the length of the repayment period.
- File the Proposal: Once you’ve agreed on the terms, your LIT will file the proposal with the Office of the Superintendent of Bankruptcy (OSB).
- Creditor Review: Your creditors will have 45 days to review and vote on your proposal.
- Proposal Acceptance: If a majority of your creditors (representing more than 50% of your debt) accept the proposal, it becomes legally binding on all your unsecured creditors.
- Make Payments: You’ll make regular payments to your LIT, who will distribute the funds to your creditors according to the terms of the proposal.
- Debt Forgiveness: Once you’ve fulfilled the terms of your consumer proposal, you’ll receive a Certificate of Full Performance, and the remaining portion of your unsecured debt will be forgiven.
The maximum length of a consumer proposal payment plan is 60 months, but it can be shorter or even a single lump sum payment.
Sample Proposal Scenario:
Let’s say you have a total of $45,000 in unsecured debts. You might propose to repay your creditors $15,750 over 36 months with a monthly payment of $437.50. If you need a lower monthly payment, you could extend your repayment plan to a maximum of 60 months, resulting in a monthly payment of $262.50. Either way, you save $29,250 plus any interest that would have accrued.
Contact a Licensed Insolvency Trustee today for a free consultation and to discuss a personalized consumer proposal plan.
Advantages of a Consumer Proposal
A consumer proposal offers several advantages over other debt relief options:
- Debt Reduction: You can significantly reduce your overall debt, potentially by up to 80%.
- Stops Creditor Actions: Filing a consumer proposal immediately stops all collection actions by your creditors, including harassing phone calls, wage garnishments, and legal proceedings.
- Asset Protection: Unlike bankruptcy, you get to keep your assets, including your home, car, and other personal belongings.
- Fixed Payments: You’ll have a fixed monthly payment that fits your budget, making it easier to manage your finances.
- No Interest: Interest on your debts stops accruing once the proposal is filed.
- Higher Recovery for Creditors: A consumer proposal offers a higher recovery to creditors compared to bankruptcy.
- Keep Credit Cards: You can keep credit cards with zero balances, allowing you to maintain access to credit for essential needs.
- Improved Credit Rating: While a consumer proposal will initially impact your credit rating, it’s less severe than bankruptcy, and your credit score will start to improve as you make consistent payments. You can also expect a faster recovery of your creditworthiness compared to bankruptcy.
Contact a Licensed Insolvency Trustee today for a free consultation and learn more about the benefits of a consumer proposal.
Consumer Proposal vs. Bankruptcy Ontario
Both consumer proposals and bankruptcy are legal debt relief options, but they have key differences:
| Feature | Consumer Proposal | Bankruptcy |
|---|---|---|
| Impact on Credit Score | Less severe, typically stays on your credit report for 3 years after completion | More severe, stays on your credit report for 6-7 years after discharge |
| Debt Forgiveness | Partial, you negotiate a reduced amount to repay | May be complete, depending on assets and income |
| Assets | You keep your assets | You may have to surrender some assets |
| Process | Negotiation with creditors, less complex legal proceeding | Legal proceeding involving court appearances and asset liquidation |
| Cost | Generally lower, no upfront fees | May involve filing fees and legal fees |
| Control | You have more control over the process and repayment terms | Less control, stricter requirements and reporting obligations |
| Eligibility | Debt limit of $250,000 (excluding mortgage on principal residence) | No debt limit |
Consumer Proposal vs. Debt Consolidation
While both consumer proposals and debt consolidation aim to simplify debt repayment, they differ significantly:
| Feature | Consumer Proposal | Debt Consolidation |
|---|---|---|
| Debt Reduction | Reduces your overall debt amount | Consolidates debts without reducing the total amount |
| Interest | Stops interest accrual on your debts | May offer a lower interest rate but doesn’t eliminate it |
| Legal Protection | Provides immediate legal protection from creditors | Doesn’t stop all creditor actions |
| Impact on Credit | Less severe impact on your credit score compared to bankruptcy | Can potentially improve your credit score if managed well |
| Eligibility | May be accessible even with poor credit | Typically requires a good credit score for favorable terms |
Consumer Proposal vs. Credit Counselling
Credit counselling and consumer proposals are both debt management strategies, but they cater to different needs:
| Feature | Consumer Proposal | Credit Counselling |
|---|---|---|
| Debt Reduction | Reduces your overall debt amount | Requires full repayment of debts over time |
| Interest | Freezes interest on your debts | May or may not reduce or stop interest accrual |
| Legal Protection | Provides legal protection from creditors | Doesn’t offer the same level of legal protection |
| Creditor Participation | All unsecured creditors are bound by the proposal | Creditors may choose to participate or not |
Types of Debt Covered by a Consumer Proposal
A consumer proposal can cover a wide range of unsecured debts, including:
- Credit card debt
- Lines of credit
- Payday loans
- Personal loans
- Income tax debt
- Student loan debt (under certain conditions)
Steps to Filing a Consumer Proposal in Ontario
- Contact a Licensed Insolvency Trustee: Reach out to a Licensed Insolvency Trustee in Ontario to schedule a free consultation.
- Gather Financial Information: Your trustee will need information about your income, expenses, assets, and debts.
- Develop a Proposal: Your trustee will work with you to create a proposal that meets your needs and is acceptable to your creditors.
- File the Proposal: Your trustee will file the proposal with the Office of the Superintendent of Bankruptcy.
- Attend a Meeting of Creditors (if required): You may be required to attend a meeting with your creditors to discuss your proposal.
- Make Proposal Payments: Once the proposal is accepted, you will make regular payments to your trustee, who will distribute the funds to your creditors.
Get Debt Help with an Ontario Consumer Proposal Today
If you’re struggling with debt in Ontario, don’t wait any longer to seek help. Contact a Licensed Insolvency Trustee today for a free, confidential consultation. They can help you explore your options and find the best solution for your financial situation.
A consumer proposal can be a lifeline for individuals and families in Ontario facing overwhelming debt. It offers a structured path to regain control of your finances, reduce your debt, and avoid the more severe consequences of bankruptcy. By working with a Licensed Insolvency Trustee, you can navigate the process with confidence and achieve a fresh start. A consumer proposal offers many benefits, including significant debt reduction, legal protection from creditors, and the ability to avoid bankruptcy. Contact a Licensed Insolvency Trustee today for a free consultation and start your journey towards a debt-free future in Ontario.