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A consumer proposal is the legal, regulated process of making a settlement with your creditors to resolve a portion of your debt, based on your ability to pay. In most cases, this is less than what you owe, and creditors will often accept as little as 20% of the total unsecured amount owed.
Secured debt, such as a car loan or a mortgage, is not included in a consumer proposal, but reducing your payments to other creditors can make it easier to afford your car or mortgage payments.
This means that unsecured creditors can take no further action to collect the debt and any existing legal action against you must stop. Wage garnishments and bank account freezes are common examples of legal action creditors may have started that will be stopped by the stay of proceedings. The trustee will inform all parties involved – the creditors, the Court, and, if applicable, your employer.
Payments under the terms of the proposal will take place – usually monthly payments – and once the payments are completed, a certificate of completion is issued by the trustee. Completing the proposal, not filing the proposal, is what releases you from your debt.
Almost all unsecured debt is released under a consumer proposal, though there are occasional exceptions – your trustee will discuss any that apply to you before the proposal is signed and filed.
You are able to continue to sell or buy any personal asset you require during the proposal.
Aside from the payments, you will be required to attend two financial counselling sessions. These sessions are set up to assist with budgeting questions, as well as covering credit reports and rebuilding your credit. These must be done before a certificate of completion can be issued.
Other positive notations, such as maintaining your car loan or mortgage payments, will help to counteract this to some extent.
The proposal will remain on your credit report for a period of three years after being completed or six years after filing it, whichever is sooner.
They will be fully responsible for the amount left owing, minus what the creditor receives from the proposal.
A lawyer is not generally required to be part of this process, but if you feel the need for legal assistance, you should seek a lawyer that is familiar with personal insolvency law.
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