If you’re a resident of Ontario struggling with unsecured debts, a Consumer Proposal may be a viable solution to help you regain financial stability.
A Consumer Proposal is a legally binding agreement between you and your creditors, facilitated by a Licensed Insolvency Trustee, that allows you to pay off a portion of your debts through affordable monthly payments.
What is a Consumer Proposal (Ontario)?A Consumer Proposal is a debt relief option available to residents of Ontario who are struggling with unsecured debts.
It is a formal, legally binding agreement between you and your creditors that allows you to repay a portion of your debts to creditors.
In a Consumer Proposal, you offer to pay off a portion of your debts through affordable monthly payments, usually over a period of up to five years.
Once accepted by your creditors, the terms of the Consumer Proposal are binding on both you and your creditors, and any outstanding debts are typically forgiven at the end of the term.
The Consumer Proposal process is governed by the Bankruptcy and Insolvency Act, and your arrangement will be managed by a Licensed Insolvency Trustee (LIT), a debt professional who will take charge of your payments to creditors and offer you guidance throughout.
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What is the process to file a Consumer Proposal?The process to file a Consumer Proposal in Ontario involves several steps. The most important steps are listed below.
Consultation with a Licensed Insolvency Trustee (LIT)The first step is to consult with a Licensed Insolvency Trustee (LIT).
They will assess your financial situation and help determine whether a Consumer Proposal is the right solution for you.
Filing a Consumer ProposalOnce you and your LIT have determined that a Consumer Proposal is the best course of action, your LIT will help you prepare and file the necessary documents with the Office of the Superintendent of Bankruptcy.
Your creditors will then have 45 days to vote on whether to accept or reject your proposal.
Once your creditors vote, as long as the votes representing the majority of the money owed are in favour, your Consumer Proposal will become legally-binding among all creditors.
Making monthly paymentsOnce your proposal is accepted, you will make affordable monthly payments to your LIT for a period of up to five years, according to the terms of the proposal.
Your LIT will distribute the funds to your creditors as outlined in the proposal.
Repairing your credit profileDuring the term of the proposal, your LIT will arrange for you to attend two mandatory financial counselling sessions with an accredited counsellor.
Once you have completed all payments and requirements of the proposal, your LIT will provide you with a Certificate of Full Performance, which will allow you to begin rebuilding your credit profile.
Are there strict eligibility criteria for Consumer Proposals?While there are some eligibility requirements for Consumer Proposals in Ontario, they are generally less restrictive than those for other debt relief options like bankruptcy.
In order to be eligible to file a Consumer Proposal, you must:
- Be an individual (not a corporation or partnership)
- Be a resident of Canada, own a property in Canada, or do business in Canada
- Be insolvent (i.e. unable to pay your debts as they become due)
- Have unsecured debts of between $6,000 and $250,000 (excluding mortgages on your principal residence)
- Be able to make affordable monthly payments to your creditors under the terms of the proposal
Your Licensed Insolvency Trustee (LIT) can help you determine whether you meet the eligibility requirements for a Consumer Proposal and guide you through the process.
How much are consumer proposal payments?The level of your Consumer Proposal payments depends on your individual financial circumstances, including the amount of debt you owe, your income, and your living expenses.
The overall goal is to help you get out of debt while still being left with enough money to meet your living expenses.
When you file a Consumer Proposal, you will work with a Licensed Insolvency Trustee (LIT) to develop a proposal that outlines the terms of your repayment plan.
The proposal will typically involve making affordable monthly payments over a period of up to five years.
The amount of these payments will be based on your ability to pay. Your LIT will help you determine what you can afford to pay and will work with your creditors to try to negotiate a settlement that is acceptable to everyone involved.
What debts can be included in a Consumer Proposal in Ontario?In Ontario, a Consumer Proposal can only be used to deal with unsecured debts. Unsecured debts are those that are not secured by collateral, such as a house or a car.
Examples of unsecured debts that can be included in a Consumer Proposal include credit card debt, personal loans, and lines of credit.
Secured debts, on the other hand, cannot be included in a Consumer Proposal. These are debts that are secured by collateral, such as a mortgage on your home or a car loan.
If you have secured debts that you are unable to repay, you may need to explore other options, such as negotiating with your secured creditors.
Will a consumer proposal affect my credit report?Yes, a Consumer Proposal will have an impact on your credit report and credit rating.
When you file a Consumer Proposal, it will be recorded in your credit file and will remain on your credit report for a period of three years after you have completed all of the payments under the proposal, or six years from the date you filed the proposal, whichever is earlier.
During the term of the proposal, your credit rating will be negatively impacted, as you will be seen as having an unresolved debt.
However, because a Consumer Proposal is generally seen as a more favorable option than bankruptcy, your credit rating may not be as severely impacted as it would be if you were to declare bankruptcy.
Once you have completed all of the payments under the proposal and received a Certificate of Full Performance from your Licensed Insolvency Trustee, you can begin the process of rebuilding your credit rating.
While a Consumer Proposal will have an impact on your credit rating, it may be a worthwhile trade-off if it allows you to get out of debt and regain control of your finances.
Here’s an example of how we can help
Let’s say you owe…
Canadian Tire Card
TD Bank Overdraft
Total amount owed:
Repayments reduced by 88%
* monthly payments are based on individual financial circumstances
Why should I consider filing a consumer proposal to deal with unsecured debts?Filing a Consumer Proposal can be a good option to consider if you are struggling with unsecured debts. Here are a few reasons why:
Turn unaffordable debts into one manageable monthly paymentIf you are struggling to keep up with your debt payments, a Consumer Proposal can help you turn your unaffordable debt into a manageable monthly payment.
By negotiating a lower amount of debt with your creditors, and stretching the payments over a longer period of time, a Consumer Proposal can help you pay off your debts in a way that fits within your budget.
Get legal protection from unsecured creditorsWhen you file a Consumer Proposal, you receive legal protection from your unsecured creditors.
This means that they cannot take legal action against you or garnish your wages, which can give you peace of mind and the breathing room you need to get back on track financially.
Reduce your total unsecured debt by up to 80%Depending on how much debt you’re in, you may be able to negotiate a reduction in your total unsecured debt of up to 80% when you file a Consumer Proposal. This can provide significant relief and make it much easier to work towards a debt-free life.
Are there other debt relief options available in Ontario?Yes, there are other debt relief options available in Ontario, depending on your individual financial circumstances. Two other common options are:
Debt Management Plan (DMP)A DMP is a repayment plan that is negotiated between you and your creditors, typically through a credit counselling agency.
With a DMP, you make one affordable monthly payment to the credit counselling agency, which then distributes the funds to your creditors. DMPs are typically used for unsecured debts and can provide relief from high-interest rates and fees.
Personal BankruptcyPersonal bankruptcy is a legal process that can help you eliminate most, if not all, of your debts.
Personal bankruptcy is typically considered a last resort option, as it can have significant consequences for your credit rating and financial future.
It’s important to note that the debt relief option that is best for you will depend on your individual financial circumstances.
It’s always a good idea to speak with a Licensed Insolvency Trustee to explore all of your options and determine the best course of action for your situation.
Where can I get advice to help me improve my financial situation?If you’re seeking guidance on whether a consumer proposal is the right debt relief option for you, A. Fisher & Associates can provide the assistance you need.
We’ve helped thousands of individuals regain control of their finances and we’re ready to help you too.
We understand that dealing with debt can be overwhelming, and that’s why we’re here to provide reliable advice and support.
We can help you explore all of the debt relief options available to you and make an informed decision about your financial future.
Don’t let debt control your life any longer. Reach out to A. Fisher & Associates today to start the process of regaining control of your finances.
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If you’re looking for help, or you’re worried about your ability to repay the debt you owe, A. Fisher & Associates is here to support you.
For free advice and guidance tailored to your financial situation, you can talk to one of our debt experts today. Give us a call for free on 416-842-0040