What is a Consumer Proposal, & How Does it Work?
A consumer proposal is– a proposal made by a LIT acting on behalf of you, the consumer, to pay a portion of the unsecured debt owed to your creditors. To qualify for a consumer proposal, you must:
- be an individual (not a business),
- owe less than $250,000 (excluding secured debt such as your mortgage), and ·
- be able to pay your unsecured debt, or a portion of them, in the proposal within five years.
When the proposal is submitted, all legal actions and collection activities must stop, and creditors must stop contacting you and begin working with your LIT. Your creditors will have 45 days to accept or reject the consumer proposal. A simple majority of a dollar value is required for acceptance, which binds all your unsecured creditors in the proposal. In most situations, your creditors will accept the deal because they would get less money if you declared bankruptcy. Any creditors who do not vote are deemed to have accepted the proposal; the vote to reject your proposal is considered.
Once the proposal is accepted, your LIT will pay your creditors from the monthly amounts you pay to them, and you will be required to attend two financial counselling sessions. Your unsecured creditors cannot take further legal or collection action unless you fail to make three of the agreed payments. You will receive a Certificate of Full Performance once your obligations have been met.