Avoiding Bankruptcy:
Consumer Proposals
Source: Strategis
What is a consumer proposal?
A consumer proposal is an offer
made by a debtor to his or her creditors
to modify his or her payments. For
example, you may propose that you
will pay a lower amount each month,
but over a longer period of time.
Or you may propose that your creditors
accept being paid a percentage of
what you owe.
How does a consumer proposal benefit
you?
Your unsecured creditors will not
be able to take legal steps to recover
their debts from you (such as seizing
property or garnisheeing wages)
unless the proposal is withdrawn,
rejected or annulled or until the
administrator is discharged where
the proposal was not fully performed
(except for debts which would not
be released in a bankruptcy by an
order of discharge).
Who can make a consumer proposal?
Any natural person who is insolvent,
including a bankrupt, whose debts
are less than $75,000, excluding
a home mortgage, can make a consumer
proposal. When someone who is bankrupt
wishes to make a proposal, it must
first be approved by the inspectors
and the bankrupt person must have
obtained the assistance of a trustee
who will be the administrator of
the consumer proposal. If the debts
are more than $75,000, the proposal
will be made under Division I of
Part III of the Act.
What about joint proposals?
It is possible to make a joint consumer
proposal. Two or more consumer proposals
may be joined where they could reasonably
be dealt with together because of
the financial relationship of the
consumer debtors involved. It should
be noted that a joint consumer proposal
will be available to consumer debtors
who do not have total debts exceeding
$75,000.
How do I make a proposal?
The procedure begins when you seek
the help of an administrator who
might be a trustee in bankruptcy
or a person appointed by the Superintendent
of Bankruptcy. He or she will ask
you about your financial situation,
assess it and give you advice about
what kind of a proposal may be best
for you and your creditors. The
administrator will ask you to sign
the required forms, which will then
be filed with the Official Receiver.
What happens after a proposal is
filed with the Official Receiver?
Within 10 days after filing your
proposal with the Official Receiver,
the administrator is required to
send the Official Receiver a report.
The report contains the administrator's
opinion about whether the proposal
is fair and reasonable and whether
he or she believes you will be able
to perform it. It also contains
a list of your assets and debts,
and a list of your creditors.
At the same time, the administrator
must send to each of your creditors
a copy of your proposal and a copy
of the report on the proposal. The
administrator will ask the creditors
to accept or reject the proposal.
The administrator will also provide
information about calling a meeting
of creditors.
How does a proposal get accepted?
Your creditors will have up to 45
days to consider whether to accept
or reject your proposal. A creditor
may send a note to the administrator
accepting or rejecting the proposal.
If creditors do not respond, they
will be considered to have accepted
the proposal. If a sufficient number
of creditors accept the proposal,
then it will become binding on you
and your creditors, and you will
have to meet its terms.
My proposal has been rejected. Now
what?
If the proposal is rejected, you
will no longer be protected by the
Act. The administrator will, within
5 days, notify you, all your creditors
and the Official Receiver of this
fact. Your creditors will now be
able to take legal steps to recover
their debts from you. If you were
bankrupt when you made this proposal,
the administration of your bankruptcy
will continue.
I've been accepted, and I've fully
met the terms. Now what?
When the proposal is fully performed,
the administrator must give a certificate
of full performance to you and the
Official Receiver and you will be
relieved of the debts that were
in the proposal.
What if I stop making the payments
and default on the performance of
the proposal?
If you fail to keep the terms of
your proposal, it may be annulled.
If you were insolvent prior to making
the proposal, you return to the
same situation and your creditors
would have a claim against you for
the amount owed to them before the
proposal, minus any amount you paid
them during the proposal. If you
were bankrupt when the proposal
was made and the court subsequently
annuls your proposal, you will be
considered bankrupt on the date
of the annulment.
What does it cost to make a proposal?
There is a filing fee to be paid
to the Superintendent of Bankruptcy.
In addition, the administrator is
entitled to be paid. These fees
are prescribed by the Bankruptcy
and Insolvency Rules. |
