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What is a Consumer Proposal and How Do I File?

Friday, September 12, 2014
Cutting Dept in half

Many people who have debt problems have heard of bankruptcy, but they don't always know much about alternative solutions to their debt. One such solution is a consumer proposal. For some people, it is actually a better option than bankruptcy, because it doesn't leave quite the same mark on your credit score and avoids bankruptcy completely.

What is a Consumer Proposal?

When you file a consumer proposal, a bankruptcy trustee helps to negotiate a settlement between you and your creditors. The actual proposal is a legally binding document that spells out the minimum payments you must make to your trustee (known as an Administrator during this process) who then distributes the funds to your creditors and a time period in which you must make the payments.

Creditors tend to prefer consumer proposals because they end up receiving more money from their clients than they would through a bankruptcy. Debtors also prefer consumer proposals because they can settle their debts without the stigma of bankruptcy.

Am I Eligible to File a Consumer Proposal?

To qualify to file a consumer proposal, you must owe less than $250,000 excluding any debt secured by your primary residence. You must also prove that you are able to make monthly payments. Only individuals are eligible to file consumer proposals; businesses must look to other debt management solutions.

How do I File a Consumer Proposal?

You must work with a qualified bankruptcy trustee/administrator to file a consumer proposal. Your bankruptcy trustee will help you determine what monthly payment you can afford. You will also set a period of time to pay your debts. The maximum period is five years. Your trustee/administrator will file the proposal. When you file, your creditors no longer have a legal right to collect debt payments from you until they review the proposal. The filing also halts wage garnishment and lawsuits.

Do Creditors Reject Consumer Proposals?

Creditors do have the option of rejecting your consumer proposal. They have 45 days to reject the proposal and you need more than 50% of your creditors based on dollar value to agree for your proposal to pass. If your creditors reject your proposal inside the 45 days, it is possible to make amendments and resubmit it, but if it is rejected outright by the end of the 45 days, then you will have to consider other options to resolve your debts, or declare bankruptcy.

If they accept your proposal, you begin making the agreed payments. At the end of the agreed period of time, your debt is discharged.

Is a Consumer Proposal Right for Me?

The best way to determine if a consumer proposal is the right solution to your debt problems is to talk to a qualified bankruptcy trustee. Check out our website ( to find out more about our services for individuals with debt.

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