Consumer Proposals

The Bankruptcy & Insolvency Act provides two ways of dealing with your debt problems: The first of these is a consumer proposal. A Consumer proposal is a repayment plan that is formulated in accordance to the consumer's ability to pay. It may require paying back the full amounts owed, or only a portion of it. A proposal may be in the form of a lump-sum payment or monthly payments.

A Proposal will stop all interest charges going forward, as well as most lawsuits and garnishments. Proposals must be accepted by the majority of your creditors and be approved by the court. The trustee or administrator may have to call a meeting of creditors (which the consumer must attend) in order to have creditors vote on the proposal. If the proposal is voted down, the consumer may not make another proposal, but it may be possible to amend the existing proposal in order to offer a better return to creditors. If the proposal is not accepted, the consumer IS NOT automatically bankrupt; however there are usually few other alternatives then to proceed with an assignment in bankruptcy if the proposal is not accepted.

A consumer proposal is reserved for consumers with total debt that is less than $75,000, excluding the mortgages on their residences. If the aggregate of a consumer's debt is more then $75,000, the alternative is a commercial proposal, the caveat being that if the proposal is not accepted by the majority of creditors, then the debtor is deemed (automatically) bankrupt.