A Consumer Proposal is a federally regulated and legally binding process available to insolvent Canadian individuals. A Consumer Proposal provides for a reduction of debt owed to unsecured creditors, or an extension of time for repayment of the debt, or both.
Who can file a Consumer Proposal?
A Consumer Proposal may be filed by an individual who is bankrupt or insolvent and whose debts, excluding debts secured against the individual’s principal residence, do not exceed $250,000.
What is the Role of the Licensed Insolvency Trustee?
A Consumer Proposal is administered by a Licensed Insolvency Trustee (“LIT”), whose role includes assisting the consumer in formulating the Proposal; notifying and reporting to the creditors on the Consumer Proposal; adjudicating creditor claims; receiving, distributing and accounting for the Proposal funds; and administering the process generally.
What happens after filing a Consumer Proposal?
Upon filing the Consumer Proposal, a stay of proceedings comes into effect immediately and prevents unsecured creditors from seeking repayment of debt outside of the Proposal process.
What is the term of a Consumer Proposal?
The term of a Consumer Proposal may not exceed five years.
What fees are payable in a Consumer Proposal?
The Licensed Insolvency Trustee receives fees for administering the Consumer Proposal and the fees are prescribed by a tariff contained in insolvency legislation. The Trustee receives payment for its fees from the Proposal funds – they are not an added cost.
How is a Consumer Proposal accepted?
The Consumer Proposal is deemed to be accepted by creditors 45 days after the filing date, provided there is no requirement for a meeting of creditors. The Consumer Proposal is deemed to be approved by the Court 15 days after creditor acceptance.
A meeting of creditors is required if 25% of the proven creditors request it within the 45-day period after filing the Proposal. The purpose of the meeting is to vote on the Consumer Proposal. The Consumer Proposal will be accepted if a majority in dollar value of voting creditors votes to accept the Consumer Proposal. The Consumer Proposal can be amended or altered if necessary to obtain creditor approval.
When is a Consumer Proposal completed?
In addition to fulfilling the terms of the Consumer Proposal, an individual must also attend two mandatory financial counselling sessions which can be provided by the Licensed Insolvency Trustee or a Registered Qualified Insolvency Counsellor. When the terms of the Proposal and the counselling sessions have been completed, the Licensed Insolvency Trustee issues a Certificate of Full Performance of Consumer Proposal.
This is the first of five blogs I wrote for the MNP Debt Series on Consumer Proposals. Stay tuned for the next post in the series. The original blog post can be viewed here.
Lana Gilbertson is a Licensed Insolvency Trustee serving the Greater Vancouver and Vancouver Island regions. To learn more about how Lana can help, contact her directly at 604-637-1599.