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Filing a Consumer Proposal in British Columbia
A consumer proposal is a legal process where you make an offer to your creditors to repay them on terms that are possible for you to meet based on your situation. In most consumer proposals, you offer to repay a portion of what you owe over a specific period of time. Consumer proposals are usually paid in monthly payments. Once you have completed your proposal, the remaining outstanding debt is forgiven. For this reason, many people who are struggling with debt in British Columbia choose consumer proposals.
A consumer proposal allows you to eliminate a portion of your debt while still paying your creditors something. For many people, this option is preferable to bankruptcy.
You can only include unsecured debts in a consumer proposal (much like in a bankruptcy). Unsecured debts are debts such as credit card debt, unsecured lines of credit, personal loans and other such debts. You cannot include debts such as mortgages or automobile loans. In addition, court ordered payments such as alimony and child support are not included in a consumer proposal.
When you file for consumer proposal in British Columbia (or anywhere in Canada, for that matter) you must do so with a licensed trustee in bankruptcy. Despite the name, these professionals are able to do more than just help you file for bankruptcy. A trustee in bankruptcy is called a “Proposal Administrator” when dealing with a consumer proposal.
Most trustees offer the initial consultation at no charge. During this consultation, the trustee will review your financial situation and explain the different options that are available to do. The available options will be different for each person since each financial situation is unique. If you decide to proceed with a consumer proposal, the next step is for the trustee to determine what a fair offer to your creditors would be.
Once the offer is prepared, it is sent to all of your unsecured creditors. You must include all your debts in your proposal to all unsecured creditors. You can’t leave any out. They will then have 45 days to decide whether or not they vote to accept the proposal. If the majority vote to accept, then all of your unsecured creditors are bound by the terms of the proposal. A majority is determined by the amount of money that you owe to each creditor. For example, if you owe $10,000 in total, then creditors who are owed $5,001 of the debt are considered the majority.
Payments are made directly to your trustee who will then distribute them to your creditors. All administration fees are taken from these payments so you do not need to pay anything extra.
If the proposal is accepted, your primary responsibility is to make the payments as outlined in the proposal. It is important that you make these payments as agreed. If you miss three payments that you have not been able to make up, your proposal will be annulled. This means that your unsecured creditors will be free to take legal action against you for the full amount of your debt. This is important since, once your proposal is accepted, you receive protection from your unsecured creditors. They are not able to contact you directly or send collection agencies after you to collect their debts. All communication will be done by through your trustee. In addition, most civil legal action against you to collect debts will stop as well. If you proposal is annulled, you stop receiving this protection.
As a part of the consumer proposal process, you will also need to attend two financial counselling sessions. The goal of these sessions is to provide you with information on budgeting and money management that will help you avoid ending up in financial trouble in the future. You will also learn what can be done to improve your credit rating once you have completed your proposal. This is an important step as it allows you to rebuild your financial life and put yourself on a better track.
If you are struggling with debt, you may wish to do what many in British Columbia have already done and speak with a licensed trustee in bankruptcy. A trustee will help you understand your options and provide you with the information that you need to make an informed decision. A consumer proposal may be an option for you, but once you have detailed information on all options, you’ll be in a better position to make a decision for your financial future.