Clients Currently in Consumer Proposal
If any of the following terms have recently become part of your vocabulary:
- Trustee Bankruptcy
- Debt Counselling
- Bankruptcy Referral
- Trustee in Bankruptcy
- Debt Consolidation
- Personal Bankruptcy Proposal
- Insolvent Creditor
- Financial Problems
- Consumer Proposal
- Credit Card Problems
- Proposal Refinance
- Financial Proposals
- Debt Restructuring
- Proposal to Creditors
and you have equity in your home, we may be able to help you without your having to declare Bankruptcy or file for a Consumer Proposal.
In the business of mortgage financing, the client(s) involved in a consumer proposal are considered an “unknown risk” to the world of lenders. In our opinion, the reason for this originates that if the borrower misses 3 or more payments the Trustee has the option/duty to void the proposal agreement in its entirety. Once the proposal is null and void the next option to the individual(s) is bankruptcy. The word “bankruptcy” as it pertains to someone’s immediate history is generally speaking perceived as a negative in the mortgage lending industry. Neither institutional nor private lenders generally tend to seek out opportunities that they perceive to be potentially problematic.
Take heart, however; there are institutions who will lend mortgage financing to individuals who are either:
- Considering the consumer proposal (disclosure)
- Mortgage financing in the midst of a proposal
- Mortgage financing to pay off a proposal
- Recently discharged from the formal proposal after completion.
Various conditions apply and each mortgage application is unique.
Re-established credit is the key term to a life after consumer proposal.
Fill out our application and submit via email or fax for our free professional advice on the options available to you. There is no charge for this service. You may find that preparation and presentation are the only things necessary in arranging mortgage financing/refinancing. You have nothing to lose in applying and everything to gain.
If you have questions regarding the proposal process hopefully you will find the FAQs below to be of assistance. Feel comfortable to contact us at any time, even if it’s just for clarification.
Keep in mind that you do have hope.
FAQs on Consumer Proposals
- What is a Consumer Proposal?
- What is the purpose of a Consumer Proposal?
- Who can make a Consumer Proposal?
- What are the Major Steps in a Consumer Proposal?
- What happens if the Consumer Proposal is rejected?
- What happens if the debtor stops making the payments?
- What happens if the debtor’s circumstances change?
- How long will the Consumer Proposal last?
- Does the debtor require a lawyer?
- How are secured creditors dealt with?
- How does a Consumer Proposal affect co-signers?
- What happens to the debtor’s assets?
- What happens to the credit cards in the possession of the debtor?
- What happens to the debtor’s credit rating?
- Who pays the Trustee?
- A summary of the steps in the Consumer Proposal process.
1. What is a Consumer Proposal?
A Consumer Proposal is a legal process which provides a debtor with an opportunity to modify his or her payments to creditors by extending the time for payment or reducing the total amount to be paid and without ongoing interest, usually over a period of time.
2. What is the purpose of a Consumer Proposal?
The purpose of a Consumer Proposal is to give a debtor or a bankrupt an opportunity to make a settlement with his/her creditors while avoiding bankruptcy. Executions, garnishees, and other actions by creditors as well as interest charges, will be stopped once the Consumer Proposal is filed.
3. Who can make a Consumer Proposal?
To qualify to make a Consumer Proposal a debtor must owe between $1,000 and $75,000 (excluding the mortgages on a personal residence). If the debts exceed $75,000, there are other provisions of the Act to deal with these debts.
An individual who is already in bankruptcy may make a Consumer Proposal, if the Inspectors, if any, have given their approval.
A joint Consumer Proposal may be filed by two or more individuals, if the Consumer Proposal can be reasonably dealt with together because of the financial relationship of the consumer debtors involved (e.g. married couple, common-law partners).
4. What are the Major Steps in a Consumer Proposal?
- Contact a Trustee
The first step in the process is to contact a Trustee. A Trustee is an individual or corporation who is licensed by the Government to administer Proposals.The Trustee will inform you of the effects of a Consumer Proposal and other alternatives and will prepare the necessary documents to file the Consumer Proposal with the Office of the Superintendent of Bankruptcy.
Upon filing of the Consumer Proposal with the Superintendent, the Trustee takes over all dealings with creditors and will send a notice of the Proposal, together with a copy of the Consumer Proposal and some financially relevant personal information of the debtor, to all known creditors. At the time of filing a Consumer Proposal, a creditor is generally prohibited from instituting or continuing any legal action, unless they obtain permission (leave) from the Bankruptcy Court which is granted only in special instances. Interest on the amounts owing to the creditors stops accruing at the time of filing the Consumer Proposal.
The unsecured creditors will have up to forty-five days to request a meeting to vote on the Consumer Proposal. If creditors do not respond, they will be considered to have accepted the Consumer Proposal.Unsecured creditors may request a meeting although this is not a common occurrence. If the unsecured creditors requesting a meeting are owed more than 25% of the total value of creditors who have responded to the Consumer Proposal, the Trustee will arrange a meeting to vote on whether to accept or reject the Consumer Proposal. At the meeting, if the majority in value of the unsecured creditors, who are voting, accept the Consumer Proposal, it will become binding on the debtor and all unsecured creditors.When a Consumer Proposal is accepted by the creditors, it is deemed approved by the Court after fifteen days have expired, unless a Court hearing to approve the Consumer Proposal is requested which again is unusual.
The Trustee will arrange for two counselling sessions during the Consumer Proposal. The counselling will help you understand the cause(s) of your financial difficulty, which sometimes is non-budgetary. These sessions will also provide information to assist you in managing your financial affairs in the future. You must attend both of the counselling sessions. Additional counselling is available if you need more assistance.
Once the Consumer Proposal is accepted, the debtor will make the payments to the Trustee, as provided for in the Consumer Proposal. This may involve a one-time lump sum payment or monthly payments for a period of no more than five years or a combination of both.”Dividend” payments will be made by the Trustee to the creditors in accordance with the terms of the Consumer Proposal.
Once all payments under the Consumer Proposal have been made and the two counselling sessions have been attended, the Trustee will issue a “Certificate of Completion” which shows that the terms of the Consumer Proposal have been completed. Any balance still owing to the unsecured creditors from the original date of the Proposal is legally forgiven.
5. What happens if the Consumer Proposal is rejected?
If the creditors reject the Consumer Proposal, the debtor will no longer be protected by the Act and the creditors will again be able to take steps to recover their debts. The debtor cannot file another Consumer Proposal. At that time, the debtor may wish to consider other alternatives, with the assistance of the Trustee.
6. What happens if the debtor stops making the payments?
- If you are required to make monthly payments and three of the monthly payments under the Consumer Proposal have been missed,
- If you are required to make the payments less frequently than monthly and you miss any payment for more than three months,
the Consumer Proposal will automatically be in default. The creditors will again be able to take steps to recover their debts, less any payments paid to them during the Consumer Proposal.
7. What happens if the debtor’s circumstances change?
The debtor is required to advise the Trustee of any changes in his/her circumstances that could jeopardize his/her ability to make the payments required under the Consumer Proposal. However, this will not change the amounts to be paid as agreed to in the Consumer Proposal.
8. How long will the Consumer Proposal last?
A Consumer Proposal can be made for any period up to a maximum of five years.
9. Does the debtor require a lawyer?
Generally, a lawyer is not required. However, if the debtor feels the need for legal advice, he/she may retain a lawyer.
10. How are secured creditors dealt with?
If a creditor has a lien on any assets (known as a secured creditor), they are not usually bound by the Consumer Proposal. Examples would include a car loan or a loan secured by a lien or furniture. In such cases, the debtor may wish to do one of the following:
- surrender the secured asset to the secured creditor and obtain a receipt. Any balance left due after the asset has been sold by the secured creditor may be a claim in the Consumer Proposal, depending on Provincial legislation,
- make arrangements to continue to pay the secured creditor in order to keep the asset.
11. How does a Consumer Proposal affect co-signers?
Consumer Proposals will not cancel the liability of anyone who has guaranteed or co-signed any loans. These guarantors will still be responsible for the debts less any payments the creditor receives from the Consumer Proposal.
12. What happens to the debtor’s assets?
The assets generally remain with the debtor. This includes any assets acquired during the term of the Consumer Proposal such as gifts, inheritance or winnings. The debtor may however voluntarily surrender specific assets as part of the Proposal.
13. What happens to the credit cards in the possession of the debtor?
The credit cards generally remain with the debtor. However, one should recognize that the granting of the credit cards is a privilege provided at the option of the credit company. When the credit card company learns about the Consumer Proposal they may suspend this privilege.
14. What happens to the debtor’s credit rating?
Once the level of debt has become so great that a Consumer Proposal is required, the credit rating is usually at its lowest. The ability to obtain and use credit after completion of the Consumer Proposal will depend upon the debtor’s ability to convince a potential lender of his/her future personal financial maturity.
The Trustee’s fee is based on a tariff set by the Government. It is deducted from the payments made by the debtor, before payments are made to the creditors.
16. A summary of the steps in the Consumer Proposal process.
- Contact the Trustee and file the Consumer Proposal.
- The creditors vote on the acceptance of the Consumer Proposal.
- Once the Consumer Proposal is accepted, the debtor makes payments to the Trustee, who in turn makes payments to the creditors according to the terms of the Consumer Proposal.
- If the Consumer Proposal is not accepted, the debtor will have to consider other alternatives.
- If the debtor defaults in his/her payments, the Consumer Proposal will be annulled.
- Attend counseling sessions as required.
- Once the payments are completed and the two counseling sessions have been attended, the Trustee issues a Certificate of Full Performance of Consumer Proposal
Mortgage Financing or Refinancing During a Consumer Proposal
Genesis Associates Ltd. has an institutional lender who will lend up to 80% (conditions do apply) of the value of the home when purchasing to clients that are currently in a Consumer Proposal. This same institutional lender will allow those individuals who are currently in a Consumer Proposal the opportunity to consolidate monthly expenses in refinancing an existing mortgage.
This mortgage must include the balance that is owed to the trustee to complete the obligation under the terms of the Proposal.
- All payments to the trustee must be paid as agreed under the terms of the Consumer Proposal and in good standing
- Any debts not included in the consumer proposal must be paid
- 12 months recent bank statements will be required to confirm that the existing mortgage(s) is paid as agreed
- Subject to lender approval and all other standard guidelines
- The Institution will charge a “commitment fee” which will be paid out of the mortgage advance at the time of closing. This program offers many advantages to those individuals that qualify:
- It provides qualifying individuals the ability to complete the Consumer Proposal sooner than the terms specified;
- Typically the new mortgage payment will be less that the total payments currently being paid to their existing mortgage holder(s) and the trustee, thus providing individuals with additional monthly resources, and;
- Puts clients in a position where they can re-establish their credit sooner than if they were to continue under the terms of the Consumer Proposal.
By having the Consumer Proposal paid out sooner, the administrative costs to maintain this are eliminated which in turn reduces the cost to the Trustee.
Office of the Superintendent of Bankruptcy Canada
Canadian Bankruptcy and Consumer Proposal Statistics