Consumer Proposals: An Alternative to Bankruptcy in Ontario
What is a Consumer Proposal?
A consumer proposal is formal, legally binding deal you make with your creditors.
If you have more debt than you can handle, but don't want to go bankrupt, a consumer proposal may be a great solution.
For example, if you have $50,000 in credit card debts, bank loans, and taxes, and can't afford to pay the $1,500 per month in minimum payments, it may be possible to file a consumer proposal where you pay $500 per month over a period of up to five years, and at the end of the proposal the creditors write off the balance owing. You pay no further interest, and you end up with one manageable payment each month.
Why would my creditors accept a consumer proposal for less than the full amount owing?
Your creditors may be willing to accept the consumer proposal because it's a better option than having you file bankruptcy in Ontario, because the creditors may receive less money in a bankruptcy. it's a great solution for you because now you only have to worry about one, affordable monthly payment.
Of course every situation is different, and the exact amount you would be required to offer in a consumer proposal will depend on your personal situation. Here are more resources to help you understand consumer proposals:
Consumer proposals: the solution for you?
Watch a video about consumer proposals
Contact
a licensed proposal administrator today.
Should I file a consumer proposal, or go bankrupt?
This is a difficult question, and will depend on your individual circumstances. In general, if you have assets that you would lose in a bankruptcy (such as a house or a car), or if you would be required to make significant surplus income payments in a bankruptcy, a consumer proposal may be the best option. In addition, if you have the income to support at least partial payments to your creditors, a proposal is often the best option.
However, if your future income is uncertain (because you expect to be laid off or have your hours reduced), or if you don't own any assets, personal bankruptcy may be the best option.
What are the chances that my creditors will accept a consumer proposal?
In most cases a reasonable proposal will be accepted by your creditors. Creditors want to recover as much as they can, but they also know that if they say no to your proposal, you may go bankrupt. Since they don't want to risk getting even less in a bankruptcy, if the proposal offers them a greater return than a bankruptcy, they will generally accept a reasonable proposal.
I think I should file a consumer proposal; what's my next step?
If you are experiencing financial difficulty, we suggest you contact a licensed trustee to discuss whether a consumer proposal is an alternative to bankruptcy in your situation.
Our consumer proposal administrators and bankruptcy trustees will assess your situation and help you decide which option is right for you, and your family. The first meeting is free, and may help you to resolve your problems before they get out of hand.
If you think you're in trouble - contact a proposal administrator today.
Additional Resources:
Consumer proposals: the solution for you?