At Faber, our objective is to provide you with forward thinking debt solutions. That means understanding your personal situation, exploring the options and finding the perfect debt resolution for you. Our Licensed Insolvency Trustees are experts at this.
One of the most popular alternatives to personal bankruptcy in Canada is a consumer proposal, a legal process administered under the Bankruptcy and Insolvency Act. A consumer proposal gives you the flexibility to negotiate a settlement to pay all or a portion of your unsecured debts over a maximum of five years.
When a consumer proposal is filed, you receive immediate protection against further action from unsecured creditors, including the Canada Revenue Agency for income tax debt or GST debt. Telephone calls, collection or legal action, and wage garnishments stop. Bank account seizures and unencumbered asset seizures will be terminated immediately.
If you owe between $1,000 and $250,000, you may file a consumer proposal. The $250,000 maximum threshold does not include secured debts like a mortgage on your principal residence.
If you owe more than $250,000 you may want to consider filing for Personal Bankruptcy.
A consumer proposal is likely to be accepted by your unsecured creditors as it provides a “greater financial recovery” for your unsecured creditors than they would receive if you file a personal bankruptcy. When we use the term “greater financial recovery” it could include one or more of the following:
- a one-time lump sum payment
- distributing payments to your unsecured creditors more frequently than in a bankruptcy
- reduced administration fees
- paying more into the consumer proposal on a monthly basis or for a longer period of time than would be required in a personal bankruptcy
A consumer proposal must be made through a federally regulated Licensed Insolvency Trustee who is known as the Proposal Administrator. The Proposal Administrator will file your consumer proposal and send notice to your unsecured creditors who respond with a voting letter to either accept or reject your consumer proposal. If the unsecured creditors vote to accept your consumer proposal by a simple majority (50% or more) and the court approves it, your consumer proposal becomes a binding legal contract that applies to all your unsecured creditors, even if some of your unsecured creditors voted to reject your consumer proposal or did not vote at all.
Fortunately, the unsecured creditors are more likely to accept consumer proposals, as they know they will receive a “greater financial recovery” from your consumer proposal than they will receive from a personal bankruptcy.
If the unsecured creditors vote to reject your consumer proposal, then we must explore other options to resolve your unsecured debts.
Do you have questions? Contact one of our Licensed Insolvency Trustees.