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There are many options available to people who have debt loads which they are finding difficult to reduce. They normally find themselves in positions where they are paying monthly minimums on their credit cards or making partial payments on their debts. With interest charges on many debts being over 20% they find that the principal owing does not go down. At this point it’s time to take stock and look at the options available.

There are really four options open to you to manage your debts:

Every option has its advantages and disadvantages, but the option being chosen by many Canadians today is to filing a consumer proposal in Ontario as it offers a number of significant advantages.

Toronto Consumer Proposal Helped Torontonians To Avoid Bankruptcy For More Than 34Years

This is a formal procedure, regulated by the Federal government, under which you make an offer to all of your creditors to pay them a portion of what you owe them, in full settlement of your debts. If they accept your offer then your debts are effectively reduced to the amount you have agreed to pay them.

Why Would Your Creditors Accept Your Proposal

When you do a consumer proposal, the amount you offer to pay will be determined by your specific circumstances. Specifically:

  • the amount of your debts,
  • your after tax income,
  • the number of dependents,
  • your monthly living expenses, and
  • what your creditors could have received in a bankruptcy.

From this information your creditors will generally conclude that what you are offering to pay is fair and is likely more than they would get if you were to declare bankruptcy. They will also factor in the savings to them of your proposal versus having to pursue their claims through collections or legal actions.

What are the Benefits to You of a Consumer Proposal

  1. rebuild-your-credit-ratingsYou’re allowed to keep all of your assets; your house, your car, any RRSP’s or RESP’s. This is important as these items are the things you’ve worked hard for and on which you will have to rely when it comes to retirement
  2. It’s affordable as the amount that you have offered to pay can be paid over a maximum of 60 monthly installments. These payments can be built into your household budgets. This should help you avoid further problems down the road
  3. Any and all legal actions against you including wage garnishments are stopped. The parties making these claims against you are legally obliged to desist by federal regulation. Many of the other options do not offer this benefit and you will have to negotiate with each legal claim separately.
  4. You no longer have to deal with your creditors calling for collection. Once your proposal is accepted, ALL of your creditors will be bound by this. Your obligation is to continue to make your monthly payments.
  5. It may be a better option that bankruptcy. This will depend on your specific circumstances, but majority of people are doing consumer proposals in Ontario today rather than filing for bankruptcy protection. (please contact our bankruptcy trustees to determine your best financial needs)


How to file a Consumer Proposal

As a consumer proposal is an agreement regulated by the government, it must be administered by certified proposal administrator. You will need to meet with an administrator who will review your specific circumstances, and work with you to determine what a fair offer to your creditors would be. This offer would then be submitted to your creditors who have 45 days within which to accept your offer. If accepted by a majority, all of the benefits described above come into effect upon signing. If they do not accept your offer, which is not common if it is fair, then you and your administrator can revise it and submit a new offer. During this negotiation stage, you are still protected from your creditors that is, they cannot take any steps against you to collect upon the debt.

Once the process in underway it is important that you continue to make your monthly payments so that at the end of the period, usually 60 months, you can be given a Certificate of Full Performance, the effect of which is to legally forgive these debts. From this point onward you can start to rebuild your credit and plan for a better financial future.



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