How does someone file a consumer proposal? What is the process?
The process of filing a consumer proposal begins by seeking the help of a licensed trustee in bankruptcy who is qualified to act as an “administrator” in the consumer proposal. He or she will review and assess your financial situation, and advise you of your alternatives to achieving a debt settlement with your creditors, including filing a consumer proposal.
If a proposal is the appropriate choice, the administrator will provide advice as to what kind of a proposal may be best for you and your creditors and may have a greater chance of succeeding.
As the first step in the consumer proposal process, the administrator will prepare the consumer proposal documents for you to sign and will register them with the Office of the Superintendent of Bankruptcy. The proposal will also be sent to all your creditors.
The administrator then prepares and sends a report which summarizes your assets and debts. In addition, he/she provides an opinion about whether the proposal is considered fair and reasonable and whether he/she, the administrator, believes you will be able to perform it.
What happens after a proposal is filed?
Following the receipt of the proposal and the administrator’s report on it, each creditor will have 45 days to file a proof of claim with the administrator and to submit a vote either for or against the proposal. Once the consumer proposal is filed, all collection actions by unsecured creditors should cease.
How does a proposal get accepted?
Your consumer proposal will be deemed accepted if a majority of voting creditors, by dollar value, vote in favour of it. Only those votes received by the administrator within the 45 days are counted for voting purposes. If none of the creditors respond with a vote, then the proposal will be deemed to have been accepted. However, if more than 25% of the votes received are not in favour of the proposal, the administrator must call a meeting of creditors at which a formal vote is held.
If a sufficient number of creditors accept the proposal, there will be a deemed court approval 15 days later. In some circumstances an actual court hearing for approval may be required, but this is uncommon.
Once approved by the court, the consumer proposal will become binding on you and your creditors, and you will have to meet its terms.
What happens if the proposal is rejected?
If the proposal is rejected, you will no longer be protected by the stay of proceedings under Bankruptcy and Insolvency Act. The administrator will within 5 days notify you, all your creditors and the Superintendent of Bankruptcy of this fact. Your creditors will then be able to continue to take legal steps to recover their debts from you and you may need to consider other alternatives, such as bankruptcy.
What if my proposal is accepted, and I fully meet the terms?
If the proposal is fully performed the administrator will, as the last step in the consumer proposal process, issue a certificate of full performance and you will be relieved of the debts that were in the proposal.
What if I stop making the payments and default on the performance of the proposal?
If you fail to keep the terms of your consumer proposal, it may be annulled. You will then return to the same situation you were prior to filing of the proposal. Your creditors will still have a claim against you for the amount you owed them before the proposal was filed, less any amounts they received during the proposal.
If you have any questions regarding filing a consumer proposal and the consumer proposal process, please contact one of our B.C. bankruptcy trustee offices for a free consultation. You can also send us an online request for a Free Case Evaluation and we will provide you with our feedback in the next 24 hours.