Consumer Proposal Eligibility: Do You Qualify?
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By Bromwich+Smith Staff | 560 words | Reading Time: 3 minutes | Date: 2022/02/03
First of all, what is a consumer proposal? A consumer proposal is a legally binding agreement between you and your creditors to pay a reduced amount of the debts you owe within five years. Creditors will often agree to these arrangements to ensure they receive payments with a regular schedule rather than waiting for a full payment that may not come. To that point, your monthly payments could turn out to be lower than what you may pay otherwise, plus they won’t increase even if your income rises.
Due to its legally binding nature, a consumer proposal must be administered by a Licensed Insolvency Trustee, according to the rules governed by the Bankruptcy and Insolvency Act of Canada.
While fees vary, your overall fees are part of your monthly payment and there will be no upfront costs. Your Licensed Insolvency Trustee will be sure to clearly outline this for you.
Do you qualify for a consumer proposal?
In order to qualify you must be insolvent to consider a consumer proposal but these are the specific criteria to qualify:
- You must be a person to file (businesses may not file consumer proposals).
- You are insolvent, that is you are unable to pay your debts as they become due.
- Have total debts less than $250,000 (excluding the mortgage on your principal residence).
- Have a stable source of income, to ensure that you will be able to make monthly payments.
- Have no prior proposal proceedings that are still open.
Can you file a joint consumer proposal?
You and a spouse (or any two individuals) can file a joint consumer proposal if the debts between you are substantially the same. You can also file a consumer proposal during a bankruptcy, but the date of the consumer proposal will be listed as the same as the bankruptcy, so you can’t add debts incurred during bankruptcy to a consumer proposal.
You will be jointly responsible, through co-signing or guaranteeing a loan. Usually, but not always, this occurs with a couple who are living together.
Can I file a consumer proposal if I am bankrupt already?
Yes, this is possible but you may want to consider this if your situation changes after declaring bankruptcy. Changing to a consumer proposal might reduce your monthly payment (by extending the repayment term) and therefore make the payments a bit more manageable.
If you are eligible for a consumer proposal..
Even if you are eligible, a consumer proposal is best suited to those with money to pay their creditors monthly, and who own assets they don’t want to lose during bankruptcy. However, all of this can be discussed with your Licensed Insolvency Trustee in order to determine the best solution for conquering your debts.
Bottom-line, only a Licensed Insolvency Trustee like Bromwich+Smith has the legal authority to administer a Consumer Proposal for you once eligibility has been determined. In fact, if an online or offline debt relief service offers a Consumer Proposal, ask if they are Licensed Insolvency Trustees. If they are not, they will be required by law to engage an external Trustee, which could add unnecessary fees to the process.
Remember, we’re here to help you find the solution that works best for you. At Bromwich+Smith, we do this by offering an initial free, no obligation, confidential consultation by phone 1-855-884-9243 or video. You can also request a call back at our contact us page. We’re working with you to rebuild your worth.