Do You Need a Trustee to File a Consumer Proposal?

Filing a consumer proposal has become a popular option for people who are unable to pay their debts in full.  And yes, you do require a licensed trustee to file a consumer proposal.

It is always an option for you to informally propose some kind of compromise or settlement to a creditor on your own.  However, ceasing collections is voluntary and you are unlikely to receive that co-operation unless you can pay a significant portion of the debt in a very short time.

A consumer proposal is different because it is a formal proceeding pursuant to the Canadian Bankruptcy & Insolvency Act.  The advantages of a consumer proposal are obvious:

  • Your creditors are legally required to cease all collections activity
  • You retain control over all of your assets
  • It deals with all of your unsecured debts
  • You are not required to repay the full amount of the debt
  • Payment terms can be structured to fit your circumstances, with a total period of up to five years

Understandably, creditors don’t really want you to file a consumer proposal.  Their preference would be that you repay the full amount of the debt as well as the agreed upon interest.  However, they will usually agree to a consumer proposal when they see that it is better than the alternative, meaning that you would file bankruptcy and they would receive even less.

Can you file a consumer proposal on your own?  The answer is no.  You require the assistance of a trustee.  Any proposal you personally make to your creditors does not carry the power of the Bankruptcy & Insolvency Act. 

Can you hire a consultant to file a consumer proposal for you?  Again, the answer is no.  However, this question touches on a point of controversy.

A common tactic is for unlicensed debt consultants to advertise that they can help you with “government programs” to help reduce your debts by up to 70%.  Some of them will go out of their way to note that they are “not a trustee.”  All they are referring to is a consumer proposal.  The controversy is that you would be charged a consulting fee of a few hundred to a few thousand dollars, and then referred to a licensed trustee to actually file the proposal.  There is no need to pay that consulting fee when you can contact a trustee directly for no upfront cost.

The bottom line is that a large percentage of people these days are struggling with debt payments.  For many of those people, a consumer proposal is a good option to deal with their money problems.  One of the challenges is finding the right person to help you through the process.  Your best choice is to talk to a licensed trustee because a trustee is required to review all of your options in an open and unbiased manner.

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