To file a consumer proposal, you must do so through a Consumer Proposal Administrator, who is also a Licensed Insolvency Trustee. No-one else can file a formal consumer proposal in Canada.
A consumer proposal is a legal debt settlement option filed under the Bankruptcy and Insolvency Act of Canada. That means that you receive all the creditor protection afforded in a bankruptcy, while avoiding declaring bankruptcy.
The giving of credit and debt advice has become a growing industry and it is difficult for the average person to know where to turn. Most people who are looking for help with credit and debt problems want to be able to make smaller payments or to have a settlement negotiated for their debts. There are many companies offering these services so how do you know where to turn. When researching online, your results are only as good as the source you have found.
The credit counselling industry is changing. Historically, small, local not-for-profit credit counselling agencies were a resource for budgeting and debt management help. Today, these services are consolidated in a few large, national, credit counselling agencies. They offer a program called a debt management plan which required repayment of 100% of your debts. They earn their fees from two sources: typically they keep 10% of what you pay into the DMP and they typically receive a donation back from the creditors of up to an additional 20%.
This is one of the fastest growing, and evolving areas of debt management in Canada. Responding to abuse by unlicensed debt settlement companies, provincial governments began to crack down on most debt settlement practices. One of the broadest changes was to ban up-front fees and limit debt settlement fees in general. The result: these agencies adapted. Instead of doing their own negotiating, they now advertise consumer proposals and charge fees to ‘process your paperwork’ and ‘work on your behalf’ only to refer you to a licensed Consumer Proposal Administrator. They charge the consumer and these additional fees can add up to several thousand dollars.
It is important to note that you do not need a referral to see a Consumer Proposal Administrator. All of the trustees on our site offer a FREE, initial, no-obligation consultation.
Licensed Insolvency Trustees
Licensed Insolvency Trustees act as consumer proposal administrators in a proposal. Unlike the other two credit and debt advisors, they are regulated by the Bankruptcy and Insolvency Act which rules what they can and cannot do and what their fees can be. The options they offer, including a consumer proposal, are court approved so it will be binding on creditors and prevent legal action from being taken against you. If they cannot assist you, they can offer some advice on how to deal with your problem. Finally there is a regulatory body that oversees the work they do that ensures quality and that everything is done correctly.
Consumer proposal administrators are paid by tariff, with fees set in accordance with bankruptcy legislation. These fees are paid out of your agreed proposal payments, in effect they are deducted from monies paid to the creditors. The administrator is paid 100% of the first $1,500 on receipts in the proposal (to cover administrative costs) and 20% of payments after that.
Your Consumer Proposal Administrator is responsible for:
- Conducting your initial assessment to help you determine if you qualify for a consumer proposal and if that is the correct debt relief solution for you.
- Helping you prepare your proposal, including determining how much you will need to offer to ensure your proposal is acceptable to both you and your creditors.
- Filing the official paperwork with the Office of the Superintendent of Bankruptcy which begins the consumer proposal process and provides your stay of proceedings. This means any wage garnishments and collection actions stop.
- Communicating the terms of your proposal to your creditors by mailing or faxing the document to each creditor. He or she also collects, records and approves claim forms submitted by your creditors, the amount of which is used to access the votes received in your proposal.
- 45 days after the filing of your proposal, your Consumer Proposal Administrator counts the votes received for and against your proposal.
- If a creditors meeting is called, they will act as administrator at the meeting and can help you negotiate additional payment terms if that is necessary.
- Once your proposal is approved, they complete all administration duties including collecting payments, dealing with your creditors, arranging for your credit counselling sessions and making payments to your creditors in settlement of your debts.
- Upon successful completion of your proposal, your Consumer Proposal Administrator will issue you a Certificate of Completion.
Your Consumer Proposal Administrator will work with you to find a debt repayment plan that you can afford. After looking at your financial situation, they can help you decide if a consumer proposal is your best option. If it is, they will explain the process and help you make an informed decision.
Contact a local Consumer Proposal Administrator today. Let us help you get out of debt.