Filing A Consumer Proposal in Ontario

A consumer proposal is a legally process between you and your creditors that allows you to settle your debts for less than what you owe. Available to anyone in Canada including residents of Ontario, it must be filed through a Licensed Insolvency Trustee. Unlike bankruptcy, you keep your assets while reducing your debts through manageable monthly payments. Once you successfully complete all payments under your consumer proposal, the remaining portion of your debts are legally discharged, meaning you are no longer responsible for paying those outstanding balances.

How to File a Consumer Proposal

If you’re considering a consumer proposal, here are the steps you’ll need to file a consumer proposal in Ontario:

1. Contact a Licensed Insolvency Trustee for a Debt Assessment

The first step in filing a consumer proposal is to book a free consultation with a Licensed Insolvency Trustee like Hoyes Michalos. During this consultation, your trustee will:

• Determine if you qualify for a consumer proposal based on your total debt level
• Explain all available debt relief options, including credit counselling, debt consolidation, consumer proposal, and bankruptcy
• Help you understand which debts can be included in a consumer proposal. A consumer proposal can help you manage unsecured debts including credit cards, lines of credit, personal loans, payday loans, tax debt and certain student loan debts.

2. Determine the Offer and Payment Plan

A consumer proposal can reduce debts by up to 80%. Your trustee will work with you to create a viable payment plan by:

• Reviewing your monthly income and expenses
• Assessing your assets and total debt obligations
• Calculating an affordable monthly payment amount
• Determining a fair total repayment amount for creditors
• Creating a realistic timeline for your proposal (proposals can last up to a maximum of 5 years)

Learn more about the cost of a consumer proposal.

3. File the Proposal & Gain Creditor Protection

Your trustee will prepare all the necessary paperwork to document your proposal to creditors. This will include information about your current finances as well as how much debt you propose to repay, how long your proposal will last and what your monthly payment will be.

Once your trustee files your proposal electronically with the federal government and court, you immediately receive legal protection through a ‘stay of proceedings’ which:

• Stops all collection actions against you
• Halts any existing wage garnishments
• Prevents creditors from starting new legal actions
• Allows you to stop payments on unsecured debts included in the proposal

4. Creditors are Notified

Your trustee notifies all listed creditors about your proposal.

• Creditors have 45 days to review the proposal
• During this time, your legal protection remains in place
• If you forgot to list a creditor, simply direct them to your trustee
• Creditors can request a meeting during this period

5. Potential Meeting of Creditors

Creditors have the right to ask for a meeting in order to discuss your proposal and ask questions. If creditors, totalling at least 25% of your debts, ask for a meeting then one must be held within 21 days. At this meeting, your creditors will vote to accept or reject your proposal or may propose a modified offer. Your LIT will attend the meeting with you and work as an intermediary to negotiate an offer that works for everyone.

6. Creditors Vote on the Proposal

If no meeting is required at the 45-day mark, your proposal is deemed to be accepted. If a meeting is held, creditors vote at the meeting. If a majority of the dollar value of your debts (51%) are voted in favour of the proposal, it passes and is binding on all creditors, even those who voted no.

7. Complete Your Proposal Requirements

To successfully complete your proposal, you must:

• Make all scheduled monthly payments
• Attend two mandatory credit counselling sessions

A consumer proposal is an interest-free repayment arrangement. You can pay off your proposal early if your financial situation improves.

8. Obtain Your Certificate of Full Performance

Once payments are completed you will receive a certificate that shows the terms of the consumer proposal have been completed and you will be relieved of any balance still owed from the debts that were in the proposal.

9. Begin Credit Rehabilitation

Many people are worried about having a consumer proposal appear on their credit report. However, most clients find they are able to begin the process of improving their credit score even while in a consumer proposal.

After filing a consumer proposal, you can rebuild your credit by:

• Obtaining a secured credit card
• Making all bill payments on time
• Monitoring your credit report regularly for reporting errors
• Following the financial and credit management strategies learned during counselling

Sample Consumer Proposal in Ontario

Let’s look at a typical Ontario consumer proposal example to understand how it works:

Suppose you owe different creditors a total of $45,000 in unsecured debts. Through a consumer proposal, you might offer to repay $15,750 (35% of your total debt) in exchange for eliminating all your debt. Here’s how the payments could work:

• 36-month plan: $437.50 monthly payments
• 60-month plan: $262.50 monthly payments (maximum allowed time period)

In either scenario, you would save $29,250 plus interest. Your Licensed Insolvency Trustee will help structure the payments to ensure they’re affordable for your budget while being attractive enough for creditors to accept.

Consumer Proposal Costs in Ontario

When filing a consumer proposal in Ontario, you should know:

• There are no upfront fees
• All fees are regulated by the federal government
• Trustee fees are included in your proposal payments
• You only pay one monthly payment that covers both your proposal and all administrative fees

Finding a Licensed Insolvency Trustee in Ontario

In Ontario, all consumer proposals must be filed through a Licensed Insolvency Trustee (LIT). Here’s what you need to know:

• LITs are federally licensed and regulated professionals
• Initial consultations are always free
• You can find a licensed trustee through the Government of Canada’s database
• At Hoyes Michalos we offer both in-person and virtual consultations
• Our trustees are available for Ontarians in all major cities and smaller communities

Never pay upfront fees to debt consultants or credit counselors who offer to create proposals or refer you to trustees – Licensed Insolvency Trustees provide initial consultations and proposal planning at no cost as part of their regulated services.

Ready to explore whether a consumer proposal is right for you? Contact a Hoyes Michalos Licensed Insolvency Trustee today for a free consultation. We offer flexible meeting options to suit your schedule and location.