Consumer Proposal In Ontario: An Alternative To BankruptcyPosted on: April 21, 2019
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Most people don’t want to declare bankruptcy in Ontario. Therefore, when they would go to a licensed insolvency trustee, they would be looking for an alternative to bankruptcy. The alternative that a trustee would provide is called a consumer proposal in Ontario. A consumer proposal is an agreement between what the debtor is willing to offer and what the creditor is willing to accept to resolve a financial debt problem. In a consumer proposal, the debtor will have an agreement with creditors through a trustee. This agreement is under the protection of Bankruptcy and Insolvency Act Law.
Benefits of A Consumer Proposal
A consumer proposal would allow the debtor to resolve his financial debt problems without going bankrupt. The consumer proposal removes the ordinary options that creditors have to collect money from the debtors whenever they are behind with their payments. This means that creditors can’t sue the debtor when he is unable to pay his debts. Through the proposal, creditors are enforced to pay attention to what a debtor offers to them.
Since a consumer proposal is an open contract, the debtor can accelerate his payments. He can pay more than the agreed monthly plan, thus, speeding up the term.
How Consumer Proposal Works In Ontario
If a debtor becomes insolvent and can no longer pay his contracts, the courts are there to try and find a just resolution to it. Hence, the debtor will ask the court to discharge him from his debts.
Creditors can’t just accept any proposal that a debtor offers. It has to something reasonable. Therefore, a consumer proposal involves a process. First, the debtor has to figure out how much he can afford to pay on a monthly basis. As an alternative to bankruptcy, a consumer proposal is a matter of figuring out the budget of the debtor. Once he makes up his mind as to how much he can pay monthly, the trustee has to prepare all the paper works. As soon as the contract is ready, the trustee would give it to the creditors. Then, creditors will decide whether they accept the offer or not. When the creditor accepts the offer within the given period of time, then comes a new deal.
For example, you owe a creditor $40,000 worth of consumer debt. You make a proposal offering to pay $15,000. If the creditor finds it as it’s for their best interest, they would accept the offer. If they don’t accept it, negotiations may take place as part of the process. When the creditor accepts a debtor’s proposal, the court will then approves or ratifies it. The debtor will then make his monthly payments.
The consumer proposal process can take from 9 months to 3 years depending on circumstances. Sometimes, it can take longer than 3 years. However, for most people, the proposal has a straightforward process. It is just following administrative rules and as long as the debtor hasn’t done anything fraudulent, the courts will end up releasing him from his debts.
Consumer Proposal vs Bankruptcy
While both consumer proposal and bankruptcy have some things in common, such as both are court-supervised and release the debtor from being sued when he’s behind from his payments, consumer proposal and bankruptcy are different. The difference between bankruptcy and consumer proposal is that in the proposal, the debtor makes a deal with the creditor. In bankruptcy, there is no need for a deal with the creditor. The debtor would be asking the courts to release him from his debts. Since the debtor has signed contracts, the creditor has a right to expect those contracts to be fulfilled. Furthermore, the basic laws of contracts are there for a reason and quite valid. The number of Consumer proposals in Ontario exceeds the number of bankruptcies.