What is a consumer proposal?

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A consumer proposal is a deal you make with your unsecured creditors, with the help of Hoyes, Michalos & Associates Inc., to make payments on your account over time. A consumer proposal is not a loan, it is an agreement in writing between you and your unsecured creditors. A consumer proposal does not get rid of a mortgage payment or car payments unless you get surrender the asset (house or car) when you file the proposal. The amount of money you pay under a consumer proposal depends on the amount of money you owe, and what your budget is. We will review your individual situation and discuss a payment plan that is suitable for you. A consumer proposal is available to individuals who owe less than $75,000 (not including the mortgage on their home). If you owe money than $75,000 you can file another type of proposal known as a “Division 1 proposal. Call us for more details.

Once the consumer proposal has been filed, the creditors have 45 days to vote on your consumer proposal. The proposal is accepted if the majority in dollar value of the unsecured creditors accepts it. They will vote yes, no or they can also choose not to vote. If the proposal is accepted, you continue making the scheduled payments until the proposal is paid in full. If the creditors reject the consumer proposal they usually offer a counter proposal. For instance, they may offer to accept the consumer proposal if the debtor offers payments for a longer period of time. The maximum term for a proposal is 60 months (5 years).

If you file a consumer proposal, unlike bankruptcy, you do not lose your assets, income tax or GST refund. If you find that in the future, your situation changes and you can no longer afford the payment, you can offer an amendment to the proposal.

Sample consumer proposals

Example A
Debtor brings home $2,500 per month. He has various credit cards totaling $25,000. The debtor offered a consumer proposal of $300 per month for 48 months and it was accepted by the unsecured creditors.

Example B
Debtor brings home $3,000 per month. He and his spouse have credit cards totaling $35,000. He and his spouse offered a consumer proposal of $300 per month for 48 months. He owed $20,000 to one credit card and that company rejected his proposal but offered a counter proposal of $400 per month for 48 months. The debtor and his spouse agreed to the counter offer and the proposal was accepted.

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