Banks don’t want you to consider government options (bankruptcy or consumer proposals); they’d prefer to sell you yet another (consolidation) loan. Trustees want you to consider a consumer proposal before bankruptcy (they earn more that way). Debt-negotiation companies demand you pay upfront based on the percentage of your debt, regardless of their results.

If the consumer proposal is your best option, the following process is followed.

To find a trustee in your area, consult the Yellow Pages under Bankruptcy. The trustee will work with you to develop a consumer proposal that works for both you and your creditors.

Once your proposal is filed, you will stop making any payments directly to your unsecured creditors, any salary garnishments will stop and lawsuits against you by creditors will be stopped.

Her or his proposal will include a report on your personal situation and the causes of your financial difficulties.

Any creditor with a proven claim may accept or object to the proposal. This can be done either prior to or at the meeting of creditors, if one is held. It can also be done within 45 days following the filing of the consumer proposal.

Any acceptance of, or objection to, a proposal counts as a vote at the meeting of creditors, if one is held, provided it is received at or before the meeting.

Any objection received is not considered a request for a meeting of creditors and will not count as a vote on the proposal unless there is an obligation to call a meeting of creditors.

A meeting of creditors will be called if one is requested by one or more creditors having at least 25% of the value of the proven claims. This request must be made within 45 days of the filing of the proposal. The OSB can also direct the trustee to call a meeting of creditors at any time within this 45-day period. A meeting of creditors will be held within 21 days after being called.

At the meeting of creditors, the creditors vote to either accept or refuse the proposal.

The number of votes corresponds to the total dollar value of the proven claims. The vote is decided by a simple majority of this dollar value (i.e., 50% plus one). For example, if the proven claims total $150,000, and if the creditors voting “yes” to accepting the proposal are together claiming at least $75,001, then the proposal will be deemed accepted and all other unsecured creditors must accept it as well. (In the event there is no quorum of creditors at the meeting, the proposal will be deemed accepted by the creditors.)

If no obligation has arisen to apply to court within 15 days after the acceptance or deemed acceptance by the creditors, the proposal will be deemed to have been approved by the court.

If no meeting of creditors is requested within 45 days of the filing of the proposal, the proposal will be deemed to have been accepted by the creditors, regardless of any objections(s) received.

If no obligation has arisen to apply to court within 15 days after the deemed acceptance, the proposal will be deemed to have been approved by the court.

If your consumer proposal is accepted, the following conditions apply:

• you will be responsible for paying either a lump sum or periodic payments to the trustee and adhering to any other conditions in the proposal;
• you retain your assets so long as you make your payments to your secured creditors;
• you must attend two financial counselling sessions; and
• the proposal will be on your credit record for the duration of the term plus, depending on what province you live in, a few years thereafter.

If your proposal is not accepted, the choices are as follows.

• make changes to the proposal and resubmit it for consideration;
• consider other options for solving your financial problems; or
• declare bankruptcy.

If you meet the conditions in the proposal in full, you will be legally released from the debts included in the proposal.

However, if you are making monthly payments and miss three payments, or if your payment schedule is less frequent but your last payment is more than three months past due, the proposal will be deemed annulled. This means your creditors will be able take action to collect the money you owe them, unless the court has ordered otherwise, or unless an amendment to the consumer proposal has been filed. A consumer proposal that has been deemed annulled may be revived under certain conditions.

The debtor must meet the following obligations:

• disclose all of his or her assets (property) and liabilities (debts) to the trustee;
• attend the first meeting of creditors (if a meeting is requested by the creditors);
• attend two counselling sessions;
• advise the trustee in writing of any address changes; and
• generally assist the trustee in administering the proposal.