Eligibility to File Consumer Proposal
Am I Eligible to Make a Consumer Proposal to My Creditors?
There are certain requirements you must meet to be eligible to file a proposal with your creditors. The first requirement to be eligible to file a consumer proposal is that you must be an insolvent person. To be insolvent means you must owe at least $1,000 and be unable to pay your debts as they become due for payment.
In order to meet the eligibility requirements to file a consumer proposal you must:
- Be a person, as businesses are not able to file consumer proposals for their debts;
- Your total debts must be under $250,000 (not including the mortgage on your principal residence only);
- You must have a steady income source, as you must be able to make the required consumer proposal payments – the more you owe, the larger your payments each month will be (or the larger your one-time lump sum payment would be);
- You cannot have any other proposal proceedings still in place;
- If you have a prior proposal that was annulled (cancelled), you are not eligible to file another proposal unless you have paid off all debts that were included in the proposal or had the debts eliminated by filing bankruptcy;
Your creditors must be “better off” (receive more payments) than if you were to go bankrupt.
Are Two People Eligible to File a Joint Consumer Proposal?
Often your debts will be shared with another individual, and you are jointly responsible for the debt.
Under the insolvency laws in Canada it is possible for you to file a joint consumer proposal with the other person who you have the debts with
The eligibility to file a joint consumer proposal is slightly different from a consumer proposal eligibility. For a joint consumer proposal filing you must:
The debts must be substantially held by the different individuals in a joint agreement;
The total debts must be less than $500,000 (not including the principal residence mortgage) which is double the $250,000 debt limit for a consumer proposal filed by a single individual;
If I already Filed Bankruptcy Can I Make a Consumer Proposal?
Section 66.11 of the Bankruptcy and Insolvency Act lays out the eligibility requirements to file a consumer proposal with your creditors:
In relation to filing a proposal the debtor making the proposal is known as the “consumer debtor” which is defined in the Bankruptcy and Insolvency Act as a “natural person who is bankrupt or insolvent and whose aggregate debts, excluding any debts secured by the person’s principal residence, do not exceed two hundred and fifty thousand dollars or such other maximum as is prescribed.”
Generally, people would want to make a proposal if they are already bankrupt if their income increases dramatically, as an increased income will mean your bankruptcy will last longer and cost you more. If you change to a consumer proposal you can reduced your monthly payment as the repayment term can be extended and this will be better for both you and your creditors (the main rule of a consumer proposal is that your creditors must receive more money than if you were to declare bankruptcy).
How Can I Learn More About My Eligibility to File a Consumer Proposal?
If you are considering making a consumer proposal, whether you are already bankrupt or not, it is important that you discuss the matter with a professional consumer proposal administrator (also known as a Licensed Insolvency Trustee) during a free, no obligation consultation.
The administrator will review your situation and help you determine if a consumer proposal is the right option for you to get out of debt.
To schedule a free consultation you can contact one of our local Licensed Insolvency Trustees.