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It is a legal process which enables you to make an
offer to your creditors to modify your payments or to pay them a
percentage of what you owe. A proposal allows a fresh start without
going bankrupt. |
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Briefly the steps are: |
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Choose a Trustee such as
Frank J. Jaglowitz of Collins Barrow. |
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The Trustee will help you prepare a Statement of
Affairs which lists all of your assets, creditors, income, expenses
and other pertinent information. |
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Your finances will be reviewed and the Trustee will
assist you in preparing a proposal to your creditors. |
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After you make your proposal, most creditors are no
longer able to pursue you for collection of their accounts. |
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You make your payments to the Trustee who will pay
your creditors until the terms of your proposal have been met. |
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You will be required to attend two financial counselling
sessions. |
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Once you have met the terms of your proposal, you will
receive a document stating that you completed your proposal and you
will have no further obligation for the debts covered in your
proposal. |
Are there different types of proposals?
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Yes, there are two types: consumer proposals and
proposals under Division 1 of the Bankruptcy and Insolvency Act. |
What is a consumer proposal?
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A consumer proposal is an offer made by a debtor to
his or her creditors to modify his or her payments. For
example, you may propose that you will pay a lower amount each
month, but over a longer period of time. Or you may
propose that your creditors accept being paid a percentage of what
you owe. |
Who can make a consumer proposal?
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An insolvent person whose debts are less than $75,000,
not including their home mortgage. |
What are the fees in a consumer proposal?
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The fees are set by the government and are the same
across Canada. |
How is my consumer proposal accepted by the
creditors?
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Your creditors have 45 days in which to respond to
your proposal. If no creditors respond or your creditors vote yes,
your proposal is approved pending Court approval. However, if more
than 25% of your creditors request a meeting, one must be held in which
your creditors vote whether or not to accept your proposal. |
What if my proposal is accepted, and I fully meet the terms?
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When the proposal is fully performed, the
administrator must give a certificate of full performance to you and
the Official Receiver and you will be relieved of the debts that
were in the proposal. |
What if I stop making the payments and default on the performance of the
proposal?
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If you fail to keep the terms of your proposal, it may
be annulled. If you were insolvent prior to making the
proposal, you return to the same situation and your creditors would
have a claim against you for the amount owed to them before the
proposal, minus any amount you paid them during the proposal.
If you were bankrupt when the proposal was made and the court
subsequently annuls your proposal, you will be considered bankrupt
on the date of the annulment. |
What happens if my proposal is not accepted?
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You will no longer be protected by the Bankruptcy and
Insolvency Act and your creditors will be able to take legal steps
to recover their debts from you. The option of filing an Assignment
in Bankruptcy is still available. |
What if I owe more than $75,000?
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You may file a Division 1 Proposal. If this
proposal is rejected by your creditors, automatic bankruptcy
results. The fees are based on the Trustee's time charges as opposed
to a fee set by the Government. |
Are my spouse's assets or debts included in
my bankruptcy or proposal?
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No. Only assets owned by you are included. If assets
are jointly owned, then your portion may have to be sold. If most of
your assets and debts are joint with your spouse, then it may be
appropriate for a joint bankruptcy or consumer proposal to be made. |
Do I require a lawyer if I go bankrupt or
make a proposal?
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Generally, you do not require a lawyer to go bankrupt.
However, if you feel the need for legal advice, you can contact a
lawyer. |
What about my secured creditors if I go
bankrupt?
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In most cases, bankruptcies and consumer proposals do
not affect the rights of secured creditors. In certain
circumstances, if a creditor has a
valid security against your property (i.e., car or house), and if
you can afford monthly payments, financial arrangements may be made
with the secured creditor to keep the property and continue paying
for it. |
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| This web site is for general
information purposes only. The major sources of reference were the
Bankruptcy and Insolvency Act of Canada and the Executions Act of
Ontario.
Although every reasonable effort has been made to ensure the
accuracy and timeliness of the information contained herein, no
individual or organization involved in the preparing of this
information accepts any contractual or any other form of liability
for its content or from any consequence arising from its use. |
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