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Filing Multiple Consumer Proposals

Can You File A Consumer Proposal Twice?

If you’ve filed a Consumer Proposal before, you know that completing it gives you a sense of relief and accomplishment. A Consumer Proposal can also help you get back on track financially. Unfortunately, life events sometimes put you in a position where you might consider filing multiple Consumer Proposals.

Most financial matters are regulated in Canada, so there are some rules. The good news is if you’re overwhelmed by debt payments again, filing another or multiple Consumer Proposals is allowed.

Filing a Consumer Proposal

You must meet certain conditions to file a Consumer Proposal. If you meet the criteria, you can file a second. Consumer Proposal rules state how you must file, the amount and type of debt you can include, and the information you must provide.

What is a Consumer Proposal

A Consumer Proposal is also called a Consumer Debt Proposal. It’s an agreement your Licensed Insolvency Trustee files with the OSB (Office of the Superintendent of Bankruptcy). It’s legally binding. It can reduce your debt and extend your time to repay it. Your creditors must agree to the terms of the Consumer Proposal.

If your debts exceed your assets or you don’t have enough income to pay your bills and creditors, you may want to consider this debt relief option.

Who can file a Consumer Proposal?

Consumer Proposals often involve asking creditors to accept less than you owe them. Due to this, you must meet the following criteria before you can file:

  • You must prove that you’re insolvent. Being insolvent means you don’t have enough income or assets to pay your creditors.
  • You need to show that you do have enough income to make the agreed payments.
  • You cannot have an open Consumer Proposal. If you had a Consumer Proposal in the past, it must have been discharged before you can file another one. 

How to file a Consumer Proposal

In Canada, a Licensed Insolvency Trustee (LIT) must file the Proposal for you. A LIT will develop a proposal and submit it to your creditors. You can proceed if most creditors agree to accept your Consumer Proposal.

The amount and type of debt you have

Debts included in a Consumer Proposal are unsecured debts. Unsecured debts include:

  • Credit cards.
  • Lines of credit.
  • Unsecured loans.
  • Overdraft protection.
  • Outstanding taxes to the Canada Revenue Agency.
  • Payday loans.
  • Student loans if you haven’t been a student for over seven years.

Consumer Proposals exclude secured debts like car loans and mortgages. Secured debts aren’t included because your creditor can exercise their right to seize and sell the asset to settle your debt. Other debts you can’t include in your filing are:

  • Fines and penalties issued by a court.
  • Alimony and support payments or obligations.
  • Any debt you have due to fraudulent activity.
  • Student loans if you’ve been a student in the last seven years.

Your debt must fall between a minimum of $1,000 and a maximum of $250,000 to file a Consumer Proposal. If your debt is more than $250,000, other options are available to help you.

The information your LIT needs from you

Before your LIT can file a Consumer Proposal on your behalf, they’ll need accurate information about your income, assets and liabilities.

There are two reasons for this. First, your LIT needs to know you don’t have enough income or assets to pay your debts. Second, a Consumer Proposal involves paying your LIT, who then distributes the money to your creditors. So you need to show you can manage the payments.

If filing a Consumer Proposal is the best solution for your debt, your LIT will complete and submit the following documentation to the OSB:

  • An Application for Proposal.
  • A Statement of Affairs showing your debts, assets, budget and cash flow. It shows the payment you can afford with your Consumer Proposal.
  • A Trustees Report on the Proposal to show what creditors will get if they accept the Consumer Proposal vs. what they’ll get if you file for Bankruptcy.

Your creditors can choose to accept or decline your Consumer Proposal. If the majority accepts it, you can proceed.

Filing multiple Consumer Proposal

The same process applies whether you’re filing twice or need to file multiple Consumer Proposals. However, there are a few additional conditions you need to be aware of.

  1. Your most recent Consumer Proposal must be complete and discharged before you file another one.
  2. If you acquired more debt, you can’t file another until the existing one is complete.
  3. You can’t file another Consumer Proposal if you let your payments lapse on your existing one. Missing three payments will cause it to be annulled. If this happens, you may have to file for Bankruptcy.
  4. Your creditors have to agree to accept your Consumer Proposal’s terms before you can proceed with it. If they see that you’ve filed before or have filed multiple Consumer Proposals, they may not agree to another.

Benefits of a Consumer Proposal

Filing a Consumer Proposal has some benefits and some drawbacks. Having a LIT assess your financial situation will be the best way to determine if this option is the optimal way for you to manage your consumer debt.

The benefits of Consumer Proposal are:

  • It can reduce your debt by up to 80%.
  • You only have one payment to manage.
  • It allows you to keep your assets, including your home.

Possible drawbacks of a Consumer Proposal are:

  • Your credit rating will decline to an R7.
  • It can take up to five years to become debt free.

Despite the drawbacks of a Consumer Proposal, it’s a great solution for many people:

  1. It provides similar benefits to Bankruptcy but allows you to keep your assets.
  2. The Consumer Proposal will drop off your credit report much sooner than a Bankruptcy will.
  3. It’ll be easier for you to rebuild your credit.

An R7 on your credit report from a Consumer Proposal is less damaging than an R9 from a Bankruptcy, and the Consumer Proposal will be purged from your report sooner than a Bankruptcy.

Filing multiple consumer proposals or a second Consumer Proposal is possible if you find yourself overwhelmed by debt. Our LITs at Adamson and Associates will work with you to find the right solution for your debt. Call us today at 519-310-5646 for a free consultation so you can be on your way to a debt-free fresh start.

John Adamson, Licensed Insolvency Trustee Ontario

John Adamson, CPA, CMA

John is a Licensed Insolvency Trustee (1994), a Chartered Insolvency and Restructuring Professional (CIRP – 1994), and a Chartered Professional Accountant with a Certified Management Accounting designation (CPA, CMA – 1992). His experience includes more than 25 years of helping individuals, small businesses, their owners and even lenders, find solutions to their debt problems.

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