In every proposal, whether Consumer Proposal or Division 1 Proposal, there are certain steps that take place as illustrated in the diagram below.
Click on each step to learn more
1. Initial consultation with a Trustee in Bankruptcy
Initial consultation with a licensed Trustee who will perform a financial assessment and advise you of your best proposal options.
2. You complete the Application for a Proposal
Application for a Proposal
The application provides the Trustee with all the necessary information to file his documentation. You may also be asked to provide backup documentation for verification of your debts.
3. Documentation prepared by Trustee
Documentation prepared by Trustee
Documentation will be prepared by the Trustee and filed with the OSB. This includes a Statement of Affairs which is a personal financial statement listing all of your assets and debts as well as a budget or cash flow statement showing what you can afford to pay. As well, a Trustee’s Report on the Proposal shows the creditors what they would get under a bankruptcy versus proposal scenario.
4. Signing of proposal documents by client
Signing of proposal documents
After signing the Proposal documents, the Trustee will send copies of the proposal and reports to each creditor, asking the creditors to accept or reject the proposal.
5. Trustee files documents with OSB and creditors which imposes the Stay of Proceedings
The Trustee Discharge
Stay of Proceedings is imposed immediately upon the Trustee filing documents with the creditors.
In order for the consumer proposal to be approved, creditors having at least 50.1% of the total amount of the debt must accept the proposal.
For a Division 1 Proposal, 66.7% of the total dollar value of the debts plus 50% plus 1 of the total number of eligible creditors must accept the proposal. The Division 1 Proposal must then be approved by the court.
6. Creditors have 45 days to accept the proposal
Creditors in a consumer proposal have 45 days to either (1) accept the proposal as filed; (2) request a creditors meeting to gather more information; or (3) reject the proposal as filed.
7. If accepted, you begin fulfilling your obligations and making your payments to the Trustee who, in turn, divides the payments amongst the creditors
Fulfilling Your Obligations
You MUST fulfill your obligations under the terms of the proposal. Should you default on your payments for more than 3 months, your proposal is deemed annulled and your creditors have the right to continue their collection activities, legal proceedings or garnishment against you. At this point, many people will choose to go bankrupt for relief from their creditors.
8. If not accepted, a meeting of creditors is called to renegotiate an acceptable compromise of your debts
Meeting of Creditors
We view this required meeting of creditors as an additional opportunity to speak to your creditors and get them onside. Many times, once creditors get more information regarding what they are entitled to in a bankruptcy versus what they will get in a proposal, they will be more willing to negotiate acceptable proposal terms with the Trustee.
9. Certificate of Full Performance
Certificate of Full Performance
Once you have complied with the terms of the proposal, the proposal is fully performed. The Trustee with provide you with a Certificate of Full Performance which serves as your discharge. After this, you are completely released of any obligations to the creditors.
People often are worried about counselling and what to expect. Our counselling is usually done in our office and we provide this service on an individualized basis. Although the BIA states that we can provide the service in groups of up to 10 people at a time, we respect your desire to keep your situation as private as possible, and therefore we do individual sessions.
There are only two sessions, and each session will last between half an hour to an hour depending upon your situation. In order to get a discharge from bankruptcy, you must attend two sessions. Generally, we receive very positive feedback about the information that we provide, and most people find it beneficial.
First Counselling Stage – Consumer and Credit Education
The purpose of the first session is to provide information about:
- money management;
- spending and shopping habits;
- warning signs of financial difficulties; and
- obtaining and using credit.
Second Counselling Stage – Identification of Roadblocks to Solvency and Rehabilitation
The second counselling session is to determine the budgetary and/or non-budgetary causes of insolvency or bankruptcy and we generally use this time to provide you with an both the required counselling and provide you with an update on how your bankruptcy is progressing.
In the counselling session, we are required to provide you with:
- follow up information on the principles presented in the first stage, and therefore we will assist you better understand your strengths and weaknesses with regard to money management and budgeting skills;
- provide follow up regarding any non-budgetary causes of insolvency and make appropriate referrals and recommendations regarding problems such as gambling abuse, compulsive behaviour, substance abuse, employment and marital or family difficulties that may have contributed to financial difficulties, and if necessary provide you with referrals to professionals, or resources that can help you with non-budgetary causes of financial problems; and
- we will assist you to better understand financial management and consumption habits.