How to qualify for a consumer proposal
Véronique Lalonde, partner and licensed insolvency trustee at Raymond Chabot. Photo by The Canadian Press.
Generally, consumer proposals are for debt such as personal loans, lines of credit, credit cards and unpaid income tax. Assets funded by secured debt such as car payments and mortgage payments are not included.
A licensed insolvency trustee looks at your full financial picture—the value of assets, equity in your home and everyday life expenses, Lalonde said. Then there’s a thorough budgeting process to understand what a person can afford to pay off.
“We’ll go over all of the expenses and see what’s realistic, what’s reasonable, depending on that individual’s situation,” she said. “If there’s money left at the end of the month, then we’ll see how much we can offer to the creditors.”
On average, creditors settle for 20 to 30 cents for every dollar owed, but no two people would pay the same amount on the same debt, Lalonde said. A proposal is tailored to each person’s specific situation and the specific lenders they’re dealing with.
What happens during a consumer proposal
Once a proposal is offered to a creditor, Lalonde said lenders have 45 days to respond—either accepting or refusing it. While most are accepted, there’s a small percentage that trustees have to negotiate further, she added.
When the proposal is accepted, a monthly payback amount is set for the client for a maximum of five years with no strings attached.
That means if the client’s financial situation changes after the proposal is accepted, such as receiving an inheritance, they don’t have to disclose it to the creditors.
“Once it’s settled, it’s settled. You just have to make your payment,” Lalonde said.
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