📅 Last Updated: March 1, 2024
✏️ Written By Kale Havervold
🕵️ Fact-Checked by Caitlin Wood

Despite the fact that Ontario is by far the richest province in Canada, that doesn’t mean the residents of the province don’t struggle with money from time to time. In fact, struggling with debt is very common in Ontario, just as it is in the rest of Canada.

Want to know if the federal government provides debt relief? Look here.

Thankfully, Canada has many different options for those who are having trouble managing their debt. Some of these options are aimed at educating individuals so they can get out, and stay out of debt, while others are all about helping eliminate debt as quickly as possible.

One of the most common ways to deal with your debts in Ontario is to file a consumer proposal. In this article, we will take a closer look at consumer proposals in Ontario, including what they are, what elements they involve, and how to know if they are right for you.

What is a Consumer Proposal and How Does It Work?

A consumer proposal in Ontario is a legally-binding process that is done by a Licensed Insolvency Trustee (LIT). The LIT will help you come up with a proposal, which is essentially an offer to pay your creditors a portion of what you owe or a request to extend the amount of time you have to pay off your debts.

Click here to learn how much debt you should have before you file a consumer proposal.

You don’t pay creditors directly during a consumer proposal. Instead, you’ll pay the money to your LIT, who will send the funds to your creditors on your behalf. This is a good alternative to bankruptcy and filing one will protect you from debt collectors. For example, they won’t be able to garnish your wages, no more interest will accumulate, and you are not in jeopardy of losing your home or assets. Of course, your credit will take a hit for a certain number of years, but that hit won’t be as extreme as it would be during a bankruptcy.

Recently filed for bankruptcy? Click here for some ways of rebuilding your credit.

You might be thinking, why would a creditor accept an offer like this when they aren’t receiving the full debt that they are owed? It’s because a creditor would rather have you pay back some of the debt you owe than none of it at all. Of course, they aren’t going to accept every proposal that comes their way, so you need to work closely with your LIT in Ontario to come up with an offer that not only works for you, but also for your creditor.

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Why Might Someone in Ontario Need to File a Consumer Proposal?

Now that you know a bit about what a consumer proposal is and how they can help get rid of your debts, what are some of the reasons that a person in Ontario might need to file a consumer proposal?

Well, the first and most obvious sign is that you are in over your head with consumer debt. While some of us are comfortable dealing with a lot of debt (due to a high income or savings balance), others simply cannot stay afloat, even if they only have a very small amount of it. Another reason people in Ontario might elect to file a consumer proposal is to get annoying debt collectors off of their backs while they attempt to pay off their other, more important, debt.

Feel like you’re being harassed by a debt collector? Look here to learn what you can do.

How Do You Know When to File a Consumer Proposal?

As for getting this sort of debt relief, there are no right or wrong times to seek help. Your decision also depends on your own situation in Ontario, in terms of both your finances and your personal life. Different people will have different opinions about when (or if) to reach out for help when it comes to debt relief.

For some differences between consumer proposals and debt management programs, check out our other article.

Simply put, if you do not see a way that you will ever be able to pay off your debts in full, it could be a good idea to speak with a LIT in Ontario and see if they would recommend a consumer proposal for you. Of course, the choice is ultimately up to you. No one can make the choice for you.

Is Filing a Consumer Proposal Right For Me?

If you are considering filing a consumer proposal to get out of debt, there are a few things you should be aware of.

The first is that you must have over $5,000 (but under $250,000) of total consumer debt. If you are over $250,000, it will be very tough to get a consumer proposal. It will also be difficult for a consumer proposal to be accepted if your debts are under $5,000.

The second thing you should consider is whether or not you’ll be able to afford your potential payments. Remember, a consumer proposal does not magically get rid of your debt, it simply makes your debt easier for you to handle. You’ll still need to make either one lump sum payment or several monthly payments, depending on what you and your LIT suggest in your proposal.

Filing a consumer proposal affects your credit. Read this to discover how.

What to Look for in a Licensed Insolvency Trustee in Ontario?

Once you feel that a consumer proposal is the right option for you, you need to find a Licensed Insolvency Trustee to work with, in Ontario. As we mentioned, it is necessary to have a LIT on your side throughout the consumer proposal process. Because consumer proposals and other debt-relief options are so popular, you will likely have many LITs available in Ontario to choose from. So, how do you choose which one to go with?

The first thing you should do is ensure they are qualified and have the appropriate license. They should know all the rules about debt relief options and be able to provide you with valuable information. Next, they should be someone you are comfortable around, can trust, and will get along with. You will be dealing with them frequently for a decent amount of time, so if you can’t tolerate them or don’t trust them with your personal information, the relationship will not work.

Of course, it is beneficial to reach out to a number of different LITs in Ontario to compare their services. You should also do some online research to see which trustees in Ontario come highly recommended and which should be avoided. Also, costs should be considered as some might charge different fees than others.

What To Expect During the Process of a Consumer Proposal?

Once you have found a trustee in Ontario that you are comfortable and confident in working with, what should you expect during the process of the consumer proposal itself?

The first thing that will take place is an initial meeting between you and your LIT. Make sure to give them all the financial information that they request.

Click here to learn about the consumer proposal initial assessment.

Next, they will file the proposal. After the proposal has been filed, you will stop making payments to your creditors immediately. Any lawsuits or wage garnishment imposed upon you by creditors or debt collectors will also cease. Soon after, the LIT will submit the proposal to your creditors.

Creditors will then have 45 days to accept or reject your proposal. If you owe money to multiple creditors, and one or more of them is owed at least 25% of your debt, they may hold a meeting to discuss your case. This meeting will allow each creditor to vote on whether they should approve or deny the proposal.

If the proposal is approved, you will be responsible for either paying a lump sum or making monthly payments over the course of an outlined schedule. During that time, you will also be required to attend a few financial counselling classes. If your proposal was not accepted, you can make amendments and resubmit. You can also consider other available options or can simply file for bankruptcy. However, filing for bankruptcy should be your last resort.

Final Thoughts

A consumer proposal is one of many helpful debt relief options offered in Ontario and the rest of Canada. If you’re currently looking into filing a consumer proposal, Loans Canada is here to help.

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