Tag: debt relief options

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TRUSTEE IN BANKRUPTCY: CERTAIN ACTIONS AGAINST TRUSTEE CAN BE UNLEASHED WITHOUT FIRST REQUIRING COURT PERMISSION

trustee in bankruptcy
trustee in bankruptcy

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

Trustee in Bankruptcy: No action against Trustees without leave of court

Canadian insolvency laws say that there cannot be any legal action against trustees in bankruptcy (now called a licensed insolvency trustee) without the prior leave of the court. The leave application, more often than not, would be brought before a Bankruptcy Judge. However, as you will see below, any Judge of the Ontario Superior Court of Justice could hear such an application involving a trustee in bankruptcy.

Section 215 of the Bankruptcy and Insolvency Act (Canada) (BIA) protects the Canadian bankruptcy laws for all officials in the bankruptcy process, including the bankruptcy trustee:

“215 Except by leave of the court, no action lies against the Superintendent, an official receiver, an interim receiver or a trustee with respect to any report made under, or any action taken pursuant to, this Act.”

In my January 9, 2019, Brandon Blog, PRIVACY BREACH LAWSUIT AGAINST LICENSED INSOLVENCY TRUSTEE FAILS, I described one attempt that failed to obtain leave of the court to begin litigation against a trustee in bankruptcy.

Our bankruptcy and insolvency courts believe that the test to determine whether a court should use its discretion to give leave for litigation to be commenced against either a trustee in bankruptcy or a court-appointed receiver was not a tough test. The protection is only to ensure that the receiver or trustee in bankruptcy is protected against senseless or burdensome actions that have no basis.

In this Brandon Blog, I describe a recent Ontario court decision that further clarifies a basis for when the court will exercise its discretion and allow litigation against a licensed trustee in bankruptcy. As the Motions Judge used the old terminology, I will stick with it in this blog.

Action against the trustee in bankruptcy background

The Motion Judge‘s Endorsement was released on May 31, 2021. The Endorsement was from a motion by the plaintiff for a determination as to whether or not leave of the court under S.215 of the BIA was required. The plaintiff’s position was that it was not, but if it was, such leave should be granted. The defendant trustee in bankruptcy’s position was that leave was required and should not be granted.

The plaintiff, Mr. Flight, ended up filing bankruptcy proceedings 4 times over a 13 year period of time! He filed the same type of bankruptcy over and over again! He claims his financial situation is the fault of the defendant trustee in bankruptcy. He used the same trustee in bankruptcy for all of his bankruptcies! It is not clear in this motion how the trustee is responsible for his having to file personal bankruptcy all those times.

Mr. Flight brings on litigation against the trustee in bankruptcy claiming negligence, fraud, breach of fiduciary duty, unjust enrichment and conversion. The complainant claims the accused failed to identify and take suitable action relating to a fraud perpetrated by the bookkeeper for Mr. Flight’s sole proprietorship business.

The plaintiff’s amended claim seeks a declaration the defendant engaged in misfeasance, negligence, fraud and breach of fiduciary duty in his personal capacity, and that the defendant was unjustly enriched.

trustee in bankruptcy
trustee in bankruptcy

The plaintiff’s claim against the trustee in bankruptcy

The main subject matter of the claim alleges the bookkeeper’s theft caused the plaintiff’s repeated bankruptcies and that the defendant trustee in bankruptcy ought to have detected this fraud in the administration of the four bankruptcies.

The plaintiff maintains that the trustee in bankruptcy then failed to take any meaningful action to address the alleged fraud and its impact on the fourth bankruptcy after its discovery. In particular, the plaintiff claims the trustee failed to diligently commence an action against the former bookkeeper, failed to investigate the fraud, failed to adjust the plaintiff’s surplus income, failed to recommend debt relief options or financial options, and certainly no other possible insolvency process such as a consumer proposal alternative to bankruptcy and failed to have the plaintiff promptly discharged from his fourth bankruptcy.

The defendant’s alleged “grand failure to act” caused Mr. Flight damages of $10 million from loss of business, loss of profit, loss of income and pain and suffering.

The court’s analysis

As I mentioned above, the threshold issue under Canadian insolvency legislation is whether the plaintiff required leave to commence this action. If it is determined that leave is required, the analysis then moves to whether the claim meets the test for leave.

The Motion Judge stated that there is authority to support the plaintiff’s position that the insolvency laws state that leave is not required where the trustee in bankruptcy is being sued in its personal capacity.

More particularly, the Supreme Court of Canada held that the leave provision under the BIA is not to be interpreted as though it applied to any action arising out of the administration of the estate. That is not the way section 215 is worded. To allege that the trustee in bankruptcy made an act of omission is a claim that is not concerning a report made under or any action taken according to the BIA.

trustee in bankruptcy
trustee in bankruptcy

Trustee in bankruptcy: The court’s decision

The plaintiff alleges causes of action against the trustee in bankruptcy in his personal capacity in their amended statement of claim and affidavit materials for negligence, fraud, breach of fiduciary duty, unjust enrichment and conversion starting with the confidential consultation and with each bankruptcy assignment. The Motion Judge concluded that the plaintiff does not require leave under s. 215 of the BIA to commence this action. Based on this conclusion, the Motion Judge did not need to consider anything further.

You will observe as I previously stated, none of the court’s evaluation had anything to do with whether the claims had a possibility of success in its litigation legal process. The Motion Judge, who was not a Bankruptcy Judge but rather a Motion Judge felt the accusations were such that they were not purposeless or burdensome actions that have no basis.

As the main action will now proceed, I will follow the case to find out the exact details and the various bankruptcy claims that Mr. Flight is making regarding the conduct of trustees involved. As the case is reported, I will report to you.

Finding a good, Licensed Insolvency Trustee (Trustee In Bankruptcy) Near You

I hope that you found this trustee in bankruptcy Brandon Blog interesting. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost bankruptcy consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

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Brandon Blog Post

How Much Does A Consumer Proposal Cost: We Show You Our Rules To Make It FREE

how much does a consumer proposal cost
how much does a consumer proposal cost

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

How much does a consumer proposal cost: Only pay a Trustee for consumer proposal services

This Brandon Blog answers the question “how much does a consumer proposal cost?”. There is one thing that I want to get out of the way first, that directly impacts the cost of a consumer proposal. The only party authorized by law to administer a consumer proposal in Canada are licensed insolvency trustees (formerly called bankruptcy trustees).

There are many firms that advertise that they will settle your debts without you having to see a licensed insolvency trustee (formerly called a trustee in bankruptcy). They sell you on the sizzle of staying away from a licensed trustee implying that visiting a reputable bankruptcy trustee will immediately mean that bankruptcy will be your only option.

These firms promise a lot but deliver little or nothing. In return, you need to pay the high fees. Then, when they have charged you everything they can, they walk you down the street to a licensed insolvency trustee (Trustee) to administer a consumer proposal for you. So they end up taking you to the exact professional they first told you to avoid when they cannot charge you any more fees. Why can’t they charge you any more fees? Because by then, you have wised up to their game!

So do yourself a favour. The easiest way to know how much does a consumer proposal cost is to make an initial Trustee visit for a no-cost initial consultation to learn all your debt relief options and forget about the non-licensed debt management company.

How much does a consumer proposal cost: Getting rid of debt

When you are buried in debt, things like saving for the future can seem impossible. This is because you are trying to climb up a hill with a heavy backpack on your back, making it hard to take a step forward. You may even be tempted to stop trying when you hear everyone else talking about how they are able to save so much, but you wonder why you can’t.

If you’re looking at a pile of unpaid bills and thinking, “I just can’t afford to make those payments” or “I can’t believe I’m falling so far behind,” you’re not alone. But you’re not hopeless. It is possible to get out from under crushing debt and start getting ahead. The first step is to stop making the situation worse with missed payments and late fees. To do this, you need to make a plan.

Managing your debt is a lot like dieting – it looks easy and straightforward on the commercials, but when you get down to doing it, it’s a whole different story. There are hundreds of books and websites out there, each with different tips and techniques that you can follow to help you get a handle on your debt. Here are a few things to consider:

As I have written in several blogs before, a self-help remedy is always the best. First look at all your monthly income sources and all your expenses for a typical month. Create a budget showing what it all is so that you can figure out how much more you are spending each month than you earn. Now, look critically at all your behaviours during a typical month that leads to that spending. What can you cut out?

Also, look at your total monthly income. Do you have the time for and ability to either get a second part-time job or create a side hustle for yourself in order to earn more income? Based on all this reflection, what is the best budget you can come up with to try to spend no more than you earn, after-tax? This will let you see if you can work yourself out of your financial challenges by having excess money each month to pay off your debts or not.

If yes, terrific. Put your plan into play and pay down your debts. Curb your credit card spending so that you only charge what you can pay off by the due date. If not, then perhaps you need to visit a Trustee.

how much does a consumer proposal cost
how much does a consumer proposal cost

How much does a consumer proposal cost: Get a personalized debt free plan

When people talk about getting out of debt, it can sometimes be hard to know where to start. If you’re stressed about your financial situation, the last thing you want is to be confused by too many options and not know what to do. Thankfully, there’s a way to get a personalized debt-free plan that will help you figure out what to do and how to get out of debt. We can help you develop a debt relief plan that will put you on the path to a debt-free life.

If you have overdue consumer financial debts, you are receiving telephone calls from financial debt collectors. Although personal bankruptcy gives a fresh start for those that are drowning in debt, in my view, it is the last resort for those that have maxed out their credit cards. If you require an financial clean slate, a consumer proposal is an excellent way to relieve yourself of the stress and anxiety of too much debt. It is the only federal government-approved method for debt settlement.

In an initial no-cost consultation with a Trustee, all possible debt relief options will be discussed. At the end of the consultation, you will have a clear understanding of what personalized debt-free plan is best for you. Let us know dive deeper into how much does a consumer proposal cost.

How much does a consumer proposal cost: A negotiated debt settlement

You can easily look back on some of my earlier blogs to refresh yourself on all the details of what a consumer proposal is and how it works, including my Brandon Blog CONSUMER PROPOSAL FAQ: ANSWERS TO 10 TANTALIZING CONSUMER PROPOSAL QUESTIONS. To save you time, the important points to remember are that in the consumer proposal process:

  • You can settle your unsecured debts totalling a level of debt of $250,000 or less, not including any mortgages or lines of credit secured by way of a mortgage or other charge against your personal residence.
  • The settlement of debts will be at a total dollar settlement value much less than the total outstanding debt you owe.
  • The amount you will have to pay in a consumer proposal is based on what your creditors can expect from your bankruptcy. The bankruptcy statute in Canada states that your offer in the consumer proposal must be better than what your unsecured creditors would receive in your bankruptcy. Although there is no guarantee as to what the final amount will be, as a general rule of thumb, you can consider a consumer proposal totalling 25% of the total amount you owe as a good rule of thumb.
  • You can take a period of time up to 5 years to make monthly consumer proposal payments to the Trustee, who acts as the Administrator of your proposal, to pay the entire consumer proposal fund. The Trustee then makes the required creditor distributions to your unsecured creditors on a pro-rata basis.
  • A Trustee is the only debt professional in Canada who is licensed and supervised by the Canadian government, through the Office of the Superintendent of Bankruptcy Canada. A Trustee is the only professional that can offer consumer proposals services.

    how much does a consumer proposal cost
    how much does a consumer proposal cost

The Cost of a Consumer Proposal in Ontario

In Canada, the term consumer proposal refers to a formal, legally binding arrangement between a debtor and creditors, involving a lump sum payment spread over equal monthly payments to the Trustee but taking no more than 60 months.

This money is then used by the Trustee to make the necessary creditor distributions in return for a consumer proposal discharge. The creditors agree to accept a portion of the outstanding debt in full settlement. A consumer proposal is a viable option for those who are having trouble paying their debts because they are disabled, unemployed, or have suffered a loss of income.

How much does a consumer proposal cost is on everyone’s mind when they contemplate filing one. When we think of cost, our minds first go to “how much will the licensed trustee charge me for all this?”. The reality is that the amount the insolvent debtor will have to pay to the Trustee who is called the Administrator in a consumer proposal to create the proposal fund is a direct result of what the unsecured creditors could expect to receive in the debtor’s bankruptcy filing. The statute says that the offer to the unsecured creditors has to be better than what they could expect to receive in the debtor’s bankruptcy.

Let’s look at a real example so I can better illustrate this. Assume we have an insolvent debtor who would be a first-time bankrupt. Assume that their personal situation in their filing for bankruptcy is as follows:

  • Surplus income payments of NIL.
  • Assets realization of $20,000 and non-exempt assets therefore not sold by the Trustee.
  • Total liabilities of $173,000.

So in this bankruptcy process, the total fund that would provide for the payments to creditors would be $20,000 in the bankruptcy. The fee and disbursements allowed for the Trustee in this bankruptcy example are governed by the bankruptcy statute. The fee is therefore called a tariff fee. For purposes of figuring out what kind of consumer proposal would be required, the tariff fee of the Trustee in this bankruptcy is irrelevant.

Assuming the person in this example did not commit any sort of bankruptcy offence, there is nothing more to discuss as to what each creditor could expect out of the bankruptcy. They would receive their pro-rata share of the distribution.

In order for a consumer proposal to be a better alternative for the unsecured creditors, I suggest that a consumer proposal filing offering a total payment of $25,000 payable in regular monthly payments over a maximum five-year period would be appropriate.

This is the cost of this consumer proposal in Ontario, $25,000. As this example shows, how much does a consumer proposal cost has zero relationship to what my Firm would earn as the Administrator.

How much does a consumer proposal cost: Consumer proposal costs in Ontario

As the Administrator of a consumer proposal, I am entitled to a tariff fee stipulated in the Rules to the Bankruptcy and Insolvency Act (Canada). There are also some administrative expenses and taxes to be paid. What the tariff allows, to be paid from the consumer proposal fund, is as follows:

  • $750 payable on filing a copy of the consumer proposal with the Official Receiver;
  • $750 payable on the approval or deemed approval of the consumer proposal by the court;
  • 20% of the money distributed to creditors under the consumer proposal, payable on the distribution of the money;
  • the costs of counselling at $85 per session, payable after each session, to a maximum of two sessions;
  • the fee payable to the official receiver in the amount of $100, payable at the time of filing a copy of the consumer proposal;
  • the fee payable to the registrar in the amount of $50, but only if you have to go to Court; and
  • all applicable taxes for GST/HST.

The final amount payable not listed above is the levy payable to the federal government calculated at 5% of any distribution made to the creditors. This payment to the government is what pays for the administration of the Canadian bankruptcy system.

So taking the above example of the $25,000 consumer proposal, the consumer proposal calculation assuming everything went smoothly and there was no need to go to Court would go as follows:

Category

$

Payment under proposal25,000.00
Counselling fees (2 x $85) for Administrator 170.00
The fee paid to the Official Receiver 100.00
Administrator’s fees 1,500.00
HST on above fees ($2,250) 292.50
The amount available for distribution22,937.50
Administrator fee of 20% of the money distributed to creditors 4,587.50
Applicable HST 596.37
5% Levy payable 887.68
Total amount to be distributed to the unsecured creditors16,865.95

So in this example, out of the total consumer proposal fund of $25,000:

    • The amount paid for the consumer proposal is $25,000.
    • This represents 14.5% of the total liabilities.
    • The Administrator earned fees (net of HST) totalling $6,257.50.
    • The Administrator earned fees are paid for by the unsecured creditors as it is deducted from the amount they would otherwise receive.
  • Therefore, how much does a consumer proposal cost the insolvent debtor? The cost to the debtor for the Administrator’s services is FREE!

    how much does a consumer proposal cost
    how much does a consumer proposal cost

How much does a consumer proposal cost: Get a personalized debt free plan today

I hope you enjoyed this how much does a consumer proposal cost Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

how much does a consumer proposal cost

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CONSUMER PROPOSAL FAQs TO HELP YOUR INSOLVENCY IQ(s)

consumer proposal faqs

Consumer proposal FAQs: What is a consumer proposal?

Last week we discussed Consumer Proposal Vs Debt Settlement. Consumer proposals remain a hot topic and today we’d like to share with you some of our consumer proposal faqs.

A Consumer Proposal (Plan or CP) is a formal way governed by the Bankruptcy and Insolvency Act (BIA) available only to people. Working with a licensed insolvency trustee acting as your Plan administrator you make a proposal to:

  • Pay your creditors a percentage of what you owe them over a specific period
  • Extend the time you have to pay off the debt
  • Avoid bankruptcy

Payments are made through the trustee, and the trustee uses that money to pay each of your creditors. The debt must be paid off within five years.

Consumer proposal FAQs: How do I qualify for a consumer proposal?

As discussed in our last blog, you must be an individual and your total debts must not exceed $250,000 (not including debts from a mortgage or line of credit secured by your principal residence).

You must also meet the insolvency test. This means that:

  • your debts are greater than your assets;
  • if you liquidated all of your assets you would not have enough money to pay off your debts in full; and
  • you are having trouble making the full payment on all of your debts every month.

Making only minimum monthly payments don’t count as paying off your debts.

Consumer proposal FAQs: What does a consumer proposal cost?

There are no upfront fees associated with CPs. Your Plan payments cover the cost of filing a Plan. There are no separate charges either for filing a Plan or fees paid to the trustee to act as your CP administrator. To calculate the professional fee the trustee uses a formula in the BIA and it comes out of the amount you are paying in your Plan.

Consumer proposal FAQs: How does a consumer proposal work?

A CP allows you to make arrangements to pay all or part of your unsecured debt in monthly payments over a predetermined time period.

  1. A licensed insolvency trustee will meet with you and work out a payment plan that they believe will work for you and be acceptable by your creditors.
  2. The trustee acting as your Plan administrator will file the CP with the Office of the Superintendent of Bankruptcy.
  3. The trustee will send the Plan to your creditors who then have 45 days to accept or reject your CP. The creditors can also accept or reject your CP before a meeting of creditors if such a meeting was held. Normally in a Plan, there is no need to hold a meeting of creditors.

Consumer proposal FAQs: How long will my consumer proposal last?

A CP can last a maximum of five years but you can shorten the proposal term either by increasing the amount of your monthly payment or by offering a lump sum payment (if you are able to borrow a sufficient lump sum from either a bank or family).

Consumer proposal FAQs: Can a consumer proposal get rid of collections agencies and prevent my wages from being garnished?

Yes, a CP immediately stops almost all creditor actions (garnishments for family law support payments cannot be stopped by a consumer proposal) including tax debts.

Consumer proposal FAQs: If I agree to a consumer proposal will I lose my house and my car?

Typically secured creditors are not affected by a Plan and in most cases, you will continue to make your payments as usual. This assumes that your budget, which you prepare as part of filing your consumer proposal, shows that you can afford to do so.

If you have a mortgage against your house or a car loan registered against your car, you can opt for surrendering your house and/or car (secured assets) and stop making those payments before filing the CP. In this case, the lender will sell the secured asset and any resulting shortfall becomes an unsecured debt in your Plan.

NOTE: If you were to give up your secured assets after the filing of your Plan, you won’t be released from any shortfall debt because it occurred after the filing of your Proposal. So make sure that if you are giving up secured assets, you wait for the secured creditors to recognize that you have given them up and they have begun their enforcement proceedings, including selling the home or car, BEFORE you file your CP.

Consumer proposal FAQs: Will I have to give up my credit cards?

Typically, you will have to give all of your credit cards to the trustee and you won’t be able to apply for a new credit card until the term of your CP is over. You will, however, be able to use a prepaid or secured credit card during this period.

Consumer proposal FAQs: If I miss a payment will I be bankrupt?

We strongly recommend you to make your payments faithfully. You can defer up to two payments but if you fall three payments behind, your Plan will end. This means that you will no longer have protection from creditors and they can again start their collection efforts against you.

Consumer proposal FAQs: What is my next step if I have too much debt?

If you’re considering preparing, filing and completing a Plan or are seeking debt relief options contact Ira Smith Trustee & Receiver Inc. Our approach for every file is to create an outcome where Starting Over, Starting Now becomes a reality, beginning the moment you walk in the door. You’re only one call away from taking the steps towards a debt free life.

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Brandon Blog Post

CONSUMER PROPOSAL VS DEBT SETTLEMENT: WHAT YOU NEED TO KNOW

consumer proposal vs debt settlement

Consumer proposal vs debt settlement

I am often asked to explain the differences of consumer proposal vs debt settlement. Debt is such a prevalent issue in our society today and we’re bombarded by commercials about different options for debt relief. Two of the most talked about are consumer proposals and debt settlement. However, most people don’t really understand what they are. Let me explain.

Consumer proposal vs debt settlement: What is a consumer proposal?

According to the Office of the Superintendent of Bankruptcy Canada, a consumer proposal (Plan or CP) is a formal, legally binding process administered by a Licensed Insolvency Trustee (LIT). In this process, the LIT will work with you to develop a Plan. A CP is an offer to pay creditors a percentage of what is owed to them or extend the time you have to pay off the debts, or both.

The term of a Plan cannot exceed five years. Payments are made through the LIT. The LIT uses that money to pay each of your creditors. CPs are government sanctioned, federally regulated and administered by federally licensed and regulated LITs.

Consumer proposal vs debt settlement: Can anyone who owes money opt for a consumer proposal?

No. You must be an individual and your total debts must not exceed $250,000 (not including obligations from a mortgage or line of credit secured by your principal residence). You also must meet the insolvency test. This means that:

  • your liabilities are greater than your assets;
  • if you liquidated all of your assets you would not have enough money to pay off your liabilities in full; and
  • you are having trouble making the full payment on all of your liabilities every month.

Making only minimum monthly payments don’t count as paying off your liabilities.

Consumer proposal vs debt settlement: What is debt settlement?

Many people are seduced by slick ads and even slicker salespeople offering an easy way out of financial problems. Debt settlement companies (DS companies) tell you that they’ll negotiate with your creditors to accept a fraction of what you owe them. They tell you that like magic, your debt problems will disappear. NOT TRUE!

DS companies’ people are not financial services professionals. DS companies are not federally licensed or regulated. They’re nothing more than snake oil salesmen. They are well-known for high-pressure sales tactics, making false and unsubstantiated claims, insinuating ties to the government and demanding big upfront fees. We’ve written several blogs warning the public about DS companies:

According to Credit Canada Debt Solutions:

  • There are more than 50 organizations offering debt settlement services in Ontario.
  • The Ontario Association of Credit Counselling Services has received more than 100 complaints a month about DS companies.
  • Settlement companies have also been the focus of a “consumer alert” from the Financial Consumer Agency of Canada, which warns consumers to beware of “too good to be true” offers from debt reduction companies.

According to the U.S. Federal Trade Commission:

  • The success rate of for-profit DS companies is less than 10%.
  • 65% of people who pay fees to these DS companies leave their programs without ever receiving a settlement.
  • The amount of money that people pay in fees to these companies almost equals the amount of money that they save. However, this is before creditor late fees, penalties and interest are added in (these can often double or triple a debt by the time a settlement is negotiated). So at the end of the day, it seems fair to say that most people who deal with these companies do not save any money and are often left worse off in the end.

Consumer proposal vs debt settlement: Who can administer them?

Since LITs administer CPs, the only federally licensed and strictly regulated professionals, they really can help you deal with financial problems. DS companies are not professionals of any kind. They are slick sales organizations designed to make as much money as possible from the consumer, not save you money or repair your financial situation. More often than not, after taking your money, DS companies then hand you over to a LIT for the only liability settlement program that really works, which is called, a consumer proposal.

The choice is clear when it comes to consumer proposal vs debt settlement, consumer proposals are an excellent financial relief option and you should run from DS companies as far as your shoes can carry you.

Sometimes a settlement is also termed consolidation. Whether the question is consumer proposal vs debt settlement, consumer proposal vs debt consolidation or debt settlement vs consumer proposal Canada, there is only one correct answer – look at a Plan for financial relief.

Consumer proposal vs debt settlement: Is a consumer proposal right for me?

Consult a LIT. We are financial professionals who will evaluate your situation and recommend which financial relief options are right for you. A CP is one option; there are others as well.

Contact Ira Smith Trustee & Receiver Inc. today for a free consultation. You’ll be in good hands and Starting Over, Starting Now you can be well on your way to living a liability-free life.

Call a Trustee Now!