While consumer proposals are commonly associated with licensed insolvency trustees and debt relief specialists, many wonder if it’s possible to handle it on their own to save money. A consumer proposal is a legal agreement to pay back some of your debt and, in the process, be protected from creditors. The rules around debt resolution are often unclear, which is why we’re here to provide clarity on its most confusing aspects. In this article, we’ll answer whether an individual in Canada can file a consumer proposal on their own without the help of an LIT.
Can you File a Consumer Proposal on Your Own in Canada?
No. Canadians in debt cannot file a consumer proposal on their own. They must have an administrator or licensed insolvency trustee (LIT) who is authorized to file the consumer proposal on their behalf. This is a rule in the Bankruptcy and Insolvency Act.
Why You Need an LIT to File a Consumer Proposal
Filing a consumer proposal is a complex legal proceeding that requires expertise from a LIT.
An LIT will be able to determine whether the individual qualifies for a consumer proposal, and what terms are reasonable for creditors. This is difficult for Canadians in debt who don’t have context into Canada’s creditor landscape and how it functions. A Canadian filing a consumer proposal on their own may be misled into drafting a proposal with less favourable terms.
Similarly, the documents required for your consumer proposal are complex and contain a variety of legal and financial jargon that the average Canadian consumer won’t have a full understanding of. LITs play a key part in ensuring the consumer proposals are filed correctly, making the federal review process much quicker.
The bottom line is — LITs are there to help you! Their involvement is incredibly important to ensuring your consumer proposal is passed as soon as possible. They review your financial situation, deliver expert advice, negotiate with creditors, and act as an advocate on your behalf.
How do licensed insolvency trustees make money?
The primary way licensed insolvency trustees (LITs) make money is through a portion of the funds you pay to creditors. This is not an extra cost to you. Creditors understand when voting on your proposal that the amount offered accounts for the amount the LIT could receive.
There are also fees involved. However, the amount charged in fees is regulated by Canada’s Office of the Superintendent of Bankruptcy (OSB). In consumer proposals, these fees are paid through the individual’s repayment plan. You will not be billed by the LIT you work with for their service.
Why Consult with 4 Pillars Before Filing a Consumer Proposal?
We are dedicated to helping struggling Canadians find a way out of debt while healing their mental health and confronting the financial habits that got them there. If you want to get out of debt, but feel completely lost in the complex world of debt relief, you’ve come to the right place.
Getting out of debt and staying out of debt is not as easy as one consumer proposal or bankruptcy filing. Many people who have filed for bankruptcy before will file for bankruptcy again. That’s why we continue to work with you to break the habits that make you spiral into debt.
We are not LITs, but we are people who truly care about what this experience means to you. We want to bring you to a place where you feel confident in your financial future. Whether that be through pursuing a consumer proposal, or another debt resolution route, we’re here to present your options in a way that makes sense to you.
It’s your choice, not ours. Our only goal is to answer your questions and explain the process in a way that allows you to make an informed decision. Our consumer-first approach is what makes us different. We take creditors out of the equation. We have a duty to you, the consumer, only.
Once you make your decision, we will work with you to connect you with an LIT and provide you with the resources you need to get started.
We ask for just one hour of your time to tell you how it works with a free, no-obligation consultation! We’re happy to answer any and all questions you have.
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