The short answer is probably. There are only two legal alternatives for reducing your debt in Canada. The first alternative is bankruptcy.
The second alternative is a Consumer Proposal, which is a legally binding agreement between you and your creditors. A Consumer Proposal can only be prepared, filed and administered by a Licenced Insolvency Trustee.
When you reach out for help, the first question you should ask is “Is this company a Licensed Insolvency Trustee?” If the answer is no, that particular company cannot assist you in any legal process to reduce your debt. There are a number of companies that advertise that they can assist you in filing a Consumer Proposal, calling themselves “Debt Management Consultants”. All they actually do is assist you in finding a Licensed Insolvency Trustee, and charging you a fee for that, which sometimes amounts to thousands of dollars. In today’s day and age, it is not difficult to find a Licensed Insolvency Trustee. Licensed Insolvency Trustee’s advertise in the same locations as these Debt Management firms. Most, if not, all Licensed Insolvency Trustees will meet with you free of charge to discuss your financial situation and your alternatives so that you can make an informed decision regarding your financial future. You can interview two or three different Licensed Insolvency Trustees in order to make sure you are comfortable with them. You will be working with them throughout the Consumer Proposal process.
The real question is – can you reduce your debt by 80% though a Consumer Proposal?
After you sit down with a Licensed Insolvency Trustee, the two of you will develop a plan for the offer to your creditors to settle your debts. For the most part, the plan has typically been a monthly payment that both you and your Licensed Insolvency Trustee feel you can afford given your income and monthly expenses. The payment can, and usually does, last up to a maximum 5 years.
Your Licensed Insolvency Trustee will prepare the legal documents and send them to your creditors for their review and vote. At the end of the day, should more than 50% by dollar value of your unsecured creditors accept your offer, all your creditors would be legally bound by the offer. For the most part, once you have seen a Licenced Insolvency Trustee, the creditors know if they turn down your offer, your next alternative is probably bankruptcy. They don’t want that any more than you do, so they will compare what they would expect to receive under your offer with what would they receive should they turn down the offer and you file for bankruptcy. Most creditors will make business decisions, and as long as they will get more in the Consumer Proposal than a bankruptcy, will accept your offer. However, we have been told that there is an internal cost to keeping the file open to receive Consumer Proposal payments, as well as tax consequences for them etc. They do take this into account in their calculations on whether or not they are willing to accept your offer.
D. Thode & Associates Inc. is a Licenced Insolvency Trustee. Douglas Thode, the company’s founder, has been assisting in the preparation and filing of Consumer Proposals since 1992, when Consumer Proposals became a legal alternative here in Canada. With 1000’s of Consumer Proposals filed, we have seen Consumer Proposals accepted that reduced ones debt by 99.5%, and others turned down that were estimated to pay 80 cents on the dollar. Over the last 10 years, our average Consumer Proposal paid the creditors between 15% and 35% on the dollar of the debt.
Should you be having financial difficulties, D. Thode & Associates Inc. is here to assist you in alleviating your financial stress. View our contact page to find an office near you, or email the Licensed Insolvency Trustee at with any questions you may have and/or to book your free initial consultation.