Consumer Proposals Explained by a London ON Bankruptcy Lawyer
Consumer proposals sit in a quiet middle ground between overwhelming debt and the drastic step of bankruptcy. They are a formal, legally binding settlement that can reduce the amount you repay on unsecured debts, stretch payments over as long as five years, and protect you from collection calls, wage garnishments, and lawsuits. For many people who walk into a London ON law firm asking about bankruptcy, a well‑structured consumer proposal ends up being the right answer. The trick lies in knowing when it fits, how to craft terms that creditors will accept, and how to avoid the pitfalls that derail a proposal.
I have spent years working alongside Licensed Insolvency Trustees, the only professionals in Canada who can file consumer proposals. As a bankruptcy lawyer assisting clients in London and nearby communities, I often provide pre‑filing advice, negotiate in thorny cases, and help clients understand the legal effects on assets, contracts, and joint obligations. This article distills that experience into plain language, with a focus on what matters for individuals and small business owners in Southwestern Ontario.
What a consumer proposal actually is
A consumer proposal is a legally sanctioned deal under the Bankruptcy and Insolvency Act that you make with your unsecured creditors. You commit to pay a fixed amount over time, typically monthly for up to 60 months. In exchange, your creditors agree to settle the rest of your unsecured debt, and all collection activity stops the moment the proposal is officially filed. If a sufficient majority of your creditors vote yes by value of claims, the proposal binds every unsecured creditor, even those who voted no or did not vote at all.
Not all debt experienced law firm attorneys qualifies. Unsecured consumer professional estate lawyer debt such as lines of credit, credit cards, unsecured bank loans, payday loans, and old utility balances generally falls into the basket. Certain obligations are excluded or treated specially by statute: recent student loans may not be fully dischargeable unless enough time has passed since you ceased being a student, child and spousal support are non‑dischargeable, and most court fines and fraud‑related debts survive. Secured debts such as mortgages and vehicle loans remain in place unless you decide to surrender the asset. Your proposal does not alter the secured creditor’s rights, which is one reason careful pre‑filing planning matters.
The legal foundation matters because it gives you real protection. Once filed by a Licensed Insolvency Trustee, an automatic stay of proceedings kicks in. Lawsuits pause. Wage garnishments are stayed, except for support orders. Creditors must route communication through the trustee, which removes 99 percent of the stress for most clients. This is not a handshake deal, it is a court‑regulated process with teeth.
Who should consider a consumer proposal
The profile varies, but a few patterns recur. The client whose debt has climbed to 30,000 to 90,000 dollars, mostly unsecured credit, income is steady, and there is modest equity in a home or car. Bankruptcy in that case could be more expensive than expected once surplus income and asset equity are factored in, while a proposal can protect the home and set predictable payments. Another common pattern is the self‑employed tradesperson with tax debt and a tough past season who wants to keep tools, a vehicle, and existing contracts intact. Many of these clients can repay 30 to 60 cents on the dollar over five years, sustain their business, and clean up Canada Revenue Agency arrears in the same process.
There are edge cases. If you are unemployed with no foreseeable income for the next year, a proposal might be hard to fund and creditors will know it. If your debt is modest, say under 8,000 dollars, informal arrangements or a consolidation loan could do the job. If you carry 200,000 dollars of unsecured debt from a failed venture, but you also have meaningful equity in real estate, we need to look closely at values, exemptions, and the bankruptcy alternative. A good London ON bankruptcy lawyer construction legal advice will walk through the math, because the numbers decide more than emotion does.
The math behind a viable offer
Creditors assess proposals using a simple matrix. First, will the proposal pay them more than they would receive in a bankruptcy? Second, does the timeline and the debtor’s budget appear realistic? Third, are there any red flags suggesting fraud or preference that might be challenged in bankruptcy?
To answer the first question, we estimate hypothetical bankruptcy proceeds. That means calculating realizable equity in non‑exempt property, factoring in trustee fees, and projecting any surplus income payments under the Superintendent’s standards. For example, if a client’s home equity available to unsecured creditors would be roughly 15,000 dollars, and their projected surplus income over 21 months might generate another 9,000 dollars, the total available in bankruptcy could be around 24,000 dollars before costs. A proposal that pays 30,000 dollars over 60 months compares favorably. It avoids forced sale complications, minimizes legal friction, and delivers more to creditors overall, so it has a strong chance of acceptance.
Budget credibility matters just as much. I have seen proposals fail because the monthly figure was set too high to look attractive to creditors. Three months later, missed payments piled up. A wiser path is a conservative offer that builds in a cushion for car repairs, seasonal income dips, and utility spikes. The statute allows a maximum of three missed payments before a proposal is annulled, but waiting until you are on the edge is painful. Build the margin at the outset.
How the filing process unfolds in real life
Clients often arrive after one trigger: a wage garnishment, a lawsuit, a CRA Requirement to Pay, or a bank offset that emptied their account. The first meeting with a Licensed Insolvency Trustee is free, and in Southwestern Ontario you can workplace dispute lawyers usually book within a few days. Expect a thorough review of your income, expenses, debts, assets, and recent transactions. Disclose everything. Concealing assets is both a legal and strategic mistake, because creditors cross‑reference credit files, public registries, and bank statements in contested cases.
Once the trustee prepares the Statement of Affairs and the formal proposal terms, you will review and sign. Filing happens electronically, and the stay of proceedings is immediate. That includes stopping most garnishments the same day if timing allows. Your creditors receive a copy and have 45 days to vote. If more than half by dollar value who vote say yes, the proposal passes and binds all unsecured creditors. In practice, a well‑constructed offer sees broad acceptance from banks and finance companies. Sometimes one outlier pushes for a few extra cents on the dollar or a shorter term. The trustee may convene a meeting of creditors to hash it out, though most are resolved without drama.
You will attend two brief financial counselling sessions as part of the process, generally in the first few months. These are practical meetings about budgeting, credit rebuilding, and planning for tax time. They are not lectures. Many clients leave with a clearer sense of priorities, and that often sticks years after completion.
What happens to assets, contracts, and day‑to‑day life
A consumer proposal lets you keep your assets, subject to paying what you propose. You continue paying secured creditors to keep the house or the car. Ontario exemptions protect basic household goods, clothing, and tools of the trade up to specific limits. If you own a vehicle free and clear with a value above the exemption, we discuss whether to keep it and offer more in the proposal to account for available value, or to sell and downsize before filing.
Leases and service contracts continue as usual unless you choose to end them. Gym memberships, phone plans, and car leases are not automatically cancelled. If you want out, there is a right to disclaim certain contracts, but timing and method matter. Real estate transactions are a frequent topic for London ON lawyers who also act as real estate lawyers and estate lawyers. Buying or selling a home during a proposal is possible, but you must coordinate with your trustee and your lender. Some lenders hesitate, others will work with you if equity and income are strong. The term “bankruptcy” carries more stigma with mortgage underwriters than “consumer proposal,” but both demand full disclosure.
Life becomes quieter quickly. The day the filing goes in, the calls stop. Wage garnishments from most unsecured creditors stop. The stress relief feels immediate for most people. The hardest adjustment is the discipline of the monthly payment, especially in month eight when the crisis has faded. Good trustees set up PADs and reminders. A law firm like Refcio & Associates often checks in as well, because support at the right moment can prevent a missed payment from snowballing.
Taxes, CRA, and the self‑employed
CRA is a special creditor in that it wields stronger collection tools, but inside a consumer proposal it is just another unsecured creditor for personal income tax, HST, and payroll source deductions owed by a sole proprietor. Those debts can be included, which is often the make‑or‑break factor for self‑employed clients. If your books are late or estimates are fuzzy, expect CRA to file a proof of claim that errs on the high side. Your trustee may request additional documents or advocate for an adjustment later.
Going forward, you must stay current on all new taxes. The proposal only deals with pre‑filing amounts. If you miss filings or instalments after filing, CRA can get edgy and obstruct future approvals. If you operate through a corporation and owe source deductions or HST personally due to director liability, we will need to separate the corporate issues from personal exposure. A business lawyer with insolvency awareness, working in tandem with the trustee, can keep your enterprise alive while the personal proposal proceeds.
Credit reports, scores, and rebuilding
Credit agencies record a consumer proposal for the shorter of three years after completion or six years from the filing date. For a typical five‑year proposal, the note will fall off about a year after the last payment. During the term, your score may dip initially, then stabilize as balances convert to a single structured payment. Insurance and employment checks are rarely affected in a way that cannot be explained, though regulated roles may require disclosure.
Rebuilding begins earlier than most people think. Secured credit cards appear within weeks, and a small installment loan in year two can add positive data. Keep utilization under 30 percent, pay every bill on time, and track your file for errors. Many clients qualify for a car loan in year one or two at a fair rate, not the predatory kind. Mortgages or renewals generally become realistic 12 to 24 months after completion if income and down payment are solid. A London ON law firm that also handles real estate closings can coordinate with lenders who understand proposals, reducing friction as you move.
Comparing a consumer proposal to bankruptcy
Both options offer protection and a path out of unmanageable debt, but the lived experience differs.
Bankruptcy often finishes faster for first‑time filers with lower income, sometimes in as little as nine months. If you have little to no equity, minimal surplus income, and debt beyond your capacity, bankruptcy may be the least expensive, most direct path. The drawback is the potential for surplus income payments to climb if your income rises, uncertainty around asset realization, and a more enduring mark on credit perception among lenders who still draw a line between the two processes.
A proposal provides certainty. Payments are fixed, assets are preserved, and you stay in control of your budget. For homeowners with modest equity or families with steady income, that stability has value. The trade‑off is time. You will be making payments for up to five years, and discipline is not optional.
A small but important factor is dignity. Clients often say they prefer to pay back a portion over time rather than surrender directly into bankruptcy. That sentiment can make the budgeting and long timeline more palatable. The law recognizes this by allowing creditors to accept less than full repayment when the numbers justify it.
Practical mistakes that derail proposals
The most common mistake is low‑balling the offer without context. Creditors compare your proposal to a bankruptcy analysis. If you ignore home equity, surplus income, or a pending tax refund, expect objections or a forced amendment. A better approach is to acknowledge the bankruptcy math and beat it, even by a modest but credible margin.
Another recurring problem is an unrealistic monthly amount. If your car is 12 years old, budget as if a repair is coming this year, because it probably is. If you are a contractor, set the payment at a level that survives winter. Overpromising to shave a few months off the term rarely ends well.
Irregular or undisclosed side income is next on the list. Creditors do not expect perfection, but they do expect honesty. Trustees will ask for bank statements and pay info. If deposits do not match your story, goodwill evaporates. Clean records for three months before filing make the process smoother.
Finally, watch co‑signed or joint debts. A consumer proposal relieves your liability, but it does not release the co‑signer. If your spouse or parent is linked to the loan, they will be chased for the balance. We often design proposals that allocate extra dollars to fully repay joint debts to protect family relationships. It is not mandatory, but it may be wise.
The London and Southwestern Ontario context
Local conditions shape outcomes. Housing values in London have fluctuated in the last few years, which affects equity calculations directly. A difference of 20,000 dollars in home value can alter the bankruptcy baseline and change the proposal figure that creditors expect. Appraisals should be current, not wishful. If you are planning to sell during the proposal, structure the terms with that in mind before you file.
Employers in the region range from hospitals and universities to automotive suppliers and construction firms. Many offer steady income, which supports proposal approval, but shift premiums and overtime can bounce monthly earnings up and down. Build a buffer. For self‑employed clients, the cycle of spring tax bills is a known stress point. A credible plan includes setting aside a portion of each payment period for new taxes. Trustees and lawyers who work regularly with London ON lawyers in related practices, such as business lawyer and real estate lawyer roles, can integrate these realities into a practical plan.
Where a lawyer fits alongside the trustee
Only a Licensed Insolvency Trustee can file a consumer proposal, but a bankruptcy lawyer adds value in several places. First, before you meet the trustee, we can map the legal implications for your assets, family obligations, and pending litigation. Second, if a creditor objects aggressively or raises an allegation of preference or transfer at undervalue, legal counsel can assess risk and negotiate terms that keep the proposal alive. Third, if you own a business, coordinating corporate and personal obligations, leases, and vendor relationships often benefits from a business lawyer who knows insolvency boundaries.
Clients sometimes arrive at Refcio & Associates after a tough meeting with a creditor or a garnishment scare. Having a legal team that spans multiple disciplines, including family lawyer and estate lawyer experience, can spot cross‑currents. For example, support obligations do not disappear in a proposal, and if you are in the middle of a family law dispute, we need to align the proposal payment with support commitments to avoid a contempt motion. If you are executor of an estate, a pending distribution does not play well with a proposal unless we plan for it. These are not edge cases in practice, they are Tuesday mornings in a busy London ON law firm.
Timing, strategy, and trade‑offs
Filing too early or too late both carry costs. Filing early can freeze a debt picture before a large tax bill crystallizes, giving you control. Filing too late can leave you paying court costs on a lawsuit that would have stayed, or losing funds seized through a bank set‑off because it happened just before the filing. Coordination matters. If a creditor threatens a lien on your property, the timing of registration and the filing of a proposal can determine whether the claim is treated as secured or unsecured. A day can change the entire strategy.
There is also the personal timeline. If a major life event is imminent, such as relocation for work or the birth of a child, shape the proposal to the likely budget months from now, not the one you have today. A five‑year plan should survive normal life changes. When in doubt, add a small lump‑sum component from a tax refund or a known bonus to lighten the monthly commitment. Conversely, if your income is stronger now than it will be later, front‑load payments while you can.
What happens if your situation changes
Life does not care that you signed a proposal. Illness, job loss, or surprise expenses can upend a plan. The law allows amendments. You can propose to extend the term up to the 60‑month maximum, reduce monthly payments offset by a lump sum, or suspend payments temporarily with creditor consent. Communication is everything. Silence leads to default, and after three missed payments the proposal is annulled automatically. If that happens, creditors can resume collection and add back interest, and your options narrow.
Most trustees and lawyers prefer to renegotiate early. In my experience, creditors are pragmatic when the debtor has paid consistently and the proposal still compares favorably to bankruptcy. A two‑month pause combined with a modest extension usually carries. What does not carry is a last‑minute plea after five months of missed payments and no explanation. Pick up the phone at the first sign of trouble.
A short comparison checklist
Use this compact frame to decide whether to pursue a consumer proposal now or to explore alternatives.
- Your unsecured debt is substantial, typically 10,000 to 250,000 dollars, and your income can support a stable monthly payment for up to five years.
- You want to keep assets such as a home or vehicle, and you can maintain the secured payments.
- A realistic proposal will pay creditors at least slightly more than a bankruptcy would yield, based on home equity, surplus income, and trustee cost assumptions.
- Collection pressure is intense, but you prefer a structured repayment to a liquidation process, and you can commit to two financial counselling sessions.
- You are willing to disclose fully, budget honestly, and coordinate with both a Licensed Insolvency Trustee and a lawyer when special issues arise.
How to start, and what to bring to the first meeting
If you are ready to explore a proposal, assemble a simple package: identification, recent pay stubs or income summaries, bank statements for the last three months, a list of debts with estimated balances, mortgage or vehicle statements, last two years of tax returns if available, and any court documents. This lets a trustee or a bankruptcy lawyer see the whole board.
A first conversation with Refcio & Associates or another respected London ON law firm does not commit you to a filing. It is a strategy session. We look at the bankruptcy baseline, the proposal math, and the personal factors that matter to you. Sometimes we call in a colleague who focuses on family law if support orders are present, or a colleague who acts as a real estate lawyer if a sale or refinance is on the horizon. Legal services work best when coordinated, and London ON lawyers who collaborate can remove friction you do not need during a stressful time.
Final thoughts from the trenches
Consumer proposals have matured into a reliable, humane tool for financial reset. They ask something real of you, five years is not short, but they preserve control and protect what you have built. The best outcomes share three traits. The offer beats the bankruptcy math without bravado. The payment fits the household budget after groceries, utilities, and an honest car repair estimate. And the debtor communicates early when life changes.
If you see yourself in these pages, take the next practical step. Have a candid talk with a Licensed Insolvency Trustee and a bankruptcy lawyer who know the London market. Ask them to walk you through both the upside and the traps. Whether you work with Refcio & Associates or another provider of legal services in London, push for a plan that respects your reality. The right proposal is not just paperwork, it is a foundation for the next chapter.
Address: 380 York St, London, ON N6B 1P9, Canada
Phone: (519) 858-1800
Website: https://rrlaw.ca
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Refcio & Associates is a full-service law firm based in London, Ontario, supporting clients across Ontario with a wide range of legal services.
Refcio & Associates provides legal services that commonly include real estate law, corporate and business law, employment law, estate planning, and litigation support, depending on the matter.
Refcio & Associates operates from 380 York St, London, ON N6B 1P9 and can be found here: Google Maps.
Refcio & Associates can be reached by phone at (519) 858-1800 for general inquiries and appointment scheduling.
Refcio & Associates offers consultative conversations and quotes for prospective clients, and details can be confirmed directly with the firm.
Refcio & Associates focuses on helping individuals, families, and businesses navigate legal processes with clear communication and practical next steps.
Refcio & Associates supports clients in London, ON and surrounding communities in Southwestern Ontario, with service that may also extend province-wide depending on the file.
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Refcio & Associates is open Monday through Friday during posted business hours and is typically closed on weekends.
People Also Ask about Refcio & Associates
What types of law does Refcio & Associates practice?
Refcio & Associates is a law firm that works across multiple practice areas. Based on their public materials, their work often includes real estate matters, corporate and business law, employment law, estate planning, family-related legal services, and litigation support. For the best fit, it’s smart to share your situation and confirm the right practice group for your file.
Where is Refcio & Associates located in London, ON?
Their main London office is listed at 380 York St, London, ON N6B 1P9. If you’re traveling in, confirm parking and arrival instructions when booking.
Do they handle real estate transactions and closings?
They commonly assist with real estate legal services, which may include purchases, sales, refinances, and related paperwork. The exact scope and timelines depend on your transaction details and deadlines.
Can Refcio & Associates help with employment issues like contracts or termination matters?
They list employment legal services among their practice areas. If you have an urgent deadline (for example, a termination or severance timeline), contact the firm as soon as possible so they can advise on next steps and timing.
Do they publish pricing or offer flat-fee options?
The firm publicly references pricing information and cost transparency in its materials. Because legal matters can vary, you’ll usually want to request a quote and confirm what’s included (and what isn’t) for your specific file.
Do they serve clients outside London, Ontario?
Refcio & Associates indicates service across Southwestern Ontario and, in many situations, across the Province of Ontario (including virtual meetings where appropriate). Availability can depend on the type of matter and where it needs to be handled.
How do I contact Refcio & Associates?
Call (519) 858-1800, email [email protected], or visit https://rrlaw.ca.
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Refcio & Associates is proud to serve the London, ON community and provides legal services that may include real estate and business matters.
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Refcio & Associates is proud to serve the London, ON community and helps clients navigate legal processes with clear next steps.
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Refcio & Associates is proud to serve the London, ON community and provides legal services that may include employment and contract-related support.
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Refcio & Associates is proud to serve the London, ON community and supports a range of legal needs for local residents and businesses.
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