What is a Consumer Proposal?
A Consumer Proposal is a formal offer to your creditors to settle your unsecured debt. It reduces the overall amount of debt you pay back while ensuring your creditors still recover a percentage of what’s owed to them.
You can pay this balance in one lump sum. Or in monthly installments over a specified timeframe, up to a maximum of five years, which would reduce your total number of debt payments to one per month.
Who do Consumer Proposals benefit?
Consumer Proposals benefit both you and your creditors.
Licensed Insolvency Trustees customize your proposal to suit your income and debt load, making it a great option for people of all financial situations. It is also beneficial if you want to keep assets that would otherwise be available to creditors through a bankruptcy.
Creditors will also see a higher return through a Consumer Proposal than they would in a bankruptcy. So you will feel good about paying a percentage of your debt back and your creditors will be happy to recover a portion of the debt owing to them.
When will I know if the Consumer Proposal is accepted?
After the Licensed Insolvency Trustee files your Consumer Proposal, it will be presented to your creditors. Your creditors have forty-five days from the filing date to vote for or against the proposal.
During this period, negotiations can occur with any creditor who votes against a proposal. A majority by dollar value must vote in favour of the proposal for it to be accepted. If a certain percentage of creditors holding a certain dollar amount of the debt vote against the proposal, a meeting of creditors will likely be held to determine whether an amended proposal will be acceptable or whether the proposal will be rejected.
What do I have to do to complete my Consumer Proposal?
Once your proposal is accepted, your requirements to complete it are very straightforward:
- You must pay the agreed upon amount in the timeframe set out in the Consumer Proposal.
- You must attend two counselling sessions provided by a qualified insolvency counsellor.
- You must comply with any other requirements included in your proposal — the Licensed Insolvency Trustee will explain these thoroughly if they apply.
You will receive a Certificate of Full Performance upon completion of the Consumer Proposal and your debts will be legally discharged.
Can I pay off my Consumer Proposal early?
Yes, you can. You have the freedom to take the full length of time to pay off your proposal — but if your income increases or you receive a large tax refund, bonus or windfall, you can direct these funds toward your proposal.
Not only can you pay off your proposal early, you are also free to make as much money as you want. In a Bankruptcy, you must report monthly income to the Trustee and an increase in income can trigger a monthly payment (or a higher monthly payment). This provision does not exist with a Consumer Proposal.
How does filing a Consumer Proposal affect my credit?
Once you file a Consumer Proposal, the included debts will receive an R9 (the worst) rating on your credit report. This will remain until the end of your proposal, then change to R7 for a further three years.
If you pay your proposal off sooner than agreed upon, you will speed up your credit recovery. If you reduce your proposal by a year, the R9 rating disappears a year earlier and the R7 rating takes over for it’s three-year run.
When do I get protection from my creditors?
A Stay of Proceedings is in place as soon as the Licensed Insolvency Trustee files your Consumer Proposal. This halts current collection action and prevents further collection action and wage garnishments by your creditors, including harassing phone calls from creditors and collection agents.
Can I have credit while in a Consumer Proposal?
Yes, you can have credit while in a Consumer Proposal.
However, if consumer debt was the main reason for filing your Consumer Proposal, exercise extreme caution when accessing credit again. Some people choose to wait many months — or even a few years — before they feel confident obtaining or using credit again.
Who can help me file a Consumer Proposal?
Only a Licensed Insolvency Trustee may file a Consumer Proposal. With their extensive experience and in-depth knowledge of theBankruptcy and Insolvency Act (BIA), Licensed Insolvency Trustees can structure a custom proposal that works within your budget and provides a satisfactory return to creditors.
Is a Consumer Proposal right for me?
A no obligationFree Confidential Consultationwith a Licensed Insolvency Trustee will help you decide if a Consumer Proposal is the right debt solution for you.
FAQs
When a proposal passes, it forces all general unsecured creditors(with minor exceptions)to settle their claims against the debtor for the amount offered in the proposal. Consumer proposals get accepted in our office “eventually” at a rate of 95% or better.
How often are consumer proposals rejected? ›
Consumer proposals are rarely rejected; however, if your creditors do reject your consumer proposal, all hope is not lost. When you file a consumer proposal, your creditors have 45 days to submit votes on your proposal.
What is the downside of a consumer proposal? ›
Disadvantages of a Consumer Proposal:
A proposal will usually take longer to complete than a bankruptcy. Lowering your monthly payment means longer time paying back, however, if your situation improves, you CAN pay off a proposal early. Credit rating is still affected – A Consumer Proposal DOES affect your credit.
What Cannot be included in a consumer proposal? ›
Debts that cannot be included in a consumer proposal
Secured debts like your mortgage or car loan. Support payments or alimony obligations. Court fines and penalties including parking tickets. Debts due to fraud.
Why would a consumer proposal get rejected? ›
If your consumer proposal has been rejected, it is because your creditors will want some kind of changes to the terms. Often, these required amendments will be along the lines of the following: The amount you agree to pay each month. This is dependent on your income and what you can realistically afford each month.
Do creditors usually accept consumer proposals? ›
Consumer proposals are usually accepted as filed and negotiations can take place between you and your creditors with the help of your Licensed Insolvency Trustee to gain a positive vote.
Do you lose your credit cards after consumer proposal? ›
Credit Cards & Consumer Proposals
The only catch is that the card must have no balance at the time of filing. Since consumer proposals are different from bankruptcy, you can still opt to keep the card to give yourself the option of using it in the future.
Do you have to give up all credit cards in consumer proposal? ›
When you file for a consumer proposal, you will have to hand in any credit cards that are part of the proposal. The creditors will freeze or close the credit card for which you previously qualified. You might have a credit card with a zero balance or a credit balance not included in the proposal.
How long does it take to get good credit after consumer proposal? ›
Depending on the credit reporting agency, a consumer proposal can remain on your credit report for either 3 years after you pay off all the debts included in the proposal, or 6 years after you sign the proposal, whichever is sooner.
Is it smart to do a consumer proposal? ›
A consumer proposal filing makes good sense if you have a large amount of unsecured debt and a stable monthly income. If you can still repay at least 25% of your total debt over a five-year period, it's likely that creditors will accept a consumer proposal to avoid losing the entire loan balance in a bankruptcy.
The R7 rating is a specific code used by credit bureaus to indicate that you have entered into a consumer proposal. This code alerts potential lenders and creditors that you are undergoing a debt settlement process.
Can I keep my savings on a consumer proposal? ›
Only when you file bankruptcy would any contributions made in the past twelve months need to be surrendered to a Licensed Insolvency Trustee. A consumer proposal also allows you to keep any savings, RESPs, and other investments you may have contributed to.
Do banks accept consumer proposals? ›
They can say 'yes' or 'no' to the proposal. If at least half of your creditors vote 'yes,' then the proposal is deemed approved. Banks have 45 days from the date you file the proposal to vote. Banks also have the option to ask for a certain amount of the debt owed to them.
How much debt do you need for a consumer proposal? ›
To file a consumer proposal, which is a debt option more drastic than debt settlement but only slightly better than bankruptcy, you must owe at least $1,000 in unsecured debt. The maximum that you can owe as a single person and still qualify for a consumer proposal is $250,000.
Who pays for a consumer proposal? ›
In simple terms: You do not need to pay what you are offering to your creditors plus a fee – everything is included in one simple monthly payment. Generally if you are making a Consumer Proposal, you will only pay your first monthly proposal payment when you sign the official Consumer Proposal documents.
Will my consumer proposal be rejected? ›
Yes, a consumer proposal can be rejected. A consumer proposal requires that at least 50% of your creditors vote in favour of your proposal. In the event they do not, it will not be accepted. Thankfully, when working with us the chance of a proposal being rejected is almost zero based on past clients.
How long does it take for a consumer proposal to be approved? ›
45 days after the proposal is filed the Administrator will review all the claims filed by your creditors and their voting letters. If a majority of the dollars owed vote in favour of the proposal, it is considered accepted and all unsecured creditors are bound by it (some minor exceptions apply).
What is the catch of a consumer proposal? ›
Paying off debt with a consumer proposal will negatively affect your credit. You will get out of the unsecured debt you owe in 60 payments or less. The agreement is legally binding, so if you break it you will not receive a refund on the fees that you paid.
