Your Questions About Consumer Proposals in BC Answered (2024)

A Consumer Proposal is a legal agreement that allows a person to consolidate all of their debts into a single amount, stop all future interest charges and collection activities, and repay a portion of the debt (often 20-40%) in full satisfaction of amounts owing.

For example, an individual owing $20,000 might offer a Consumer Proposal to repay 30% of this total amount at monthly payments of $166.67 for 36 months. The balance of the debt (ie. 70% of the total debt) is written off at the conclusion of the Consumer Proposal.

A Consumer Proposal is not the same as filing a bankruptcy. Although both are legal debt solutions only available through a Licensed Insolvency Trustee (formerly bankruptcy trustees), they are two entirely different processes.

Compare the main differences between Consumer Proposals and Bankruptcy.

Only a Licensed Insolvency Trustee can help you file a Consumer Proposal, and no referral is required.

Ready to get started? Book a free, confidential debt consultation today!

A Consumer Proposal can be filed in BC by a person who owes between $1,000 and $250,000 (not including mortgages on their personal residence).

If a person owes more than $250,000 they may still be able to file a Proposal, but some different rules will apply.

A joint Consumer Proposal may also be filed by two or more individuals together (ie. couples, business partners).

To file a Consumer Proposal, you must engage the services of a Licensed Insolvency Trustee – they are the only professionals who are legally authorized to file a Consumer Proposal for you. An individual is not able to file a Consumer Proposal without the assistance of a Licensed Insolvency Trustee.

Watch a 1-minute overview of Consumer Proposals or use our Debt Options Calculator to get a general comparison of four key debt options.

In situations where spouses have debts in common it is possible (and often advantageous) for spouses to file a joint Consumer Proposal together to manage family financial issues.

It is not a requirement for all debts being consolidated in the joint Consumer Proposal to be jointly held, but there should be some substantial level of commonality/shared liability for the debts (i.e. at least some debts are in both peoples’ names).

If both spouses have unmanageable debts but few (or no) debts in common, then separate solutions to resolve the financial issues may be more appropriate.

A Licensed Insolvency Trustee can help you and your spouse assess your financial situation and work with you to evaluate all of the options that can address both individual debts and joint debts that may be causing financial stress to you and your family.

Consumer Proposals are a unique debt solution combining key advantages of debt consolidation and debt forgiveness in a repayment plan that’s customized to each individual. A Licensed Insolvency Trustee will work with you to draft a Consumer Proposal that meets your needs.

Filing a Consumer Proposal is often the most affordable way to consolidate debt, since there are no borrowing costs – and most people are able to significantly cut how much debt they must repay to have their accounts settled in full.

Book a free confidential debt consultation to explore Consumer Proposals and other debt solutions with a qualified debt help expert.

Read More: Is a Consumer Proposal right for me?

Filing a Consumer Proposal to consolidate and settle debts in BC can have many benefits and advantages over other debt solutions.

Some general benefits of filing a Consumer Proposal include being able to:

• Consolidate debt
• Reduce amount of debt that needs to be repaid (in full settlement)
  Debt can often be cut by up to 80%
• Stop interest and collections
  By law all interest will stop, and creditors must refrain from contacting you for payment
• Have a definite date of being “debt-free”
  Consumer Proposal can last no more than 60 months and can be paid off early without penalty
• Deal with virtually all types of debts
  Even government debts like taxes, student loans, WCB, MSP, etc.
• Protect assets from creditors
  Collection and legal action cease upon filing the Consumer Proposal
• Avoid filing bankruptcy.

Watch our short video: What are the benefits of filing a Consumer Proposal?

There are four main steps to filing a Consumer Proposal in BC.

1.The first step is to book a free, confidential debt consultation.
Or call us toll-free: 1-800-661-3030.
2.If you decide to file a Consumer Proposal, the next step will be to sign the official documents, which will then be officially registered and sent to your creditors.
3.Complete the terms of your Consumer Proposal. (These are usually monthly payments, along with two financial counselling sessions).
4.After your last payment, your Consumer Proposal will be finished! You are now debt-free and have achieved a financial fresh start!

Read More: What are the main steps in a Consumer Proposal?

Filing a Consumer Proposal in BC will wipe out nearly all types of debt. Including, but not limited to:

• Consumer and business debt (credit cards, lines of credit, overdrafts, payday loans, etc.);
• Income tax debts (income taxes, GST, business taxes, payroll remittances, etc.);
  
  • Aside from bankruptcy, a Consumer Proposal is the only settlement mechanism available in Canada that will reduce and eliminate government debts
• Student loans (federal, provincial, private);
• ICBC debt;
• Secured debts – should you choose to end the commitment (vehicle shortfall, mortgage foreclosure). If you continue to make monthly secured debt payments, a Consumer Proposal does not normally require you to surrender secured assets
• Debt for a business for which you have signed a personal guarantee;
• Debt owing to another person.

Yes, they will! By law, collection action against you must cease once your Consumer Proposal has been filed.

A Consumer Proposal provides a stay of proceedings, which means that, by law, your creditors can no longer contact you for payment. All collection actions against you must cease once official Consumer Proposal documents are filed. Consumer Proposals trigger a “freeze” on your debts and stop interest charges, collection calls and letters, wage seizures and bank account freezes.

If you have a mortgage or vehicle loan that you are opting to continue with, these payments or contact from your creditors about these accounts will continue.

Watch our short video about how Consumer Proposals in BC impact mortgages and vehicle loans.

Some types of debts (like those to Family Maintenance Enforcement for child and/or spousal support) may not be extinguished by filing a Consumer Proposal, and the stay of proceedings will not apply.

Consumer Proposals are generally quite private. When you file a Consumer Proposal, your Licensed Insolvency Trustee will generally only notify your creditors and the Superintendent of Bankruptcy “OSB” (the government body that oversees all Consumer Proposals) that you have made a Consumer Proposal.

Credit reporting agencies, also known as credit bureaus, will obtain information about your Consumer Proposal from the OSB and keep this information on your credit history for three years from the date your Consumer Proposal is complete. This does not mean that you cannot obtain credit during this time.

Three years after completion is similar to the amount of time that traditional and non-profit credit counselling programs will be reflected on your credit history; it is also less time than a personal bankruptcy filing, or transactions the credit bureaus consider “negative” will be reflected (ie. late payment history, collection accounts.)

The two financial counselling sessions provided during the Consumer Proposal process will provide you with tools and resources to help you re-establish your credit rating following your Consumer Proposal.

If you are making a Consumer Proposal to consolidate and cut your debt generally your spouse would not be impacted in any way. The exception to this would be if your spouse is legally responsible for your debts as a co-signer, co-cardholder or guarantor.

Without co-signer responsibilities, spouse’s debts are in fact so separate that it would be possible your spouse would not even otherwise be aware of your decision to file a Consumer Proposal, since only your creditors are typically notified of your Consumer Proposal.

Read More: How does making a Consumer Proposal affect my spouse?

If you have a vehicle financing agreement (lease or loan), or a mortgage, you can choose to continue with those arrangements outside of your Consumer Proposal. Most people will use a Consumer Proposal to deal only with debts other than those involving an ongoing car or mortgage agreement.

When you have a mortgage or vehicle financing the lender holds an asset as collateral (ie. your home, in a mortgage). This means that they are “secured creditors” and treated a bit differently than other creditors (ie. credit card debt) in a Consumer Proposal.

You can decide to continue with payment arrangements to secured creditors, if you want to keep the asset pledged as collateral.

You also have the option of surrendering the asset to the secured creditor, ending any ongoing payment obligation. If there is a shortfall (difference between what you owe and what the asset is re-sold for), this can also be absorbed by the Consumer Proposal.

Watch our short video: Can I keep making my payments on my car or mortgage?

Under a Consumer Proposal you retain possession of all of your assets – there is no “vesting” of your assets in the Trustee.

Consumer Proposals will commonly offer creditors settlement of debts by way of monthly payments, not by way of surrendering assets. This means that individuals keep all their assets when they file a Consumer Proposal.

Because filing a Consumer Proposal ensures that creditors can no longer pursue you for payment, or continue collection action, a Consumer Proposal can be an effective tool in protecting assets from creditor seizure or attachment.

Consumer Proposals can include all debts to Canada Revenue Agency (formerly Canada Customs and Revenue Agency, Revenue Canada) including debt for personal income tax, GST, payroll remittances or corporate tax.

Consumer Proposals are the ONLY mechanism in Canada that can be used to settle government debts for less than the full amount owing, besides bankruptcy.

Filing a Consumer Proposal will also stop further interest from accumulating, and halt bank account freezes and wage seizures that Canada Revenue Agency may have in place.

After you file a Consumer Proposal, you will need to ensure that your tax filing obligations are kept up to date throughout the proposal.

Watch our short video: Can income tax and GST debt be included in a Consumer Proposal?

Yes - a Consumer Proposal can be used to reduce student loans, whether they are owed to Canada Student Loans, BC Student Loans (or another province), or owed to a private lender.

• A wage garnishment or bank account freeze imposed by Canada Revenue Agency for student loan debt would be lifted by filing a Consumer Proposal.

A Consumer Proposal is the ONLY option to reduce government and private student loans, besides bankruptcy. It’s important to note that government and private student loans may be treated differently in a Consumer Proposal as follow:

Private bank-funded student loans will be treated like other unsecured debts such as credit cards, etc.

Government student loans are directly impacted by the length of time it has been since you last attended school:

• If it has been seven years or more since you last attended school, the government student loans will be fully discharged (settled) by the Consumer Proposal.
• If it has been less than seven years since you finished your studies, your government student loans survive the Consumer Proposal, and the remaining balance (less any amounts paid as part of the Consumer Proposal) needs to be repaid after the Consumer Proposal is completed.
• If it has been more than five years but less than seven since you finished your studies and you continue to have difficulty with your student loan payments and have acted in good faith, a court may order that your government student loans be discharged upon completion of the Consumer Proposal.

Many people with recent student loans find that once their other debts have been settled under a Consumer Proposal, the remaining student loan balances are then manageable.

While most debts will be settled in full by filing a Consumer Proposal in BC, some types of debts may survive. These include:

• Child and/or spousal support payments;
• Fines imposed by a court;
• Money owing for things stolen;
• Property or services obtained through false pretences or fraudulent misrepresentation;
• Award of damages by a court for intentionally inflicting bodily harm or sexual assault;
• Government student loans if the Consumer Proposal is filed within seven years after the end of studies. (If it has been more than five years however, a hardship court application may be made to release these government student loans.)

Some of these creditors are entitled to file a claim in the Consumer Proposal (spousal or child support, student loans) which would result in funds being paid to them. The person making the Consumer Proposal will then be responsible for paying the surviving balances due, less any payments received by those creditors through the Consumer Proposal.

Debts that will survive your Consumer Proposal will be discussed with you during the debt consultation process.

Most people will just make a first monthly proposal payment at the time they sign their official documents – no extra payments are required to start a Consumer Proposal.The Licensed Insolvency Trustee’s fees in a Consumer Proposal are set by government tariff.

These fees are deducted from the funds the creditors receive and there is no additional cost to the person above what they are offering to their creditors in the Consumer Proposal.

Read More: How much does it cost to file a Consumer Proposal in British Columbia?

A Consumer Proposal will be reflected on your credit history for three years after completion of your Consumer Proposal or six years from the date of filing, whichever comes first.

This is similar to the credit rating impact of traditional or non-profit credit counselling programs that require 100% repayment of outstanding debts.

This does not prevent you from seeking new credit before the Consumer Proposal expires from your credit history.

Read More: How long will a Consumer Proposal show on my credit history?

Consumer Proposals are almost always accepted by creditors.

In the rare event a Consumer Proposal is rejected by creditors, it may be because the creditor wishes to negotiate some term of the proposal (payment amount or length). In that case, you have the option to adjust the proposal terms offered or allow the proposal to be voted down.

If the creditors do not accept the Consumer Proposal and it is ultimately rejected, the creditors will then be able to continue to pursue you for payment of the debts owing. You may want to consider whether filing a personal bankruptcy is appropriate to deal with your debt and discuss this option with your Licensed Insolvency Trustee.

Watch our short video: What happens if my Consumer Proposal is rejected?

If your situation changes and you can't manage your Consumer Proposal payment, it may be possible for your Licensed Insolvency Trustee to modify your debt settlement terms by filing an amended Consumer Proposal.

In this situation, your creditors would be advised of your intention to change your Consumer Proposal terms, and they must agree to accept the amended Consumer Proposal. As with the original proposal, if the majority of creditors (by dollar value) vote in favour, the new proposal terms will take effect.

In rare cases, an adverse change in circ*mstance may lead a person who has filed the Consumer Proposal to abandon it altogether and file a personal bankruptcy. While a Consumer Proposal is an alternative to personal bankruptcy, it does not take away the option to file a bankruptcy if the circ*mstances warrant it.

If you have an ongoing Consumer Proposal and feel your situation is making it challenging to fulfill, speak with your Licensed Insolvency Trustee or Estate Manager as soon as possible. We will work with you to find an alternative solution.

It is possible to make a Consumer Proposal if you have previously filed a bankruptcy, as well as if you have previously finished a Consumer Proposal.

You can make a Consumer Proposal more than once, but you can’t have more than one active Consumer Proposal at a time. If you’re having trouble with your payments for an active Consumer Proposal or new debts that aren’t included in your current Consumer Proposal, connect with a Licensed Insolvency Trustee to discuss your options.

Read More: What are my debt options if I’ve done a Consumer Proposal before?