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Consumer Proposal Process in Canada

consumer proposal process

Like many Canadians, you may be carrying a balance on credit cards or lines of credit, have overdrawn accounts, or owe the government money. Circumstances can make it impossible to repay our debts as agreed, so getting debt help can be very valuable. You may have heard of a Consumer Proposal as a debt relief option and want to know how it works and whether or not it can help you.

Consumer Proposals

A Consumer Proposal is a legally binding, negotiated debt settlement arranged with creditors to settle your unsecured debt. It can be an effective alternative to Bankruptcy. Its advantages are:

  • It is a government-approved debt solution.
  • Only Licensed Insolvency Trustees (LITs) can initiate and submit a Consumer Proposal.
  • It is legally binding and will stop collection calls, legal action, wage garnishment and the interest on your debt.
  • A Consumer Proposal can significantly reduce your debt.
  • You can keep your assets.
  • You will be out of debt in five years or less.

A Consumer Proposal will affect your credit rating and become part of a permanent public record. However, rebuilding your credit rating is part of the process.

How To File A Consumer Proposal

The following steps outline how to file a Consumer Proposal. Filing is straightforward and can be done fairly quickly.

The Consumer Proposal process

There are six steps involved in filing and completing a Consumer Proposal.

1. Book a free consultation with a LIT

You must use the services of a LIT to file a Consumer Proposal. The first meeting is free, and your LIT will review your finances. They will need to know what you owe, your income, expenses, and assets. Your LIT will review all debt relief options such as debt consolidation, Consumer Proposal, and Bankruptcy. Then, you’ll decide which option is best for you.

2. Your LIT will file the Consumer Proposal

Your LIT (the Administrator) will prepare all the required paperwork and file the Consumer Proposal with the Office of the Superintendent of Bankruptcy. You’ll receive a stay of proceedings, sometimes known as creditor protection. The stay of proceedings will stop debt payments, collection calls, wage garnishment, legal action, and interest on your debt.

3. Your creditors will be notified

Your Administrator will submit a copy of your proposal to all of your creditors. They may choose to have a meeting and vote to accept, reject, or change the agreement. If the creditors who hold 50% or more of the debt vote “yes,” the proposal will go forward.

Any creditor who holds 25% or more of the debt can call a meeting. They have 45 days from the filing to do so. Creditors must meet within 21 days of calling for a meeting. If they don’t call a meeting within 45 days of filing, your proposal is considered to be accepted by your creditors.

4. Make your payments

You will make monthly payments to your administrator, who distributes the payment to your lenders. You can have up to five years to complete your Consumer Proposal. If you have the money available, you can pay your consumer proposal in a lump sum or pay it off quickly.

5. Complete the terms and conditions

Once you complete your two Consumer Proposal duties, you will receive a Certificate of Full Performance. The obligations to meet are to make all your payments in full, and attend two credit counselling sessions.

6. Rebuild your credit

A Consumer Proposal will stay on your credit report as an R7 for three years after you complete it. However, you can begin to rebuild your credit after you file. One way is to get a secured credit card and pay it off every time you use it. Keeping your Certificate of Full Performance and monitoring your credit report is essential. Doing so will help you notice and correct any errors or oversights.

Where to Get Help

If you’re overwhelmed by debt, a Consumer Proposal could be the debt relief solution you’re looking for. We are here to help you start your debt-free journey. We offer free consultations to help you find the best solution for your debt. Please call us at 1-888-371-8900 or fill out our online form. We’ll work with you to help you become debt-free and get on the road to financial freedom.