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Do Canadian Banks Accept Consumer Proposals?

Deep in debt but want to avoid filing for Bankruptcy? Have you considered a Consumer Proposal?

A Consumer Proposal can help you avoid some of the more severe consequences of Bankruptcy, including the sale of assets and a seven-year stain on your credit score. However, in a Consumer Proposal, your creditors get to vote if they want to accept or reject your offer. The more money you owe a creditor, the more voting power they have. If you owe a lot of money to a Canadian bank, it’s important to understand whether or not banks accept Consumer Proposals.

Do I Qualify For a Consumer Proposal?

To determine if a Consumer Proposal is the right debt solution, you first need to know if you qualify. A Licensed Insolvency Trustee (LIT) can assess your financial situation and tell you if you meet the qualification criteria. Your LIT can then walk you through the entire proposal process.

Dealing with a mountain of debt can feel isolating and intimidating, but you don’t have to do it alone. There is help available, and you can find relief.

To qualify for a proposal in Canada, you must meet the following criteria:

  • You’re a resident of Canada
  • You’re insolvent (unable to pay your debts on time)
  • You have a maximum of $250,000 in unsecured debt (excluding mortgage)

Consumer Proposals vs Bankruptcy

Consumer Proposals and Bankruptcy are the only government debt relief programs in Canada. With a Consumer Proposal, you can simplify debt repayment by consolidating all your debts into one monthly payment. A proposal can also reduce the total debt you have to pay.

In a proposal, you team up with an LIT to create an offer for your creditors where you agree to pay a portion of your debt, extend the time you have to pay, or both.

A benefit of a Consumer Proposal is you don’t have to sell any of your assets like you do in Bankruptcy, and your credit score doesn’t take as big of a hit. However, while Bankruptcy has a strict formula for how much debt you have to pay your creditors, in a proposal your creditors have more of a say. You make an offer, and your creditors can accept or reject it.

How to Get a Bank to Accept Your Consumer Proposal

In a Consumer Proposal, you’ll work with a Licensed Insolvency Trustee (LIT) who will review your income and debts and help you create an offer to your creditors.

When you submit the proposal, your creditors vote to accept or reject your offer.

Your offer includes how much you can pay, as well as details about your situation and the cause of your financial troubles.

Creditors have 45 days to review your offer and decide if they want to accept or reject it. If your proposal is accepted, the court approves it and you’re responsible for making payments for up to five years.

If your proposal is rejected, you may have to file for Bankruptcy or come up with another debt repayment plan. Again, you don’t have to figure this out alone. Your LIT will assist you in coming up with a new plan.

Whether a bank accepts a Consumer Proposal usually depends on what makes the most financial sense.

Why Banks Accept Consumer Proposals

Consumer Proposal acceptance is likely from your bank or credit card company because they often prefer this to Bankruptcy. Why?

  • More control. In a Bankruptcy, the amount of money a creditor receives is based on a court order. In a Consumer Proposal, creditors have more say. They have the power to reject your offer if they don’t agree with your proposal or if they think you can afford to pay more.
  • More money. If your bank or credit card company is likely to recoup more money through a proposal versus Bankruptcy, it makes sense for them to accept your offer.

What Are The Benefits of a Consumer Proposal?

Debt can take a serious toll on your mental health. If money issues consume your thoughts and you’re struggling to sleep at night, it’s time to find a debt solution. While you might worry that a proposal will hurt your credit score, so will missing your debt payments.

Filing a Consumer Proposal comes with several benefits that can help to immediately reduce your stress and set you on the track for financial success. Some benefits include: 

  • Creditor protection. Wage garnishment, creditor lawsuits, and collections calls will stop immediately upon filing.
  • Debt consolidation. Simplify your debt repayment process by consolidating into one monthly payment.
  • Asset protection. You can keep your house, car, and other assets when you file for a proposal.
  • Debt reduction. With a proposal, you pay a portion of your original debt.
  • Avoid Bankruptcy. If you qualify for a proposal, you can avoid filing for Bankruptcy.

Is a Consumer Proposal Right For You?

If you have a lot of bank debt with one of Canada’s big banks, including the Royal Bank, TD Bank, Scotiabank, or CIBC, it’s often in their best financial interest to accept your offer. However, different banks have different criteria for what they are willing to accept.

If you’re wondering if a Consumer Proposal is the right debt relief option for you, reach out to a Licensed Insolvency Trustee. Your LIT can tell you if you qualify for a proposal and will work with you to put together an offer to your creditors. For a free, no-obligation consultation, reach out to an LIT at Allan Marshall & Associates by calling 1-888-371-8900, or fill out our contact form online. We look forward to talking to you.

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Glenn Steiner

Glenn Steiner is a Licensed Insolvency Trustee with Allan Marshall & Associates Inc. He has over 23 years as an LIT and 15 years in senior positions with the Office of the Superintendent of Bankruptcy.