If you are having difficulties making your monthly payments, falling behind, or getting overwhelmed by your debts, but find the idea of potentially losing assets in a bankruptcy upsetting, you are not alone. Or, perhaps you wish to pay back some of your debts but need a helping hand to get there.
A Consumer Proposal is an alternative to Bankruptcy that thousands of individuals throughout Canada have used to help them pay back and eliminate their debts.
What is a Consumer Proposal?
To understand proposals, you first must recognize that most people experiencing financial problems want to pay their debts, however, many are simply unable without additional help. A Consumer Proposal is a formal offer to creditors to settle outstanding debts and is a helpful tool to provide the additional assistance needed to take control of debt problems. Administered by a Licensed Insolvency Trustee (LIT), this legally binding agreement offers a more manageable alternative to Bankruptcy. Through a Consumer Proposal, debtors can negotiate reduced payments and extended timelines, providing a structured path to debt repayment while protecting their assets.
Generally, a Consumer Proposal is comprised of a monthly payment over a certain period of time no longer than 5 years. How we calculate the amount of that payment is determined by individuals’ circumstances, including your income and the assets you own.
Secured debts like mortgages or vehicle loans are not part of a Consumer Proposal. What that means is, so long as you can maintain the payments, you can keep assets such as your car or house.
Which Debts Does a Consumer Proposal Include?
A Consumer Proposal deals with unsecured debts (debts that don’t have collateral), like:
- Credit card balances (including store cards)
- Taxes you owe
- Medical bills
- Bank loans
- Payday loans
- Student loans, but only if you haven’t been a student for 7 years
Who Can File a Consumer Proposal?
To be eligible for a Consumer Proposal in Canada, you must meet certain requirements:
- You’re insolvent, which means you owe more money than you have, or you can’t keep up with your payments anymore.
- You have a lot of debt that you can’t pay back in full; you can only pay back some of it.
- Your unsecured debt is between $1,000 and $250,000 (not counting your mortgage).
- You live in Canada or own property within the country.
How Does a Consumer Proposal Work?
Initiating a Consumer Proposal involves several steps.
1. Meet With a Licensed Insolvency Trustee
You will first met with one of our insolvency experts and your options will be explained to you. If it is determined that a Consumer Proposal is the option best suited for your situation, then you will meet with a Licensed Insolvency Trustee. They will then review the process with you and help you to create and file the proposal.
2. File Your Proposal
The LIT will work with the debtor to develop a formal proposal outlining the terms of debt repayment, which is subsequently filed with the Office of the Superintendent of Bankruptcy (OSB). Once submitted, creditors have 45 days to accept or reject the proposal. If the majority of creditors accept, the proposal becomes binding on all parties. Upon the filing of your Consumer Proposal, you can enjoy the peace of mind knowing you will be protected from most actions against you from creditors, including wage garnishments. Calls from collection agencies will stop, and you won’t accrue any more interest.
3. Complete the Obligations of Your Proposal
At this point, if your Consumer Proposal is accepted by your creditors, you need to fulfill the terms. Typically, this will include the monthly payments you agreed to with the Licensed Insolvency Trustee, as well as two mandatory counselling sessions. The object of these sessions will be to get you back on your feet, financially speaking. Budgeting, rebuilding your credit, and many other topics will be covered to ensure you are on the road to financial recovery.
4. Certificate of Full Performance
Once you have completed all the obligations laid out in your Consumer Proposal, the Licensed Insolvency Trustee will issue a certificate releasing you from the unsecured debts that were included in your proposal when you filed. You can then continue on your path to financial well-being.
When and Why to Consider a Consumer Proposal
Consumer Proposals can help if you’re dealing with a lot of debt but still have a way to make reasonable payments over time. Things like losing your job, sudden medical bills, or other money problems might make you think about ways to get rid of debt. Choosing a Consumer Proposal means you can avoid some of the bad things that come with Bankruptcy, like losing your stuff and messing up your credit. Plus, with a Consumer Proposal, you can keep your assets while you follow a plan to pay off your debt. It helps you feel more in control even when money is tight.
Costs and Asset Exemptions
The costs associated with filing a Consumer Proposal vary based on how complicated your financial situation is and what the Licensed Insolvency Trustee helping you charges. These costs are typically incorporated into the proposal and depend on how much debt you have. Sometimes, you might end up paying back only 30 cents for every dollar you owe, but it varies for each proposal.
When you’re paying off your proposal, it could take up to 5 years, but you won’t have to pay extra interest during that time. And in many cases, you end up paying only 20% to 30% of what you owe.
Plus, certain assets, such as necessary household furnishings, tools for work, and registered retirement savings plans (RRSPs), can’t be taken away during the Consumer Proposal process. This helps protect your essential possessions while you work on fixing your debt.
Find Your Financial Freedom with a Proposal: Act Now
If you’re stuck in a lot of debt, a Consumer Proposal could be your way out of trouble. With the help of a Licensed Insolvency Trustee, you can figure out how to deal with your debt and feel more sure about it. Start taking charge of your money future today—talk to a Licensed Insolvency Trustee now and begin your path to getting rid of your debt for good.Book a free consultation today.
Common Consumer Proposal Questions
What’s the difference between a Consumer Proposal and Bankruptcy?
Consumer Proposals and Bankruptcy are both debt relief options, but they’re quite different. Bankruptcy means giving up assets and hurting your credit for a long time. But with a Consumer Proposal, you keep your stuff and pay back some of what you owe. It’s less harsh than Bankruptcy and gives you a chance to fix your finances without the same kind of shame.
Will a Consumer Proposal impact my credit?
A Consumer Proposal can help you right away by reducing your debt, but it will affect your credit score for a while. When your Licensed Insolvency Trustee (LIT) files your Consumer Proposal, it will show up as an R7 rating on your credit report. This is the second-lowest rating used by credit agencies like TransUnion or Equifax. It stays on your credit report for six years from when you filed it or three years after you finish it, whichever is earlier.
Even though a Consumer Proposal affects your credit, it’s not forever. Your Licensed Insolvency Trustee can help you figure out ways to build your credit back up while you’re doing the proposal and after you’re done. A Consumer Proposal can help you save a lot of money in the short and long term. It gives you a chance to have more money in your budget so you can focus on reaching your money goals.
Client Testimonials
John Kemp
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4/12/2024
I was very anxious about calling, not sure about bankruptcy or what to do it seems medication, and sudden health issues getting worse made simple decisions painful and confusing. The team here has made this feel welcoming and helpful. and not alone
Jon Mik
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4/02/2024
Ive been struggling with debt had 3 loans coming out of my account every two weeks. I needed help to pay my bills and get back on track. So i reached out to allan marshall and got the best help from Krista k. Not only was the process comfortable and easy it has already provided me a mental relief highly recommend!
Julie Ruff
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3/13/2024
Both ladies I spoke with were super friendly and very helpful . They made the process clear understandable to me. Making a decision like this was much less painful thanks to their friendly and empathetic personalities!
Book a Free Consultation with a Licensed Insolvency Trustee
We Can Help™ – Speak with a local Licensed Insolvency Trustee and learn about all of your options to become debt free.
We encourage you to contact Allan Marshall & Associates Inc. for a free consultation to discuss your options.
Call toll-free: 1 (888) 371-8900
If you have incurred Debt exceeding $250,000, you may want to read about a second proposal option known as a Division I Proposal, or Corporate Proposal.
