Consumer Proposals: Frequently Asked Questions

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:

  1. You must pay the agreed upon amount in the timeframe set out in the Consumer Proposal.
  2. You must attend two counselling sessions provided by a qualified insolvency counsellor.
  3. 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 the Bankruptcy 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 obligation Free Confidential Consultation with a Licensed Insolvency Trustee will help you decide if a Consumer Proposal is the right debt solution for you.