What is a Consumer Proposal?

A Consumer Proposal is a great way to get out of debt and avoid having to file bankruptcy.

It involves working with a Licensed Insolvency Trustee (“Trustee”) to make an offer to your creditors to pay back only a percentage of what you owe them.  All payments to these creditors stop and the interest rate on these debts gets reset to zero.  The debtor agrees going forward to make one affordable payments to the Trustee for a period of up to 5 years and then the remaining unpaid balance of these debts gets reset to zero.

How will it benefit me?

A Consumer Proposal is a responsible way to reset your debt and free up money in your budget to live the life you want to live.

The benefits of filing a Consumer Proposal are:

  • You can stop making payments to your unsecured creditors.
  • You save a lot of money as you will only pay back a percentage of what you owe.
  • Interest on your debt is permanently reset to zero.
  • Stops all collection efforts, garnishments, and harassing phone calls.
  • Keep all your assets.
  • An approved Consumer Proposal binds all creditors to the settlement even if they voted against it.
  • It costs you nothing to try.

 

Find out how much you can save

Debt Eraser Calculator

Consumer Proposal Process

Submitting a consumer proposal to your creditors

How a Licensed Insolvency Trustee helps

 

 

Meet with the Trustee

The first step when considering a Consumer Proposal is to meet with us for a free, confidential consultation.  In this meeting we will listen and learn about your financial situation, review your options to reset your debt and develop a personalized debt solution that is tailored to meet your needs.  We will keep it simple and explain it thoroughly so you can feel confident in your decision.

 

Prepare the Consumer Proposal

We will prepare a settlement offer for your creditors where you only have to pay a portion of what you owe them.  All your unsecured debts will be consolidated into one affordable payment over a period of up to 5 years.

 

Filing the Proposal

We do all the paperwork to prepare the Proposal and file it with the government.  Next, we send a notice to all your creditors to advise them of the Proposal.  You now stop making debt payments and all collection efforts stop.

 

Creditors vote on Proposal

Your creditors have 45 days to consider the proposal during which time you do not have to make any payments.  At the end of the 45 days we will tally up the votes from your creditors and your proposal will be automatically approved unless creditors with at least 25% of the proven debts requests a meeting of creditors.

From our experience, the vast majority of Consumer Proposals are accepted as filed without any modifications.  If a meeting is required, it is usually held by telephone with the objective of providing any additional information the creditors may want.  From this meeting, the Proposal is usually accepted as filed or a modified Proposal is agreed to that will be accepted by both the majority of the creditors and the debtor.

 

Acceptance of Proposal

Once the Proposal is approved, then Congratulations! Your debt has been reset to the agreed upon total, your payments have been eliminated and replaced by the payment set out in your Proposal and any interest rates on your debt has been reset to zero.

 

Carry out the terms of the Proposal

During the Proposal it is important that you complete the terms of the Proposal.  You will need to make your payments as set out in the Proposal and attend 2 financial counselling sessions with us.  In these sessions we will help you rebuild your financial future and decide what to do with your extra cash now that your payments are reset.

 

Completion of Proposal

Once you have fulfilled the terms of your Proposal, we will provide you with a certificate of full performance and you are now legally released from all your debts.  We will advise you on how to repair your credit for future borrowing.
 

Is a Consumer Proposal right for me?

For most people that are experiencing debt problems a Consumer Proposal is the best solution.  It is the process used most often by Canadians to reset their debt, last year 83,000 Canadians reset their debt with a consumer proposal. 

A Consumer Proposal is right for you if you are struggling with a lot of debt and yet you do have an income and ability to repay some of your debts.  A Consumer Proposal will reset your debts and your payments to an amount that you can afford and that will work within your budget.  It will eliminate your interest charges so you will no longer be on a debt payment treadmill.  100% of your payment goes to principal and with each payment you are climbing out of debt.

Everyone wants to do the right thing and pay off their debts.  But the reality is that with compound interest charges and unplanned expenses it could mean years and years of struggle and sacrifice for your family.  Living with money stress, stuck on a treadmill of paying minimum payments while struggling to buy necessities and meet the needs of your loved ones, is no way to live.  The comments we hear most from my clients that file a Consumer Proposal is “that was so easy” and “I wish I had done this sooner”.

Those that file a Consumer Proposal do better than those that don’t.

Studies have shown that for those that are struggling with a lot of debt, they will be better off financially if they reset their debts with a Consumer Proposal than those who don’t and continue to limp along and struggle to pay their debts.

Here is a typical example.  

Luke is struggling to make payments on $40,000 of credit card and CRA debt.  He is being charged an average interest rate of 19%.  He can work hard and sacrifice and pay $750/month for 10 years and he will pay his debt in full.  He will end up paying his creditors $90,000 in total over 10 long hard years.

Or Luke could reset his debts and file a Consumer Proposal.  A typical Proposal would be for Luke to offer his creditors a settlement for say 35% of the balance with no interest.  With this option, Luke would pay $300/month for 5 years for a total of $18,000.

In this way, by utilizing a Consumer Proposal, Luke has settled his debts in half as many years (5 years versus 10 years) and by paying only 20% of the amount he would have paid by making the regular principal and interest payments and paying the debts in full.

Now, with filing a Consumer Proposal, Luke will have damaged his credit rating.  However, Luke has saved $72,000 in payments and is payment free after 5 years.  So, he is in a much better position financially and able to afford credit sooner with all his savings and being debt free.

In these situations, those that take responsibility for their debt and make a settlement with their creditors are much better off than those that don’t.

F.A.Q

What debts can be reset in a Proposal?

Who will know if I file for a Consumer Proposal?

Consumer Proposals are never advertised, they are treated confidentially and only the creditors and the government agency of the Superintendent of Bankruptcy will be notified. It will be listed on your credit report.

How much does it cost to file a Consumer Proposal?

There is no fee you have to pay to file a Consumer Proposal.  The Trustee fees are set by the government and get paid out of the settlement amount.

What assets do I lose when I file a Consumer Proposal?

None.

Which debts survive Consumer Proposal?

While most debts get wiped out when you file Proposal, some debts may survive:

  • Child or spousal support
  • Student loans if bankruptcy is filed within 7 years after studies ended
  • Court fines
  • Amounts owing due to fraud

Can I file a Consumer Proposal with student loans?

Yes, all types of student loans can be wiped out by filing a Proposal.  Upon filing the Consumer Proposal, all collection actions for student loans ceases, wage garnishments stop, and bank accounts get unfrozen.

If it has been at lease 7 years since you last went to school, the student loans will be wiped out in your proposal.  If it has been less than 7 years, then your student loan is not wiped out and once the Consumer Proposal is completed the student loan becomes due again.

If you have been out of school for at least 5 years when you file your porposal, if you are having difficulty paying the student loan you can apply to court to have the student loan wiped out. 

Can I keep paying my secured creditors, for example a car loan or mortgage on my house?

Yes, secured creditors are not included in the Proposal so you just keep paying them as usual and you keep your security such as your car or house.

Will the creditors stop harassing me for payment when I file a Proposal?

Yes, by law, all collection actions for debts included must cease upon filing a Proposal.

  • Wage garnishments stop.
  • Bank accounts get unfrozen.
  • Creditors much deal with Trustee.

How long will Consumer Proposal be on my credit report?

Your Consumer Proposal will be on your credit report for 3 years after the Consumer Proposal is completed.  This does not mean you cannot get credit during this time; it just means it is on your credit report.

Most people that file Proposals are able to establish credit again after a short period as their financial position has greatly improved.

Does filing a Consumer Proposal affect my spouse?

No, a Consumer Proposal is a personal thing and does not affect your spouse.  If your spouse is also having debt problems, we may be able to file a joint Proposal for both you and your spouse.

How do I choose a Trustee to file Consumer Proposal?

You will need to meet with a Licensed Insolvency Trustee to file a Consumer Proposal.

I would recommend you choose a Trustee that is resident in your area and that is convenient for you to meet with.  I would not choose a Trustee firm if they ask you to meet with a staff member instead of the Trustee.  The Trustee is a debt professional and you want to get advice from a Trustee.

When talking with a Trustee, consider if they were empathetic, understood your concerns and clearly presented all your options available to you.

What are you waiting for? WE CAN HELP!

Your first step to a debt free life starts here!

Our debt reset process is easy to understand, easy to apply and easy to complete, which makes it easy to love.

To see if you are eligible for a debt reset couldn’t be simpler:

  1. Fill out some basic financial information.
  2. Email it to us.
  3. Get a free, confidential assessment with Darrin.

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