Consumer Proposal FAQ and Everything You Need to Know

A consumer proposal is a formal agreement between you and your creditors to pay back a portion of your debts over time, typically 5 years. You can propose a plan that works for you and your creditors.

You can propose a plan that includes paying back a percentage of your debts, as little as 10% in some cases, or a lump sum payment. For example, if you owe $10,000, you might propose paying back $1,000.

A consumer proposal is different from bankruptcy, as it doesn't erase your debts but rather restructures them. You can still be sued for debts you've proposed, but your creditors can't take further action once the proposal is filed.

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Consumer Proposals benefit both you and your creditors. You get to keep assets that would otherwise be taken in a bankruptcy, and your creditors receive a higher return than they would in a bankruptcy.

Licensed Insolvency Trustees work with you to create a proposal tailored to your income and debt load, making it a great option for people in all financial situations. This means you can pay a percentage of your debt back and still keep the things that matter to you.

Your creditors will be happy to recover a portion of the debt owing to them, which is a win-win for everyone involved.

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Consumer Proposals benefit both you and your creditors. They allow you to pay a percentage of your debt back, which is a good feeling.

Your creditors will also see a higher return through a Consumer Proposal than they would in a bankruptcy. This is a win-win situation.

You can keep assets that would otherwise be available to creditors through a bankruptcy. This is especially helpful if you have assets that are important to you.

Your spouse's credit rating will not be impacted by your consumer proposal filing unless they have joint debt or are a co-signer on your debt.

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A Consumer Proposal might be right for you if you're struggling with debt and want a structured plan to pay off your creditors.

Owing taxes can lead to penalties, garnishments, and asset seizures, so it's essential to consider the consequences of not paying.

A free consultation with a Licensed Insolvency Trustee can help you decide if a Consumer Proposal is the right debt solution for you.

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A consumer proposal starts with filing a proposal to your creditors with the help of a Licensed Insolvency Trustee. They then have 45 days to review and vote on whether to accept the proposal.

To file a consumer proposal, you first need to review your finances with a Licensed Insolvency Trustee, who will assess your situation and discuss your alternatives. They'll then prepare and file the necessary paperwork, stopping any ongoing legal action.

The proposal is deemed approved by the court 15 days after it's been accepted by your creditors. Once approved, it becomes a legally binding agreement between you and your creditors to settle the debt.

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Filing a Consumer Proposal will give the included debts an R9 rating on your credit report, which remains until the end of your proposal.

This rating will then change to R7 for a further three years, unless you pay off your proposal sooner, which can speed up your credit recovery.

You can still have credit while in a Consumer Proposal, but be cautious if consumer debt was the main reason for filing.

If you have a credit card at a zero balance when you file, you can keep it, and you can apply for a secured credit card after approval.

Your spouse's credit rating won't be impacted unless they're responsible for joint debt or are a co-signer on your debt.

To rebuild credit after a Consumer Proposal, start by applying for a secured credit card, which reports to your credit bureau.

A Consumer Proposal won't ruin your credit entirely, but it will negatively impact your rating, so it's essential to work on rebuilding it.

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Filing a Consumer Proposal will give your included debts an R9 rating on your credit report, the worst possible rating, which will remain until the end of your proposal.

This R9 rating will then change to R7 for a further three years, so it's not a permanent mark on your credit history.

Paying off your proposal sooner than agreed upon can actually speed up your credit recovery, which is a positive outcome.

However, if you reduce your proposal by a year, the R9 rating will disappear a year earlier, and the R7 rating will take over for its three-year run.

You can still get credit while in a Consumer Proposal, but exercise caution if consumer debt was the main reason for filing your proposal.

Your spouse's credit rating won't be impacted by your Consumer Proposal filing unless they're responsible for joint debt or are a co-signer on your debt.

Missing payments, stopping payments, or negotiating a payment arrangement with creditors can all negatively impact your credit rating, but filing a Consumer Proposal can help mitigate this damage.

You can have credit while in a Consumer Proposal. This is good news, especially if you need to make purchases or cover unexpected expenses.

If consumer debt was the main reason for filing your Consumer Proposal, you should exercise extreme caution when accessing credit again. This means taking your time and being careful not to accumulate more debt.

In some cases, you can even keep a credit card in a Consumer Proposal, as long as it's at a zero balance when you file. If not, you can apply for a secured credit card after the proposal is approved.

A secured credit card requires a security deposit, which can help you rebuild your credit score. This is a great option if you need to start fresh and don't want to be denied credit.

Rebuilding credit after a Consumer Proposal takes time, but it's possible. You can start by applying for a secured credit card and making regular payments on time.

A consumer proposal is not the same as bankruptcy, but rather a way to settle your debts by making an offer to your creditors.

You can keep your assets and tax refund in a consumer proposal, which is a major advantage over bankruptcy.

Bankruptcy payments can be significant if you're a high income earner, but a consumer proposal allows for a fixed payment over a longer period of time, having a positive impact on your cash flow.

The consumer proposal process is simpler than bankruptcy, requiring only that you make payments as agreed and attend mandatory counselling sessions.

You can start to rebuild your credit rating sooner in a consumer proposal than in a bankruptcy.

In a consumer proposal, you only provide your income information once for the purpose of structuring and filing the proposal, and no future income or income tax reporting is necessary.

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A consumer proposal may not be the best solution for everyone, and it's essential to consider the potential drawbacks.

It's not a private process, as a proposal is a matter of public record.

You'll need to go through the court system, and even then, creditors may reject your proposal.

Not all creditors will reduce the debt you owe them, and some may require you to sell assets to satisfy your obligations.

Here are some specific disadvantages to consider:

Missing payments can have serious consequences, including the inability to file another proposal in the future.

A consumer proposal may not be the quick fix you're looking for. It's not private, and a proposal is a matter of public record.

You'll need to involve the court in the process, which can slow things down. Creditors may reject your proposal, and not all creditors may agree to reduce the debt you owe them.

If you default on payments, you won't be able to file another proposal. A consumer proposal can also negatively impact your credit score for 6 years and be reported on your credit report.

One in five people who successfully pay off their Consumer Proposal end up needing to repeat the process in the future. This can be a costly and time-consuming experience.

Secured debts can't be put on a proposal, and student loan payments less than 7 years old can't be included. It's also worth noting that many people unknowingly enter into a consumer proposal illegally by paying someone other than a trustee for their proposal.

Here are some key disadvantages of a consumer proposal:

Missing a payment can have serious consequences. You're allowed a maximum of three payments throughout the duration of your consumer proposal to creditors.

If you miss more than three payments, the consumer proposal collapses and is annulled by the court. This can lead to your creditors applying to the court to have your wages garnished.

Interest charges are applied to your debts all the way back from the day you filed, adding to your overall debt burden.

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A consumer proposal can be a great option for those struggling with debt. You can potentially repay less than you owe, which can be a huge relief.

One of the main advantages of a consumer proposal is that it pauses active collection on student loans. This can give you some breathing room to get back on your feet.

Here are some of the key benefits of a consumer proposal:

This can be a game-changer for those who feel like bankruptcy is their only option.

One of the most significant benefits of a proposal is that it pauses active collection on student loans. This can provide much-needed relief for individuals struggling to make payments.

You can potentially repay less than you owe, which is a huge advantage for those with significant debt.

A consumer proposal can be a viable option for those struggling with debt, but it's essential to weigh the pros and cons before making a decision.

Filing a consumer proposal can provide a structured repayment plan that allows you to be debt-free within 5 years.

One of the significant advantages of a consumer proposal is that it pauses active collection on student loans.

You may be able to repay less than you owe, which can be a significant relief for those struggling with debt.

A consumer proposal is an alternative to bankruptcy, offering a more manageable way to tackle debt.

Here are some of the key advantages of a consumer proposal:

While a consumer proposal can be beneficial, it's not without its drawbacks.

A Stay of Proceedings is in place as soon as the Licensed Insolvency Trustee files your Consumer Proposal, halting current collection action and preventing further collection action and wage garnishments by your creditors.

Your creditors will have 45 days to vote for or against your proposal, and it must receive a majority (50% +1) to be approved.

Harassing phone calls from creditors and collection agents will stop as soon as the Stay of Proceedings is in place.

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Creditors usually prefer your Consumer Proposal over personal bankruptcy, as they would get less in a bankruptcy scenario.

If your proposal is approved, it will be deemed approved by the court after 15 days, if there are no objections.

Once your proposal is approved, you and your creditors are locked into the terms of the proposal.

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Filing a Consumer Proposal can have a significant impact on your credit, but it's not the end of the world. Once you file a Consumer Proposal, the included debts will receive an R9 rating on your credit report, which is the worst rating possible.

This R9 rating will remain until the end of your proposal, then change to R7 for a further three years. If you pay off your proposal sooner than agreed upon, you'll speed up your credit recovery.

A Stay of Proceedings is in place as soon as the Licensed Insolvency Trustee files your Consumer Proposal, which halts current collection action and prevents further collection action and wage garnishments by your creditors.

You can have credit while in a Consumer Proposal, but be cautious if consumer debt was the main reason for filing. Some people choose to wait many months or even years before they feel confident obtaining or using credit again.

In British Columbia, you can keep a credit card in a Consumer Proposal if it's at a zero balance when you file. If not, you can apply for a secured credit card after the approval of your proposal.

Your spouse's credit rating won't be impacted by your Consumer Proposal filing unless they're responsible for joint debt or co-signed on your debt. They'll need to pay their own debts, just like you.

Rebuilding credit after a Consumer Proposal takes time, but it starts once your proposal has been accepted by your creditors. You can apply for credit again and start the process of rebuilding your credit score.

A secured credit card is a good place to start, as it reports to your credit bureau and helps you rebuild your credit score. This is different from a prepaid credit card, which doesn't report to your credit bureau.

After your proposal is approved, you'll have a clear understanding of your financial obligations and a plan to get back on track. You'll be locked into the terms of the proposal for 15 days after approval, and if there are no objections, the proposal will be deemed approved by the court.

Once your proposal is approved, you can start rebuilding your credit score. This process can take some time, but it's essential to start applying for credit again. You can apply for a secured credit card, which is a great way to start rebuilding your credit score.

Generally, you can qualify for a mortgage 2 years after completing a consumer proposal, but you'll need to have taken steps to improve your credit score in the meantime. This can involve making regular payments on your secured credit card and keeping your credit utilization ratio low.

After your proposal is approved, you can expect a significant change in your financial situation. You and your creditors will be locked into the terms of the proposal for the duration.

It takes 15 days for the proposal to be deemed approved by the court, assuming there are no objections. After that, you can start rebuilding your credit.

To rebuild credit, you can apply for a secured credit card, which requires a security deposit and reports to your credit bureau. This is a good starting point, as it will help you establish a positive credit history again.

You can start applying for credit again once your consumer proposal has been accepted by your creditors. However, be aware that your credit score has been negatively impacted, so you may need to start with a secured credit card.

You can qualify for a mortgage 2 years after completing a consumer proposal if you've taken steps to improve your credit score.

It's worth noting that improving your credit score takes time and effort, but it's a crucial step in getting back on track financially.

Generally, you can get a mortgage 2 years after completing a consumer proposal, which can be a huge weight off your shoulders.

However, this timeline can vary depending on your individual circumstances and credit history.

Improving your credit score can take less than 2 years, but it's essential to be patient and consistent in your efforts.

By taking steps to improve your credit score, you can increase your chances of getting approved for a mortgage and rebuilding your financial stability.

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A Licensed Insolvency Trustee is the only one who can help you file a Consumer Proposal. They have the expertise and knowledge to structure a proposal that fits your budget and meets the needs of your creditors.

To file a Consumer Proposal, you'll need to work with a Licensed Insolvency Trustee who can guide you through the process and ensure everything is done correctly.

To complete your proposal, you must pay the agreed upon amount in the timeframe set out in the Consumer Proposal. This timeframe gives you the freedom to take the full length of time to pay off your proposal.

You'll also need to attend two counselling sessions provided by a qualified insolvency counsellor. These sessions are a required part of the proposal process.

Additionally, you must comply with any other requirements included in your proposal. The Licensed Insolvency Trustee will explain these thoroughly if they apply.

Here's a quick rundown of what you need to do:

If your income increases or you receive a large tax refund, bonus or windfall, you can direct these funds toward your proposal.

If you're struggling with debt, it's essential to seek help from a qualified professional. Only a Licensed Insolvency Trustee can file a Consumer Proposal, so don't try to navigate the process on your own.

A Licensed Insolvency Trustee has the expertise to structure a custom proposal that works within your budget. They know the Bankruptcy and Insolvency Act (BIA) inside and out, which is crucial for a successful proposal.

Don't worry if you're not sure where to start; a Licensed Insolvency Trustee can guide you through the process.