Consumer Proposal FAQs

A consumer proposal is an alternative to bankruptcy whereby you make an offer to your creditors to settle the debt with your creditors without any further interest and often at a significantly reduced amount. A consumer proposal is a formal, legally binding agreement between you and your creditors that is administered by a Licensed Insolvency Trustee.

The first step in the process is to review your finances with a Licensed Insolvency Trustee who will assess your situation and discuss all of your alternatives. Should it be determined that a consumer proposal is the best solution for you, the necessary paperwork will be prepared and filed, and any legal action will be immediately stopped.

Your initial consultation is key to making the best choices for you and the appropriate actions are taken on your behalf.

Any time you miss payments to a creditor, stop paying a creditor or negotiate a payment arrangement with your creditor, it will negatively impact your credit rating. With a consumer proposal, you are compromising the debt by settling with your creditors and asking them to take less than what you owe and no further interest. This means that your credit rating will be impacted, however there are ways to work on rebuilding your credit and our knowledgeable staff can navigate you through this process.

A consumer proposal begins by you filing a consumer proposal to your creditors with the help of a Licensed Insolvency Trustee. The consumer proposal is then sent to creditors and they have 45 days in which to receive, review and vote on whether or not they want to accept the proposal or decline the proposal. In order for the proposal to be accepted, a majority in dollar value must vote in favour. Once approved by the creditors, 15 days later it is deemed approved by the court and becomes a legally binding agreement between you and your creditors to settle the debt.

A consumer proposal is often better than a bankruptcy for various reasons, including:

1. You can keep your assets and tax refund in a consumer proposal.

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

3. Consumer Proposal is a simpler process than bankruptcy. Your only obligations are to make the payments as agreed and to attend the mandatory counselling sessions.

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

5. A consumer proposal is much less “invasive” than a bankruptcy. In a bankruptcy you are required to report your income and provide proof of income/bank statements each and every month to the Trustee until you are discharged as well as provide the Trustee with all income tax information T4’s etc.

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

Generally you can qualify for a mortgage 2 years after completing a consumer proposal if:

1. You have taken steps to improve your credit score.

2. You’ve saved up a downpayment.

The simple answer is yes. If you have a credit card that is at a zero balance when you file your consumer proposal you may keep it. If you don’t have a credit card that is at a zero balance then you can apply for a secured credit card after the approval of your consumer proposal.

Your spouse is not responsible for your debts unless your spouse and yourself have joint debt or if they are a co-signer on your debt. Your spouse’s credit rating will not be impacted by your consumer proposal filing unless they fail to pay debts they are responsible for.

Once your consumer proposal has been accepted by your creditors, you can once again apply for credit and start the process of rebuilding your credit score. Because your credit score has been impacted negatively by filing the consumer proposal, you will likely need to start by applying for a secured credit card. A secured credit card is where you give the financial institution a security deposit and they extend credit to use and pay as you would with a regular credit card. This is not to be confused with a prepaid credit card, which does not report on your credit bureau.

A consumer proposal is legislated by the Bankruptcy and Insolvency Act, as is bankruptcy, but they are not considered the same. With a consumer proposal you are simply making an offer to your creditors to settle your debts. This can be done by way of monthly or lump sum payment, with the sale of an asset, or not, it’s your decision, and the terms can be flexible. In a bankruptcy, your assets vest or are assigned to the Trustee and may need to be sold or redeemed, except for those assets which are considered exempt under the Court Order Enforcement Act.