A consumer proposal is an incredibly empowering solution that can rescue you from the suffocating grip of debt when it has you feeling helpless. Each passing year, more Canadians just like you, turn to consumer proposals to break free from the chains of overwhelming debt. You are never alone in this struggle!
When it comes to filing a consumer proposal, only a Licensed Insolvency Trustee (LIT) possesses the skill and authority to guide you through the process. While credit counsellors or debt consultants may discuss the option with you, they will ultimately direct you to an LIT if you choose to take this bold step forward.
For over 40 years, Campbell Saunders Ltd has stood as a trusted pillar in assisting the people of British Columbia in conquering their debt challenges. Our unwavering dedication has transformed lives and brought peace to countless individuals. Don't hesitate to reach out to us and embark on a life-changing journey towards financial freedom. Take the first step today by contacting us for a free consultation. Your future awaits!
What is a consumer proposal?
A consumer proposal is, as the name suggests, a proposal to your creditors to pay back a portion of what you owe based on your situation and your ability to pay. It is governed by the Bankruptcy and Insolvency Act, overseen by the Office of the Superintendent of Bankruptcy, and filed and administered by an LIT.
Your total debt, not including your mortgage if it’s for your principle residence, must be between $1,000 and $250,000 to file a consumer proposal (there is another type of proposal that can be filed if your debt is more then $250,000). **in-text link to Div I page under ‘another type of proposal’**
A consumer proposal is not a bankruptcy, though it is covered by the same legislation. The maximum length for a consumer proposal is 5 years (60 months).
The payments you make in a proposal are calculated based on three factors – your total unsecured debt, your income, and your assets. When calculating your payments we first create a hypothetical bankruptcy scenario, and work out what your creditors would receive, if anything, if you decided to file a bankruptcy.
In calculating your proposal payments, we must consider whether the proposal gives a better benefit to the creditors than what they would get in a bankruptcy scenario – this is important because your creditors get to vote on whether to accept the proposal. The proposal will be accepted if the majority of creditors, by dollar value of debt owed to them, vote yes. The proposal is then legally binding over all your creditors, whether they voted to accept it or not.
During the proposal you are required to attend two financial counselling sessions. These sessions are one-on-one, can be in person or by video or phone, and review budgeting, internal and external factors leading to financial trouble, and credit related topics like credit reports, responsible use, and rebuilding your credit score.
A consumer proposal, like any debt settlement arrangement, will add a negative notation to your credit report. This puts many people off exploring this option, but consider what the impact on your credit will be if you fall or continue to be behind on your payments. Even if your score is great now, ask yourself what that score is doing to improve your quality of life currently? Will any creditor lend you money when they see how much debt you’re carrying? Does your good credit score help you cover your monthly expenses?
Our consultations are free, and there’s no obligation to proceed if you decide that a consumer proposal isn’t the right path for you to take. Contact us to get more information – you can’t make an informed decision if you haven’t explored all your options!
Filing a consumer proposal puts an automatic stay of proceedings in place. This means that your creditors can’t start any legal action against you, and that all legal collection action such as wage garnishment must stop. There are a few exceptions – if these apply to your situation we will discuss this before you decide to proceed.
If you are currently being garnished or there is any ongoing legal action against you, filing the proposal will put a stop to it – you’ll start receiving your full paycheque again.
Almost all of your unsecured debt will be covered by a consumer proposal. The two most common exceptions are Family Maintenance debt, and student loans that are less than seven years old.
Here are some of the advantages of consumer proposals over other options, but keep in mind that there is no ‘best’ overall option for dealing with debt – just which one is best for you and your situation.
The Advantages of a Consumer Proposal vs Negotiating with Your Creditors Yourself
- All creditors are bound by the proposal once it’s accepted.
- You will make one fixed monthly payment, making budgeting easier.
- You are protected from legal action.
- Your creditors will stop contacting you.
The Advantages of a Consumer Proposal vs a Debt Settlement Plan
- Once accepted, a consumer proposal is legally binding over all creditors (they can decide to opt out of a debt settlement plan).
- A consumer proposal can be, and usually is, for less than the full amount of the debt, whereas a debt settlement plan may reduce or eliminate interest but not reduce the principal amount owed.
- CRA debts are included in a consumer proposal.
- There is a stay of proceedings on all collection action – a debt settlement plan only pauses garnishments and other legal action if the creditor agrees to do so.
The Advantages of a Consumer Proposal vs a Bankruptcy
- It is less invasive – we only need proof of your income at the start of the process, not on a monthly basis.
- Your assets are not affected, though they may need to be factored in when calculating your payments.
- Once the proposal is accepted, the payment will not increase if your income increases.
- It has less of a negative impact on your credit score, and will be removed from your credit report sooner.
- Your tax refunds are yours to keep. If you win money or receive an unexpected inheritance, the proposal will not affect these.
You can shorten the proposal if you pay it off sooner (a bankruptcy has a fixed minimum term, which depends on your situation).
What is a consumer proposal?
If, after talking with us, you decide that a consumer proposal sounds right for you, the steps will be:
- Fill out the application form that we will send you – please ask if you’re unsure about any of the questions.
- Gather the supporting documents that we ask for – these will be items like ID, recent tax returns, vehicle registration, income proof, and statements from your creditors. It is our job to verify the information on your application form.
- Once we have all the information we need, we’ll prepare the legal documents that you’ll need to sign and book an appointment for you to sign them. This can be in person or by video.
- We’ll file the documents with the Office of the Superintendent of Bankruptcy and send notice to all your creditors.
- The creditors will have 45 days to vote yes or no to the proposal. Sometimes they may ask for more information, and sometimes they will make a counter-offer. We will keep you informed – if you don’t hear from us within the 45 days, this is good news!
- Please let us know if any creditors continue to contact you, or if you remember a creditor who wasn’t included – we can add them as long as the debt is from before the proposal was filed.
- After your proposal is accepted, your only tasks are to make the payments and attend two financial counselling sessions (in person or by video).
- You have the option, if your financial situation allows, of paying off the proposal faster than the monthly payment schedule agreed to.
Once the payments are completed and both counselling sessions have been done, we will issue your Certificate of Full Performance. Congratulations!