How Does A Consumer Proposal Work?

A Proposal is not a bankruptcy. A Consumer Proposal is a legal arrangement between you and your creditors, which is a great way to settle your debts when you are unable to repay them on your own. It is a good option, for those with home equity or other assets they wish to protect. You can settle your debts for a fraction of what you owe, while stopping interest and allowing you to pay a convenient, manageable, monthly payment. Even better, a Consumer Proposal offers protection from your creditors the moment you file, they cannot sue or garnish your wages.

A Consumer Proposal is part of the Bankruptcy & Insolvency Act, there are rules to follow — for everyone including you and your creditors. In your initial consultation you will meet with a Licensed Insolvency Trustee or Consumer Proposal Administrator. They will work with you, explain your options and fill out the necessary paperwork. You will have to disclose all your debts and assets to the Trustee or Consumer Proposal Administrator and hand over all of your credit cards. You will also be required to attend two credit counselling sessions. The creditors are given 45 days to vote on whether they accept your Proposal or not. Creditors receive a vote for every dollar you owe. You need the majority of votes to be in your favour in order for the Proposal to move forward. When and if your Proposal is accepted, it is binding on all creditors, even those who voted against it.

If your Proposal is accepted, then you will have to make monthly payments for the agreed length of the Proposal, up to 60 months. There is however some flexibility in a Proposal: if your financial situation improves, you can pay off your Proposal sooner, allowing you to put your debt burdens behind you and begin working towards rebuilding your credit.

Once you’ve completed your Proposal process, by making all your monthly payments and attending both your counselling sessions, you will receive a Certificate of Full Performance and all debts included in the Proposal will be absolved — giving you a clean financial slate. The Proposal will appear on your credit report for 3 years.

If you feel like debt has taken a hold and you’re struggling from one payment to the next, it might be time to speak with a Licensed Insolvency Trustee. Together, you can discuss what options may be available to you (like a Consumer Proposal for instance) and choose which route forward is best for you. A fresh financial start is achievable!