Consumer proposal
A consumer proposal is the most popular debt relief alternative to a personal bankruptcy in Canada.
Solutions
Avoid bankruptcy, reduce your debt up to 80% with a consumer proposal
Many Canadians think bankruptcy is the only option to overcome their debt problems. A consumer proposal can be a good alternative to personal bankruptcy, allowing you to reduce your debt while avoiding the negative consequences associated with bankruptcy. With a consumer proposal, our Licensed Insolvency Trustees at Bromwich+Smith negotiate a legally binding settlement with your unsecured creditors on your behalf. Your debt can often be reduced to a fraction of what you owe, with the remaining amount forgiven.
- Keep your assets, including your car, house and RRSPs
- Your monthly payment is based on what you can afford
- Fixed monthly payments for terms up to five years
- All interest and penalty charges, legal actions, wage garnishments and collection activities stop
Why Bromwich+Smith
Filing a consumer proposal:
a step-by-step guide
Only Licensed Insolvency Trustees can administer a consumer proposal on your behalf, which is regulated by the Bankruptcy and Insolvency Act. We’ll help you determine if a consumer proposal is the right solution for you and work together on the steps to file your application.
Here are the steps involved in filing a consumer proposal:
Step 1
Take the first step and speak to one of our experts. It’s always free, confidential, and without judgment. We’ll review your personal and financial situation by asking questions about your debts, income, and assets. We’ll help you choose the best debt relief solution based on your personal situation.
Step 2
If a consumer proposal is determined to be the right solution for you, we’ll prepare all documents for you to sign including a formal offer to settle your debts with your unsecured creditors. We will also file your documents with the Office of the Superintendent of Bankruptcy.
Step 3
Once your consumer proposal is filed, we will notify your creditors and provide details of your settlement offer, which they have 45 days to review. If the majority of your creditors vote in favor of the offer, your proposal is considered approved and legally binding, even on creditors who did not vote in favour. All interest accumulation, collection calls, legal actions and wage garnishments stop.
Step 4
You start fulfilling the terms of your proposal by making your monthly payments and attending two mandatory financial counselling sessions to help you stay debt-free. Once your payments are complete and you have completed your counselling sessions, you will receive a Certificate of Full Performance. You can now start restoring your credit and living debt free.
Solutions
Eligibility criteria for a consumer proposal
To be eligible for a consumer proposal, you must satisfy several requirements, including working with a Licensed Insolvency Trustee, the only professionals in Canada who are licensed to file your consumer proposal. Not everyone will be eligible for a consumer proposal, but don’t worry, we’ll review other debt relief options with you.
- Your debt is unmanageable and you’re unable to make your payments when they are due
- You have unsecured debt such as credit cards, lines of credit, payday loans, utility bills, student loans, and CRA tax debt
- You owe at least $1,000 and less than $250,000, not including mortgages and loans on your home
- You are a Canadian resident, or do business in Canada, or own property in Canada
- You have a reliable source of income to support the required monthly payment
Key benefits of a consumer proposal
- You keep the value of your assets, including your car, home, investments, tax refunds and tax credits
- You get creditor protection that stops collection calls and wage garnishments
- You make a fixed low monthly payment based on what you can afford, and you get up to five years to pay off your settled debt
Questions answered
FAQ’s
We’ve put together a list of common questions and answers about consumer proposals. A Licensed Insolvency Trustee can also walk you through all your options and answer any questions you have.
How much does a consumer proposal cost?
The calculation of your costs will depend on your income and your ability to pay. All costs are federally regulated and prescribed by a tariff contained in Canadian insolvency legislation. All costs associated with filing a consumer proposal are included in your monthly payment and approved by your creditors to cover all costs and payments to your creditors. You’re not charged upfront for any costs and there are no hidden fees. Please speak to one of our insolvency experts who can determine the total fees paid.
What happens to my credit cards in a consumer proposal?
Generally, when you file a consumer proposal, you will need to hand over your credit cards that were included in your proposal to creditors to your Licensed Insolvency Trustee. You will not be able to apply for a new credit card while you are making payments on your proposal. You may be eligible to qualify for a prepaid or secured credit card.
What kind of debts cannot be included in a consumer proposal?
There are several debts that do not qualify to be included in a consumer proposal. These include:
- Fines and penalties imposed by a court
- Child support and maintenance
- Spousal alimony
- Any award by court for damages for intentionally inflicting bodily harm, wrongful death or sexual assault
- Debts or money owing due to fraud, embezzlement, misappropriation or misconduct
- Money owing for things stolen
- Student loans (if it has not been seven years since your last date of study)
- Liability for any dividend a creditor would have been entitled to receive when you failed to disclose the creditor to your trustee
Can a consumer proposal help eliminate student loan debt?
If you have been out of school for at least seven years, you can include your student loan debt in a consumer proposal. This seven year “rule” only applies to government-issued student loans. If it has been less than seven years since you were a student, the Bankruptcy and Insolvency Act in Canada excludes government guaranteed loans.
How does filing a consumer proposal impact my credit rating?
Filing a consumer proposal will negatively impact your credit rating. Filing a proposal will result in an R9 credit rating. Once you have paid the debt in full, your rating will change to R7. A consumer proposal will be removed from your credit report three years after you have paid off your debt, or six years after the date your proposal was filed, whichever comes first.
Still have a question?
If you are struggling with debt and want to know if a consumer proposal is the best debt relief solution for you, give us a call. We offer free, confidential, non-judgmental consultations to better understand your unique situation and we will find an option to help you become debt free.
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Managing debt can be difficult, but we’re here to help. Our Insolvency Advisors can show you your options and help you choose the best plan for you.
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