Another option to consolidating your debts is to file a Consumer Proposal. This is a legal process and a matter of public record under the Bankruptcy and insolvency Act between you and your creditors. A Consumer proposal can only be administered by a licensed insolvency trustee and costs approximately $1500.00 to file. You are responsible for an initial set up fee and if the arrangement is accepted by your creditors and approved by the courts, you will have to pay the balance to move forward. In addition to this, the trustee, will take 20% of your future payments as a fee for overseeing and managing your Consumer Proposal. To be legally binding, the creditors who own most of your debt must agree to the proposal. Once they do, you repay the agreed amount over a maximum term of 5 years and a permanent public record is placed in a searchable, online database.
Which debts can be included in a Consumer Proposal? Can I include my student loans?
In order to file a consumer proposal, an individual must owe less than $250,000.00, excluding a mortgage on their principal residence. In addition, not all debts can be included in a Consumer Proposal. Student loans often cannot be included, especially if it has been less than 7 years from when someone stopped studying. While you are making payments on a Consumer proposal, student loan payments aren’t required, however, interest is still added to the loan during that time. At the end of the proposal, you may end up owing more on your student loan that you did before filing the consumer proposal.
What happens to my secure debts and assets?
Secured debts such as a car loan can’t be included in a consumer proposal and any assets tied to a secured loan may need to be sold when entering into a proposal because you might not be able to manage the payment any longer. Often, creditors won’t agree to a proposal if you have assets you can sell to pay back the full amount of what you owe.
Will Creditors accept my Consumer Proposal?
There is never a guarantee that creditors will accept your Consumer Proposal. Each creditor has their own policies and each will consider someone’s overall circumstances very carefully. For example, if someone has a lot of surplus income over and above the Superintendent of Bankruptcy’s monthly expense guidelines, creditors will expect them to be able to repay more of what they owe. To have your Consumer Proposal accepted, it needs to be a better outcome for your creditors than if you were to file bankruptcy. How much of your debt you’ll repay will depend in part on your income level and what assets you own.
What happens if I can’t make a payment?
You can’t file another Consumer Proposal and may need to declare bankruptcy. A consumer proposal has very strict conditions. If someone misses 3 payments, the consumer proposal defaults and they are not able to file it again. Creditors will then proceed with collecting on what is still owed and this can include legal action. Often, people who enter into a Consumer Proposal still have difficulty keeping up with monthly payments. When that happens, they are left to consider other options, including bankruptcy. Note: there is no automatic bankruptcy following an annulled consumer proposal.
How does a Consumer Proposal affect my credit?
A consumer proposal is a legal arrangement and is a matter of public record. It is also noted on your credit report and this for an additional 3 years after the proposal has been successfully completed. How a consumer proposal affects your credit will depend on what is on your credit report.
What is public record?
Consumer Proposal is a matter of public record. If someone wants this information, they can visit Industry Canada’s website and search for your name in the Bankruptcy Insolvency Records. A small fee of $8 is required.
How does a consumer proposal affect future employment?
If your employer is one of your creditors, they will naturally be informed. In addition, if you work or are seeking employment in the finance industry and your terms of employment state you can’t hold your position while insolvent, you will need to tell your employer. Also, when applying for positions that require you to be bondable, this could create a problem.
Contact us for more information about Consumer proposal and help with your debt.
We have been helping consumers get debt relief since 1994. If you aren’t sure if filing a consumer proposal is the right debt solution for you, we can help. Contact us at 1-888-753-2227 for a confidential appointment with one of our accredited counsellors. We’re happy to sit down with you and review your entire financial situation and provide realistic solutions. We’ll answer your questions about how to manage your debt and become debt free.