What is consumer proposal?

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A consumer proposal, a smart debt management strategy under Canada’s Bankruptcy and Insolvency Act, allows you to repay a portion of unsecured debts over up to five years. A Licensed Insolvency Trustee, your financial superhero, drafts and manages the proposal. It halts interest and creditor calls, often saving your house and car. Choose your trustee carefully. Licensed Insolvency Trustees are funded by lenders and creditors, not by Canadians facing debt issues. They can also charge extra fees or bill you twice. Questions? Contact us via phone, text, or chat!

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What A Consumer Proposal Is Question

what is consumer proposal I’ve heard of consumer proposals but don’t fully understand what they are. With my debt piling up, I want to know if this could be a way to reduce what I owe and avoid bankruptcy.

From: Anonymous Question
Location: Halifax, Nova Scotia (NS)
Category: consumer proposal

What A Consumer Proposal Is Answer

A consumer proposal is a smart and legally binding way to handle financial bumps in the road, thanks to Canada’s Bankruptcy and Insolvency Act. Instead of waving the bankruptcy flag, this plan helps folks pay back a portion of their unsecured debts over a period of up to five years. A Licensed Insolvency Trustee, our financial superhero, helps draft the proposal, gets it government-approved, and looks after the payment process. This nifty solution puts a freeze on creditor calls, stops interest from piling on, and often means you pay back less overall—giving you a fighting chance to keep your house and car where they belong—yours!

To qualify, you need to be insolvent and have unsecured debts under $250,000, not counting mortgages. You can create a plan that suits your monthly budget. But keep an eye on potential snags like proposal fees and the fact that it goes on public record. Picking a trustworthy Licensed Insolvency Trustee is important, as not every hero wears a cape. Since lenders and creditors pay trustees, they aren’t advocates for Canadians in debt. Trustees can also charge you twice or add unexpected fees. Have questions or want to chat? Just give us a ring, text us, or hop online.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

A consumer proposal is a formal, legally binding agreement between you and your creditors to settle your debts for less than the total amount owed. It is designed to help individuals manage their debt without going through bankruptcy. Under the Bankruptcy and Insolvency Act, specifically sections 50.4 to 50.6, you can propose a repayment plan that may reduce the total debt and allow you to pay it off over a period of up to five years.

In a consumer proposal, you make regular payments to a licensed insolvency trustee who will distribute the payments to your creditors. This process can help you avoid the negative implications of personal bankruptcy while still giving you a structured way to manage and ultimately eliminate your debts. It is worth noting that the proposal must be accepted by a majority of your creditors (in dollar value), and once accepted, the terms become binding on all creditors.

If you are considering this option, it would be beneficial to consult with a licensed insolvency trustee who can help you assess your finances and explain the process in detail.

From: OSB Helper

Related Questions to Consumer Proposal

Here are the top 5 most frequently asked questions related to consumer proposals in Canada, along with brief answers:

1. What is a consumer proposal?

A consumer proposal is a legally binding agreement between you and your creditors to repay a reduced amount of your debts over a maximum period of five years[1][3][5].

2. How does a consumer proposal work?

A consumer proposal involves filing a formal agreement with your creditors, administered by a Licensed Insolvency Trustee, to repay a portion of your debts through monthly payments over up to five years[1][3][5].

3. Who can file a consumer proposal?

You can file a consumer proposal if you live in Canada, have debt over $1,000, are insolvent, and your unsecured debt does not exceed $250,000 (excluding your mortgage)[1][3][5].

4. What are the costs associated with a consumer proposal?

The costs include about $750 to file the proposal, another $750 if it is accepted, and the trustee retains 20% of your future payments as a fee[1][3][5].

5. How does a consumer proposal affect my credit score?

A consumer proposal creates a permanent public record and negatively impacts your credit score, similar to the impact of bankruptcy, but you can start rebuilding credit immediately after filing[1][3][5].

If you have a question about debt see our debt questions or ask your own debt related question.

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