What is consumer proposal Canada?

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In Canada, a consumer proposal is a game-changer for those struggling with debts under $250,000. It lets you negotiate a partial debt repayment over 4-5 years, safeguarding major assets and managing unsecured debts. While your credit score takes a hit, it’s a manageable path to financial freedom. Be wise when choosing a Licensed Insolvency Trustee—not all are equal. Reach out via phone, text, or chat if you have any questions!

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Consumer Proposal Canada Question

What is consumer proposal Canada? What exactly is a consumer proposal in Canada, and how does it work?

From: Anonymous Question
Location: Abbotsford, British Columbia (BC)
Category: consumer proposal

Consumer Proposal Canada Answer

In Canada, a consumer proposal acts as a formal agreement where you negotiate with creditors to settle debts by paying back only part of what you owe, usually over 4-5 years. Managed by a Licensed Insolvency Trustee (LIT)—think of them as your financial peacekeepers—it’s tailored for individuals who can’t keep up with their bill payments, with unsecured debts under $250,000. This plan offers a clear route to managing your dues, with interest-free monthly payments after getting the green light from most creditors, all under the trusty Bankruptcy and Insolvency Act guidelines.

Unlike jumping straight into bankruptcy, a consumer proposal gives you a safety net for your major assets like your house or car while offering a sweeter deal on repayments compared to your original debt. So, what’s the catch? It does show up on the public Insolvency Register and impacts your credit score, staying around for up to three years once it’s all wrapped up. Oh, and a word to the wise: not all trustees are created equal. Do your homework before picking a Licensed Insolvency Trustee to guide you. And remember, if questions pop up, you can always reach out via phone, text, or live chat for some friendly advice!

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

A consumer proposal in Canada is a formal, legal process that allows individuals to negotiate a settlement with their creditors to pay back a portion of their debts over a specified period, typically up to five years. The process is governed by the Bankruptcy and Insolvency Act (RSC 1985, c 11) and provides an alternative to personal bankruptcy.

The key features of a consumer proposal include:

1. Eligibility: A consumer proposal is available to individuals who owe less than $250,000 in unsecured debts (not including the mortgage on their principal residence).

2. Proposal Process: The individual must work with a licensed insolvency trustee to prepare and file the proposal. Once a proposal is filed, creditors are automatically stayed from pursuing collection actions.

3. Creditor Approval: Creditors will vote on the proposal. For it to be accepted, a simple majority in both number and dollar value of creditor claims must approve it.

4. Payments: The individual makes regular payments as per the terms of the proposal, which will then be distributed to creditors. This payment amount is generally less than the total debt owed.

5. Protection: A consumer proposal allows the individual to keep their assets, unlike bankruptcy, where assets may be liquidated to pay creditors.

The specific legal framework for consumer proposals is outlined in the Bankruptcy and Insolvency Act (RSC 1985, c 11), particularly under Part III - Proposals. Additionally, the relevant regulations that govern consumer proposals include various provisions in the associated regulations, such as SOR/2007-256, C.R.C., c. 369, and C.R.C., c. 368.

From: OSB Helper

Related Questions to Consumer Proposal In Canada

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 debt settlement agreement between you and your creditors, managed by a Licensed Insolvency Trustee, to settle debts without filing for bankruptcy[1][3][5].

2. How do I qualify for a consumer proposal?

To qualify, you must owe less than $250,000 in unsecured debt (or $500,000 for couples), be insolvent, have a stable income, and not have an open consumer proposal or other insolvency proceedings[1][3][5].

3. What are the steps to file a consumer proposal?

The steps include selecting a Licensed Insolvency Trustee, assessing your debts and income, preparing the proposal, filing it with the federal government and court, obtaining creditor approval, and implementing the agreed-upon payments[5].

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

A consumer proposal creates a permanent public record and negatively impacts your credit score, although it is generally considered less severe than bankruptcy[5].

5. Can I file a consumer proposal if I am already bankrupt?

Yes, you can file a consumer proposal even if you are already bankrupt, provided your total debts (excluding the mortgage on your principal residence) do not exceed $250,000, and you meet other eligibility criteria[3].

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

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