Common Questions about Consumer Proposals
Consumer proposals are common choices for those who are dealing with debt and having financial difficulties. However, despite being a common option, many people are confused as to how exactly a consumer proposal works. This consumer proposals FAQ will help you understand more about a proposal with the following information about this legal process.
What is a consumer proposal?
A consumer proposal is a legal process where you make an offer to all of your unsecured creditors to pay them on terms that you can afford. In many consumer proposals, you offer to extend the time you have to pay your creditors back, offer to pay a portion of the overall amount owing, or both.
Most consumer proposals see you pay part of what you owe in monthly payments for a set period of time. The remaining debt is eliminated once the proposal is complete.
A consumer proposal must be filed with a licensed Insolvency Trustee.
What debts can be included in a consumer proposal?
A consumer proposal is sent to all of your unsecured creditors. This includes debt such as credit card debt, unsecured lines of credit, personal loans and other such debt. You cannot include secured debts such as mortgages or automobile loans.
If the majority of your unsecured creditors vote to accept your offer, then all are bound by its terms.
What does a consumer proposal cost?
The initial consultation is offered free by most trustees. All administrative fees associated with the proposal are deducted from your monthly payments to your creditors and are set by the government.
What happens to my assets in a consumer proposal?
A consumer proposal does not usually involve losing any assets. If you continue to make payments on your mortgage and vehicle loans as needed, you should be able to keep these assets. As long as your creditors agree to your proposal, you are allowed to keep the assets that you own. Money invested in RRSPs is typically protected under a consumer proposal (with some exceptions) and money invested in RESPs and TFSAs may also be protected under a consumer proposal.
Your trustee will provide you with specific information on what will happen to your assets before you make the decision to file a consumer proposal. However, a consumer proposal does not generally involve surrendering assets.
How long does a consumer proposal remain on my credit report?
A note remains on your credit report for three years after the proposal is completed. Most proposals are completed in between one and five years.
What other duties must be completed as part of a consumer proposal?
As part of the consumer proposal process, you are required to attend two financial counselling sessions. In these sessions, you will learn budgeting and money management. This will help prevent you from ending up in financial trouble in the future. In addition, you will also learn what steps you can take to improve your credit score.
Can I pay off my proposal early?
Yes. There is no penalty for paying your proposal early. If you get a raise or a bonus, are able to save more money than expected or receive a lump sum of money for any reason, you can increase your proposal payments if you wish to do so. You can even pay the proposal off in full if this is possible for you. This will allow you to start rebuilding your credit sooner
Speaking with a Trustee in Bankruptcy
If you are having financial difficulties and are unable to pay your debts as they become due, you may wish to speak with a licensed insolvency trustee. Despite the name, a trustee isn’t just able to provide you with information on how to file for bankruptcy. A trustee can also act as a proposal administrator in the case of a consumer proposal.
Most trustees offer free consultations. In this initial consultation, the trustee will review your financial situation and provide you with details on the possible options available to you. You can then use this information to decide how you would like to proceed.
If you have any questions that you do not see answered in this consumer proposals FAQ, a trustee should be able to answer them for you. Booking a consultation will allow you to ask any questions you may have regarding consumer proposals and other financial and debt management options.