A major benefit of a consumer proposal is the flexibility in the payment arrangements you can make with your creditors.
To file a consumer proposal, you will work with a Licensed Insolvency Trustee (the only professional who is legally licensed to file consumer proposals under the Bankruptcy & Insolvency Act) to create a repayment plan.
Your repayment plan must be attractive to your creditors, but it will also be affordable for you and work within your budget.
Under a consumer proposal plan, you will often propose to pay about 30 cents on the dollar over a period of time usually lasting 3 to 5 years.
To help you understand the flexible payment options available under a consumer proposal, we have laid out some common consumer proposal repayment examples.
The purpose of these consumer proposal term examples are to help you understand the flexibility offered by a consumer proposal.
To start the consumer proposal process, you will have to meet with a Licensed Insolvency Trustee.
When you meet with the Trustee ensure you discuss what payment terms could be available to you under a consumer debt proposal.
What Types of Consumer Proposals Are Available?
There are really no limits to the type of proposal that can be made, however there are a few main types.
Consumer Proposal Payment Terms Examples
The Standard Consumer Proposal
This payment arrangement is the most common type of consumer proposal, and is the easiest to work out.
You will meet with your Licensed Insolvency Trustee (who is known as a consumer proposal administrator in the proposal process) to review your finances to determine what you can afford to repay.
You will make a payment each month for a set amount over a set period of time under a standard consumer proposal arrangement.
This type of consumer proposal works for debtors who have steady income and steady expenses that do not fluctuate each month.
Payment Example: You will pay $300 a month for 60 months to repay $18,000 to your creditors through your proposal payment plan.
The Lump-Sum Consumer Proposal
This payment arrangement allows you to clear your debts in the fastest manner possible.
Under a lump sum consumer proposal you will come up with a lump sum amount of cash to offer your consumer proposal.
This allows you to finish your consumer proposal – and be out of debt – in as little as a few weeks.
Payment Example: You will come up with $18,000 to offer your creditors in a 1 time payment.
The Back-end Loaded Consumer Proposal
In a back-end loaded consumer proposal your payments will start out at a low amount and then increase over time.
This proposal arrangement is popular for people that are expecting their income to increase.
This type of payment arrangement is also popular with people who need time and funds to catch up on their secured debts, such as your mortgage or vehicle loan.
By making a back-end loaded proposal you must ensure that you can afford the higher payments towards the end of the proposal.
If you cannot make the higher payments, your consumer proposal could be annulled, which will leave you in a worse financial situation.
Payment Example: You will pay your creditors $300 a month for 12 months, then $400 a month for 36 months, to repay a total of $18,000 to your unsecured creditors.
The Front-end loaded Consumer Proposal
A front end loaded consumer proposal is the exact opposite of a back-end loaded proposal.
During this type of proposal payment plan, the payments start at a high monthly amount and then decrease over time.
This type of proposal works for people that expect their income to drop, and it also might be more attractive to your creditors as they will receive more funds faster.
Payment Example: You will pay your creditors $400 a month for 12 months, then $275 per month for 36 months, to repay a total of $18,000 to your unsecured creditors.
The Seasonal Payment Consumer Proposal
For consumer debtors that have a fluctuating income due to seasonal employment can work out this type of payment arrangement.
Under this type of proposal, a debtor will repay various amounts throughout the life of the proposal, depending on their seasonal income.
Payment term example: Pay $200 per month for 3 months, $300 a month for 6 months, $400 the next 3 months for a total of 5 years, for a total debt repayment of $18,000 to your unsecured creditors.