Consumer Proposal Services in Nova Scotia

Understanding Consumer Proposal Services in Nova Scotia for Debt Relief

Consumer Proposal Services in Nova Scotia offer a viable solution for individuals struggling with excessive debt and seeking a path to financial stability. As a form of insolvency governed by the Bankruptcies and Insolvency Act 1, Consumer Proposals provide an opportunity to minimize and manage debts through an agreement with creditors to reduce the total outstanding debt 2.

In this article, we will explore the intricacies of Consumer Proposal Services in Nova Scotia, including eligibility criteria, the filing processadvantages, and potential drawbacks. We will also compare Consumer Proposals to bankruptcy and discuss success rates, life after a Consumer Proposal, and the importance of seeking professional advice from Licensed Insolvency Trustees like MNP Ltd. 4 5.

Understanding Consumer Proposal Services in Nova Scotia

Consumer Proposals in Nova Scotia offer a viable alternative to bankruptcy, allowing individuals to retain their assets while providing relief from overwhelming debt 1. This debt relief option enables debtors to pay back a portion of their debt within a five-year period, making a single, manageable monthly payment 1 3. By entering into a Consumer Proposal, individuals can protect themselves from constant collection calls and wage garnishments 1.

The process of filing a Consumer Proposal involves the following steps:

  1. Calculating the Hypothetical Bankruptcy Value, which determines the Surplus Income obligations and values the consumer’s assets, taking into account provincial exemptions 5.
  2. Negotiating a binding agreement with creditors, where 51% of them must agree to the proposed terms 4.
  3. Making payments to creditors via a Licensed Insolvency Trustee, either in monthly installments or a lump-sum payment 4.

It is important to note that while a Consumer Proposal can provide significant debt relief, it does have an impact on credit scores. A Consumer Proposal is recorded on the individual’s credit report for three years after the last payment and can negatively affect credit for about seven years 3 4. However, compared to alternative debt relief options, a Consumer Proposal may have a more favorable impact on credit scores 1.

When considering a Consumer Proposal in Nova Scotia, it is crucial to understand the types of debts that can be included:

  • Unsecured debts, such as personal loans, lines of credit, credit card debt, income tax debt, and payday loans, are easily handled by Consumer Proposals 5.
  • Secured debts can also be included, but the associated asset must be given up to re-negotiate the debt 5.
  • Debts outlined in section 178 (1) of the Bankruptcy and Insolvency Act cannot be included in a Consumer Proposal 5.

Seeking the assistance of a Licensed Insolvency Trustee, such as MNP LTD, can help individuals navigate the Consumer Proposal process and explore alternatives to bankruptcy 3. By understanding the eligibility criteria, costs, and potential impacts of a Consumer Proposal, individuals in Nova Scotia can make informed decisions when seeking debt relief solutions.

Eligibility Criteria for Filing a Consumer Proposal

To be eligible for a Consumer Proposal in Nova Scotia, individuals must meet specific criteria:

  • Total unsecured debts must be at least $1,000 and less than $250,000 (excluding a mortgage on the primary residence) 3 4 6 7 9.
  • Married couples can file a joint Consumer Proposal if their combined debt is less than $500,000 4.
  • The individual must be insolvent, unable to pay their debts as they become due 7 8.
  • They must have a stable source of income to ensure they can make the monthly payments outlined in the proposal plan 7 8.

Other important eligibility factors include:

  1. The individual must be a resident of Canada 9.
  2. They must be a person, not a business (unless it’s a sole proprietorship) 7.
  3. No prior proposal proceedings, such as a Notice of Intention to file a proposal, should be open 7 8.
  4. If the individual is an undischarged bankrupt, they can still enter into a proposal, and their bankruptcy will be annulled if the Consumer Proposal is accepted 7 8.

It is crucial to note that creditors must receive better offers through the Consumer Proposal than they would if the individual were to go bankrupt 7. Additionally, most unsecured debts are eligible for inclusion in a Consumer Proposal agreement with creditors 7 9.

The Process of Filing a Consumer Proposal

The process of filing a Consumer Proposal involves a licensed insolvency trustee and informing creditors within a specific time frame 1. It is a formal, legally binding process that allows Canadians to reduce their debt by negotiating a settlement with their creditors 4.

The process involves four key steps 10:

  1. Meeting with a Licensed Insolvency Trustee (LIT) who works with the debtor to create a proposal outlining the terms of the debt repayment 4.
  2. Submitting the proposal to creditors for review 12.
  3. Negotiating with creditors, who have 45 days to accept or reject the proposal. If creditors holding at least 51% of the total debt accept the proposal, it becomes legally binding for all creditors 4 12.
  4. Starting to make payments to the bankruptcy trustee, who then distributes the funds to the creditors, to settle your debts once the majority of your creditors accept the proposal 4 10.

It is important to note that only a licensed bankruptcy trustee is allowed to file paperwork for a consumer proposal 11. The Court must also approve the proposal, and creditors can choose to reject it 11. To avoid an annulment, the debtor must fulfill all the terms of the proposal. If the debtor fails to make the required payments, the proposal may be annulled 4.

Advantages of Choosing a Consumer Proposal

Consumer proposals offer several advantages to both creditors and debtors. Creditors receive more money than they would in a bankruptcy, while debtors can avoid the negative consequences of bankruptcy 13. Some key benefits of choosing a consumer proposal include:

  1. Asset protection: In a consumer proposal, you can keep all assets, including your home, vehicle, and investments 17 18. Professional designations and corporate directorships are also protected 13.
  2. Income tax refund protection: Unlike in bankruptcy, where income tax refunds become a post-acquired asset subject to collection by the Trustee, consumer proposals protect your tax refunds 17 18.
  3. Flexibility and affordability: Consumer proposals typically involve lower monthly payments based on what can be reasonably afforded over a maximum period of 60 months 17. The terms of an accepted consumer proposal do not change, even if there are changes in your salary or revenues 21.
  4. Debt reduction: A consumer proposal allows you to reduce unsecured debts by as much as 75% 19. All unsecured debts, including those held by the Canada Revenue Agency (CRA), can be consolidated into a single fixed monthly payment 19.
  5. Legal protection: A consumer proposal is a legally binding agreement with your creditors, providing protection from legal actions and wage garnishments 19.
  6. Faster recovery: The impact on your credit rating is less severe compared to bankruptcy, and recovery from overwhelming debt is faster 19. A consumer proposal remains on your credit record for only three years, as opposed to bankruptcy 21.

Licensed Insolvency Trustees (LITs) are the most experienced and highly trained debt professionals in Canada 13. They listen to debtors’ needs and maximize the proposal’s chance of acceptance without compromising basic needs 13. LITs consider several factors when drawing up a consumer proposal, ensuring that the settlement amount is based on the debtor’s budget and balances the needs of creditors and the debtor 13.

Comparative Analysis: Consumer Proposal vs. Bankruptcy

Consumer proposals and bankruptcy are both debt relief options administered by Licensed Insolvency Trustees, but they differ in several key aspects 15 16:

Aspect Consumer Proposal Bankruptcy
Debt Repayment Regular payments of a fixed amount agreed upon by you and your creditors 15 Monthly payments may vary depending on your income 15 16
Asset Protection Allows individuals to keep their assets, including home, automobile, personal assets, investments, and tax returns 22 Trustee takes control over assets with limited exceptions 15
Credit Impact Recorded on credit report for a maximum of six years or 36 months from final completion 4 16 Stays on credit report for 6 to 14 years past the date of discharge 16 24
Time Until Discharged 60 months 16 Can be 9, 21, 24, or 36 months 16
Monthly Reporting No monthly reporting required 16 Monthly reporting required 16
Creditor Vote Majority of creditors must vote in favor of the proposal 6 Not applicable
Financial Institution Treatment Some financial institutions may treat a proposal the same as bankruptcy on credit reports 6 Not applicable

It is important to note that if there is no significant income or assets that would be seized, filing for personal bankruptcy might be a better option than a consumer proposal 23. Additionally, if the majority of creditors vote against the proposal, the individual may have to file for bankruptcy 6.

Both consumer proposals and bankruptcy stop wage garnishments and harassing phone calls from creditors 16. A consumer proposal will be on an individual’s credit history for the lesser of three years after the proposal is finished or six years from the date it started, while a personal bankruptcy will show on credit history for six years from the date of discharge for a first-time bankrupt 24.

Potential Drawbacks and Considerations

While Consumer Proposals offer a viable debt relief solution, there are several potential drawbacks and considerations to keep in mind:

  1. Longer Repayment Period: Consumer Proposals typically take four to five years to complete, which is longer than a typical bankruptcy 6 23. This extended repayment period may be challenging for some individuals.
  2. Credit Rating Impact: Filing a Consumer Proposal negatively impacts credit, resulting in an R7 rating that remains on the credit report for three years after completion 6 23. This can make it difficult to obtain credit or loans during and after the proposal period.
  3. Strict Adherence to Proposal Terms:
    • Adherence to all proposal payments and agreements is mandatory. Missing payments or falling behind can result in terminated proposal terms 23.
    • If three payments are missed, the proposal may be annulled 25.
    • Defaulting on the Consumer Proposal by falling three months behind in payments means the individual cannot file another Proposal until the debts included in the current Proposal are paid in full 6.
  4. Fixed Payments: If an individual needs to change the amount they pay each month, they must amend the Proposal and go through the voting process again 6. This can be time-consuming and may not always be successful.
  5. Public Record: A Consumer Proposal is a public record, included in an online searchable database 11. This can have implications for future employment opportunities or professional licenses 11.
  6. Limitations on Debts:
    • Secured debts cannot be included in a proposal 11.
    • Student loans less than 7 years old cannot be part of a Consumer Proposal 11.
  7. Costs: Filing a proposal costs approximately $750, and if accepted, an additional $750 plus 20% of future payments as a fee for administering the proposal 11. These costs should be factored into the decision-making process.

It is crucial for individuals to carefully consider these potential drawbacks and seek professional advice from a Licensed Insolvency Trustee before proceeding with a Consumer Proposal. The proposal must be fair and based on the individual’s ability to pay, not the amount owed 26.

Success Rates and Statistical Insights

Consumer proposals have an impressive 98% acceptance rate, largely due to creditors receiving more money than they would in a bankruptcy 13. The expertise of Licensed Insolvency Trustees plays a crucial role in ensuring this high acceptance rate 13.

Recent statistics from the MNP Consumer Debt Index, which measures Canadians’ attitudes towards their consumer debt and ability to pay bills, highlight the financial challenges faced by Nova Scotians:

  • In April 2022, the Index dropped to an all-time low of 87 points since its inception in June 2017 28.
  • 68% of Nova Scotians are concerned about their ability to pay debts as interest rates rise, the highest among all provinces 28.
  • 57% of Nova Scotians are already feeling the effects of interest rate increases 28.
  • 64% of Nova Scotians are concerned about the impact of rising interest rates on their financial situation, more than any other province 28.
  • 43% of Nova Scotians believe that rising interest rates could drive them closer to bankruptcy 28.

These statistics underscore the importance of consumer proposal services in Nova Scotia as a viable debt relief option for individuals struggling with financial hardship.

Life After a Consumer Proposal

Life after a consumer proposal involves rebuilding credit and establishing responsible financial habits. A consumer proposal will affect an individual’s credit rating, appearing as an R7 credit rating on their credit report for three years from the completion of the proposal or up to six years from the time of filing, whichever is first 26 29. However, the impact is not permanent, and adopting responsible financial habits can demonstrate creditworthiness to potential creditors 29.

To rebuild credit after a consumer proposal, consider the following steps:

  1. Start early: Begin working on rebuilding credit as soon as the consumer proposal is completed 30.
  2. Obtain a secured credit card: A secured credit card is typically the chosen method for rebuilding credit. Start with a small limit initially and gradually increase it over time 29 30.
  3. Pay bills on time: Establish and maintain responsible financial practices by paying all bills on time, including credit cards, utilities, and cell phone bills 31 32.
  4. Monitor your credit report: Check your credit report regularly to monitor progress and identify any errors that may be negatively impacting your credit 31 32.
  5. Create a budget: Track your spending habits to identify areas where you can cut back or exercise more self-control, and ensure you are living within your means 31 32.
  6. Consider an RRSP: When financially able, consider opening a Registered Retirement Savings Plan (RRSP) account and asking the bank for a small RRSP loan 31 32.
  7. Make smart financial choices: Avoid getting into debt again by making smart financial choices 33.

The SANDS Plan provides a structured approach to rebuilding credit:

  • Set the Stage: Complete the Consumer Proposal or bankruptcy to receive the Certificate of Full Performance or Discharge 24.
  • Ensure Accuracy: Review credit history reports for errors 24.
  • Get New Credit: Obtain a secured credit card with a low limit and demonstrate responsible use 24.
  • Be a Dependable Customer: Pay all bills on time 24.
  • Spend Less than you Earn: Maintain credit account balances below 50% of the credit limit and start saving 24.

It is important to note that a consumer proposal does not impact an individual’s ability to apply for or receive a student loan in the future after the required waiting period 26. By following these steps and maintaining responsible financial habits, individuals can successfully rebuild their credit and achieve financial stability after completing a consumer proposal.


The consumer proposal services in Nova Scotia offer a viable solution for individuals struggling with overwhelming debt. By negotiating with creditors and making manageable monthly payments, debtors can reduce their debt while retaining their assets and avoiding the negative consequences of bankruptcy. Although filing a consumer proposal may have short-term impacts on credit scores, the long-term benefits of debt relief and financial stability make it a worthwhile consideration.

Seeking the guidance of a Licensed Insolvency Trustee is crucial in navigating the consumer proposal process and ensuring the best possible outcome. With a high success rate and the potential for a fresh financial start, consumer proposals provide a valuable tool for Nova Scotians looking to regain control of their finances and build a more secure future.


1. What is the process of a consumer proposal in Nova Scotia? A consumer proposal is a formal process in which a consumer negotiates with their creditors to reach a debt settlement agreement. It is a debt relief option sanctioned by the Bankruptcy and Insolvency Act and must be facilitated by a Licensed Insolvency Trustee.

2. Are there any disadvantages to filing a consumer proposal? Yes, there are some drawbacks to consider. A consumer proposal often takes longer to complete compared to filing for bankruptcy. While it allows for lower monthly payments, this also means a longer duration of debt repayment. However, should your financial situation improve, you have the option to pay off the proposal early. Additionally, it’s important to note that your credit rating will be impacted by entering into a consumer proposal.

3. To what extent can a consumer proposal reduce the amount of debt owed? A consumer proposal can significantly reduce your debt, allowing you to legally agree with your creditors to repay only a portion of the amount owed. This repayment is in full settlement and is free of interest, fees, or additional penalties. It is common for debts to be reduced by 70-80% under a consumer proposal.

4. Is it necessary to surrender all credit cards when entering into a consumer proposal? Yes, when you file for a consumer proposal, you are generally required to hand over all your credit cards to your Licensed Insolvency Trustee. You may not be eligible to obtain a new credit card until the terms of your consumer proposal have been fully met and the proposal is complete.


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