Consumer Proposal Steps – Start to Finish

Navigating the Consumer Proposal Process: A Comprehensive Guide to the Steps in a Consumer Debt Proposal

Debt can be a crippling burden, leaving many Canadians feeling overwhelmed and unsure of where to turn. However, there is a solution that can provide much-needed relief – the Consumer Proposal. This legal debt consolidation and settlement option allows individuals to negotiate with their creditors, offering a more manageable repayment plan that often results in a significant reduction of their total outstanding debt.

In this comprehensive guide, we’ll explore the step-by-step process of initiating and completing a Consumer Proposal, providing you with a clear understanding of how this powerful debt-relief strategy can transform your financial situation. Whether you’re struggling with credit card balances, payday loans, student loans, or other types of debt, the Consumer Proposal offers a viable path to becoming debt-free.

Understanding the Consumer Proposal: Key Benefits and Advantages

A Consumer Proposal is a legal debt consolidation and settlement option that enables Canadians to negotiate with their creditors to reduce the total amount they owe. By combining all outstanding debts into a single, interest-free payment plan, a Consumer Proposal offers several significant advantages:

Debt Reduction and Consolidation

One of the primary benefits of a Consumer Proposal is the ability to reduce the total amount of debt you owe. Typically, individuals will offer to repay 20-50% of their total debt, with the remaining balance legally forgiven by their creditors.

Frozen Debt Balances

When you file a Consumer Proposal, your debts are frozen, meaning that interest charges and additional fees will no longer be added to your balances. This provides much-needed stability and predictability as you work towards becoming debt-free.

Protection from Creditor Actions

Once a Consumer Proposal is filed, creditors are legally prohibited from continuing any collection efforts, including wage garnishments or account freezes. This offers immediate relief from the stress and harassment often associated with debt collection.

Personalized Repayment Plan

A Consumer Proposal is tailored to your specific financial situation, taking into account factors such as your total debt, income, and family size. This ensures that your monthly payments are affordable and manageable.

No Additional Fees or Financing Charges

Unlike debt consolidation loans, a Consumer Proposal does not require any additional borrowing or financing charges. The administration costs are covered by your creditors, so the only payments you make are those outlined in your personalized repayment plan.

The Three-Step Process: Initiating and Completing a Consumer Proposal

The process of initiating and completing a Consumer Proposal can be broken down into three key steps, which we’ll explore in detail:

Step 1: Debt Consultation and Proposal Estimate

The first step in the Consumer Proposal process is to connect with a Licensed Insolvency Trustee (LIT) for a free, confidential debt consultation. During this meeting, the LIT will review your financial situation, including your debts, income, and any specific goals or challenges you’re facing.

Based on this information, the LIT will work with you to estimate a personalized Consumer Proposal that is affordable and tailored to your needs. This crucial step ensures that you have all the relevant details and can make an informed decision about moving forward.

Step 2: Gathering Financial Information and Preparing Paperwork

If you decide to proceed with a Consumer Proposal, the next step is to collect and provide the necessary financial information to your LIT. This includes details about your debts, income, and assets. Your LIT will guide you through this process, ensuring that all required documents are gathered and any missing information is filled in.

With this information, your LIT will prepare the formal Consumer Proposal documents on your behalf. This step is crucial, as you cannot file a Consumer Proposal on your own or through any other type of debt management service.

Step 3: Signing and Registering the Consumer Proposal

The final step in the process is to sign your official Consumer Proposal documents with your LIT. Once signed, your LIT will register the proposal with the Office of the Superintendent of Bankruptcy (OSB), the government body responsible for overseeing all insolvency filings.

After the registration, your creditors will have 45 days to consider and vote on your Consumer Proposal. If more than 50% of your creditors (by dollar value) vote in favor, the proposal will be legally binding on all your creditors, even those who voted against it or did not vote at all.

The First 60 Days: Key Milestones and Protections

In the first 60 days after your Consumer Proposal is filed, several important milestones and protections will come into effect:

Immediate Creditor Protections

As soon as your Consumer Proposal is filed, your creditors are legally required to stop all collection efforts, including contacting you for payments, charging interest, and pursuing any legal actions such as wage garnishments or account freezes.

Initial Payment and Creditor Voting

During the first month after filing, you’ll make your first regular monthly payment as outlined in your Consumer Proposal. Your creditors will then have 45 days to review and vote on your proposal.

Deemed Court Approval

If your proposal is accepted by the majority of your creditors (by dollar value), it will be deemed court-approved after the 45-day voting period. This provides additional legal protection and ensures that your creditors cannot change their minds or renege on the agreement.

Completing Your Consumer Proposal: Timeline and Obligations

The length of time it takes to complete a Consumer Proposal depends on the specific payment terms you’ve agreed to with your creditors. While most people opt for monthly payments, the timeline can range from as little as a few months to up to 60 months (5 years).

In addition to making your regular payments, you’ll also be required to:

  • Keep your tax filings up to date and pay any new balances as they come due
  • Participate in two private financial counselling sessions with a Qualified Insolvency Counsellor
  • Maintain regular communication with your Licensed Insolvency Trustee throughout the process

Once you’ve fulfilled all the terms of your Consumer Proposal, you’ll receive an official Certificate of Full Performance, and your unpaid debt balances will be considered forgiven or written off by your creditors.

Comparing Consumer Proposals and Bankruptcy

While a Consumer Proposal is a legal debt solution, it is distinct from bankruptcy. Some key differences between the two include:

  • Debt Reduction: Consumer Proposals typically result in a 20-50% reduction in total debt, while bankruptcy may discharge a higher percentage of debt.
  • Asset Preservation: In a Consumer Proposal, you generally get to keep your assets, whereas bankruptcy may require the liquidation of certain assets.
  • Credit Impact: A Consumer Proposal has a less severe impact on your credit report compared to bankruptcy.
  • Ongoing Obligations: Consumer Proposals involve ongoing payments and financial counselling, while bankruptcy has a more defined timeline and process.

Ultimately, the choice between a Consumer Proposal and bankruptcy will depend on your unique financial circumstances and goals. Your Licensed Insolvency Trustee can help you evaluate the best option for your situation.

Unlocking Debt-Free Living: Start Your Consumer Proposal Journey Today

If you’re struggling with overwhelming debt and seeking a viable path to financial freedom, a Consumer Proposal may be the solution you’ve been looking for. By taking the time to understand the step-by-step process and the key benefits this legal debt consolidation option offers, you can take the first steps towards regaining control of your finances and achieving the debt-free life you deserve.

Remember, you don’t have to navigate this journey alone. Reach out to a qualified, non-judgmental debt expert who can guide you through the Consumer Proposal process and help you develop a personalized plan to achieve your financial goals. With the right support and the power of a Consumer Proposal, debt-free living could be closer than you think.

Frequently Asked Questions

What types of debt can be included in a Consumer Proposal?

A Consumer Proposal can settle a wide range of debt types, including credit card balances, payday loans, student loans, taxes, and even CERB overpayments. Virtually any type of unsecured debt can be consolidated and reduced through this legal debt solution.

Can I pay off my Consumer Proposal early?

Yes, one of the advantages of a Consumer Proposal is the flexibility to pay it off early without any penalties. If your financial situation improves, you can choose to accelerate your payments and become debt-free sooner than the original timeline.

What happens if a creditor votes against my Consumer Proposal?

Even if a creditor votes not to accept your Consumer Proposal, or if a creditor doesn’t vote at all, the proposal can still be legally binding on all your creditors if it is accepted by more than 50% of your creditors (by dollar value). The dissenting or non-voting creditors will still be bound by the terms of the accepted proposal.

How does a Consumer Proposal impact my credit report?

A Consumer Proposal will be noted on your credit report, but it typically has a less severe impact compared to a bankruptcy. After successfully completing your Consumer Proposal, the notation will remain on your credit report for 3 years, after which it will be removed.

Can I still keep my assets in a Consumer Proposal?

One of the key advantages of a Consumer Proposal is that you generally get to keep your assets, unlike in a bankruptcy where certain assets may need to be liquidated. As long as you continue making your agreed-upon payments, you can typically retain ownership of your home, vehicle, and other valuable possessions.

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