Understanding the Timeline of a Consumer Proposal
A consumer proposal offers a legally binding agreement between a debtor and their unsecured creditors to pay back the debts. It effectively lowers the total debt and stops all collection activities, making repayment significantly more manageable. This article delves into the question: how long does a consumer proposal take?
1. Introduction
A consumer proposal is a legal agreement made between a debtor and their unsecured creditors to pay back debts. The proposal reduces the total debt and halts all collection activities, making repayment significantly more manageable. If you owe less than $250,000 (excluding the mortgage on your primary residence) and find yourself unable to repay your debts, you may be eligible to file for a consumer proposal.
The repayment period for a consumer proposal is a maximum of 5 years, but that doesn’t include how long it takes to file the proposal initially. That timeline can vary, depending on the following steps:
2. Meeting Your Trustee: The First Step
The initial step in a consumer proposal is to consult with a Licensed Insolvency Trustee. These Licensed Insolvency Trustees offer free consultations and have helped thousands of clients file consumer proposals. During the consultation, the trustee will assess your financial situation to determine if a consumer proposal is the best option, or if you should consider an alternative debt relief strategy.
3. Filing the Consumer Proposal: The Second Step
Next, your trustee files your consumer proposal with the Office of the Superintendent of Bankruptcy. The Office oversees Licensed Insolvency Trustees and maintains public records of insolvency filings. Once the proposal is filed, all of the unsecured creditors named in the proposal will need to pause their collection actions. This includes collection calls, wage garnishments, and legal action taken against you.
4. Informing the Creditors: The Third Step
After filing the proposal with the Office of the Superintendent of Bankruptcy, your trustee will submit it to your creditors. They will also submit a report regarding your financial situation.
5. Waiting for Creditors to Respond: The Fourth Step
Once the creditors are informed about the proposal, they are given time to consider and respond. If the majority of creditors accept your agreement, it goes into effect.
6. Starting the Proposal: The Fifth Step
If the creditors approve, the consumer proposal starts. You must then follow all of the terms of the proposal and make the required payments to your trustee, who distributes the funds to the creditors.
7. Re-submitting the Proposal: The Sixth Step
If most creditors do not accept your consumer proposal, you have an opportunity to amend your proposal and try again. Your trustee will help you make reasonable alterations to your proposal and then resubmit it.
8. Missed Payments and Their Consequences
To complete your proposal, you need to make every scheduled payment. If you fall behind by more than three payments without filing an amendment, the proposal will be annulled, and your debts will return to normal.
9. Increasing Your Income
One of the best advantages of a consumer proposal is that the repayment amount remains the same, even if your income increases suddenly. This means if you get a raise, take on a second job, or come into an inheritance, you don’t have to change the terms of the agreement.
10. What Happens After?
When you finish all of your repayments and credit counselling sessions, your consumer debt proposal is officially complete. Your debts are considered paid in full, and you have a clean slate to rebuild your personal finances.
In the end, the answer to the question – how long does a consumer proposal take? – depends on various factors, such as your financial situation, your ability to make timely payments, and the response of your creditors. By understanding these steps and requirements, you can better anticipate the timeline and requirements involved in a consumer proposal, making the process less daunting and more manageable.
