Length of an Average Consumer Proposal
This method allows people to give one last shot at repaying their debts using a revised timeframe, approved by creditors, and thus be debt-free and maintain a good credit score.
One of the leading causes of payment defaults is the lack of time to earn enough to pay back the loan installments.
Such a debt proposal allows you that extra time you need to get your earnings back on track and start paying back the loan amount, in small yet steady installments.
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So, the question is, exactly how long is the average consumer proposal?
Although there are no public statistics or records presented by the government agency that supervises the consumer proposals, it is estimated that the average consumer proposal may be up to 60 months (5 years) long.
In practice, some License Insolvency Trustees offer 47 months in the consumer proposal, out of which most of the time the repayment is completed within 42-44 months.
The reason why this window, is a workable one, is because as soon as you file for a proposal, you see an immediate improvement in your financial situation and have the ability to regain control of your loan repayment situation, as well.
You may even find yourself capable of making a couple of extra payments to pay off the loan at a date earlier than mentioned in the consumer proposal.
What time frame should you offer in the consumer proposal?
You should offer a recommended 60-month period as mentioned above, to close the proposal.
This will help spread out your payment amount over a long period and bring down each installment to a comfortable number.
Creditors often don’t negotiate on the 60-month term.
Thus, by offering this time, rest assured, you will have removed one variable of negotiation for your creditors.
The next variable, that they would want to negotiate on would be the monthly payment.
Your creditors might want you to increase the amount of monthly payment in your consumer proposal.
However, if you have made your best offer which seems reasonable based on your income and expenditure, then chances are that they would accept the amount you have proposed in the consumer proposal.
Therefore, by mentioning 60 months along with a reasonable monthly payment, you can increase the chances that your debt proposal is accepted.
Will you be stuck with the 60-month consumer proposal?
The good news is no, you will not be stuck with the 60-month consumer proposal.
In case, you experience a change in your earning status, a new job, a windfall or a payout, you have every right to use that amount to pay off your debt at a time earlier than the 60 months mentioned in your proposal.
Consumer proposals are “open.”
This means you can pay them off as quickly as you can.
This is what most people with consumer proposals do.
You can make a lump-sum payment and close the proposal, or you may make a lump sum payment that brings down the total amount owed to the creditors, substantially.
Are there any typical terms in consumer proposals?
Yet another common concern that most consumer proposal applicants have is if there are any typical terms that they should include in their proposal to ensure it gets accepted.
The truth is that, although the way a debt proposal is negotiated does follow a set pattern, consumer proposals themselves are varied and different.
No two proposals are ever the same.
This is because the reason behind every debt is different, the debtholder and their particular situations are different, and the creditors in each case are different, too.
Also, the reason why a debtholder might want to file a consumer proposal could vary.
For example, one might want to file a debt proposal because the total debt they have collected has become too overwhelming for them to handle.
On the other hand, someone else might file a proposal as they stand to face legal action, otherwise.
However, just like any other legal documents, there are certain pointers that you need to have in your consumer proposal to ensure it has a better chance of getting accepted.
- You need to prove yourself unable to repay your debts. To do so, you need to prove insolvency to qualify to apply for a proposal.
- You need to appoint a License Trustee to file the consumer proposal on your behalf as the proposal must comply with all the rules specified in the Bankruptcy & Insolvency Act.
- You need to show your creditors that they stand to gain more from your proposal as opposed to a bankruptcy scenario. Otherwise, creditors will automatically reject the proposal so that you take the route of applying for bankruptcy, which could fetch them better benefits.
- You need to find a License Trustee who has experience filing several consumer proposals with a variety of creditors. An experienced trustee will know how to skillfully structure and negotiate your debt proposal so that creditors see value in it and accept it.
While there are no certain typical terms that you need to worry about in your proposal, you should find a License Trustee who has the expertise and skill to make the Debt Proposal route work for you.
Also, after carefully appraising your debt situation, your license trustee can give you a better idea of the length of the repayment window you should offer in your consumer proposal so that it seems lucrative to your creditors.
This will go a long step in not only getting your proposal accepted but also giving you enough breathing room to slowly and steadily pay back your debt, without any pressure from your creditors.
As mentioned earlier, there is no average time specified for a proposal.
You can always negotiate terms and durations that suit you best, while ensuring your proposal looks attractive to your creditors, too.
It is only when both parties are mutually benefitted, is when a consumer proposal is truly successful.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal