Frequently Asked Questions
What is a consumer proposal?
A consumer proposal is a legally binding debt settlement agreement between a consumer and their creditors, relating to the repayment of unsecured debts. A consumer proposal is prepared with the assistance of a Licensed Insolvency Trustee, when a consumer is unable to pay off their debts, and it helps them pay back as much as they reasonably can without extra interest or debt collection worries.
How does a consumer proposal work?
A consumer proposal sets out terms for a consumer to repay a portion of their debt to their creditors, without interest payments accumulating and typically at a lower level than they would otherwise do. This means that consumer proposals are cheaper for the consumer; they allow creditors to get some portion of their money back, and help consumers clear debt they would otherwise be unable to pay.
How does a consumer proposal consolidate your debt?
Your Licensed Insolvency Trustee is responsible for managing your consumer proposal and disbursement of its proceeds. So in effect, you must make a single monthly debt payment to the Trustee, who then portions it out to your creditors on your behalf. This effectively consolidates your debts.
How do I file a consumer proposal?
Filing a consumer proposal is the same across the country; first you must have a Licensed Insolvency Trustee to advise you and help you complete the necessary paperwork. Four items are required to properly file: an Assessment Certificate, a Statement of Income and Expenses, a Statement of Affairs and a Consumer Proposal. These must be submitted, via your Trustee, to the OSB.
What happens in a consumer proposal?
A consumer proposal effectively combines all of your unsecured debt into a single sum, which is administered and managed by your Licensed Insolvency Trustee. It sets up rules that you must follow to pay off this debt - usually via a monthly sum that your Trustee distributes to your creditors. It relies on you working collaboratively with your creditors to give them back as much as you reasonably can.
How does a consumer proposal affect your credit?
A consumer proposal filing will reset your credit score to the lowest possible level. This stays in effect for three years after you have completed the consumer proposal. So if you close the proposal within two years, you can start rebuilding your credit after five years.
What is the consumer proposal process?
The consumer proposal process starts with finding a Licensed Insolvency Trustee, who will advise you and help you complete the necessary paperwork. They then file this paperwork with the OSB, and the OSB informs your creditors. Your creditors must then either approve or reject your proposal.
What’s the difference between a consumer proposal and bankruptcy?
A consumer proposal is a less harsh process than bankruptcy. In bankruptcy, your assets can be used to help pay off creditors; this is not true in a consumer proposal - you retain your assets. However a consumer proposal relies on you continuing to pay something towards your debts, while a bankruptcy does not.
Who should consider a consumer proposal?
Anyone struggling with unsecured debt, and who has a steady income, should consider a consumer proposal as a possible route out of debt. You must meet some eligibility requirements though: to file in Canada you need to be a Canadian resident or worker, and your debt must be between $1000 and $250,000.
How long after a consumer proposal can you get a credit card?
Once your consumer proposal is closed, the task of rebuilding your credit begins. There is no single timeline for doing this, and how quickly you can regain your credit (and how soon you will be eligible for loans and credit cards) will depend on your personal finances, your income, other debts, and so on. In theory, there is nothing stopping you from applying for a credit card right away, but many companies will have a certain minimum credit score threshold for you to meet before you can be approved.