What You Should Know About Consumer Proposals & Your Future
After struggling with debt for a long time, a consumer proposal might seem like the ultimate solution – but it may also feel like a long process.
We promise you: it is possible to complete your consumer proposal and become debt-free. How many years can you expect to reach the end – and how can you do it? Learn the answer to that question and more below.
What is a Consumer Proposal?
A consumer proposal is a solution available to resolve a heavy load of debt. In this case, you work with a Licensed Insolvency Trustee (“an LIT”), who acts as a third party between you and your creditors. Upon review of your situation, the LIT develops a consumer proposal which is fair to all parties. The consumer proposal is filed with the Office of the Superintendent of Bankruptcy (“OSB”) and presented to the creditors for their review and approval.
The consumer proposal outlines a repayment plan that is affordable to the debtor. This often means reducing your overall debt load by paying back a portion of what you owe over a period of time.
What Does the Process Look Like?
The consumer proposal will specify the payment requirements on your end – how much you are required to pay, how frequently each payment must be made, and more. These interest-free payments are made directly to the LIT, who distributes to funds to the unsecured creditors.
There are plenty of factors that affect these requirements: the amount of debt owed, your monthly household income, the assets you own and how long you can reasonably expect to pay it off.
Consumer proposals must be completed within five years. Typically they last between one and five years, and most of them involve a monthly payment.
If you are able to, you may pay your consumer proposal off faster, or in larger chunks, than what is required.
How Much Time a Consumer Proposal Takes From Filing Until Completion
If you’re interested in filing a consumer proposal, you might be wondering how long the process takes. Below, we’ll walk you through each step.
If you want to file for a consumer proposal, find an LIT. The federally-regulated professionals are licensed to act as a third-party between you and your creditors. They know the ins and outs of debt management and will be able to come up with an acceptable consumer proposal for you to offer to your creditors.
The process begins with an initial assessment, in which the LIT will ask questions about your debt, assets and income in detail. You are required to fully disclose all details to the LIT so they can provide you with the options available to resolve your debts.
Upon signing the consumer proposal documents, the LIT will file the documents with the OSB and then send the consumer proposal documents to your creditors.
Approval of the Consumer Proposal
The creditors have 45 days from the date your consumer proposal is filed with the OSB to reject the consumer proposal and request that the LIT convene a meeting to consider the consumer proposal. Upon expiry of the 45 days, if less than 25% in dollar value of the creditor claims received by the LIT requests a meeting, the consumer proposal is deemed to have been accepted by the creditors.
If, within the 45 day period, at least 25% in dollar value of the creditor claims received by the LIT request a meeting or the OSB requests a meeting, the LIT must call a meeting of creditors to consider and vote on the consumer proposal. At the meeting, the consumer proposal will be accepted if a simple majority of creditors, as determined by the dollar value of the claims present and eligible to vote, accept the consumer proposal as filed or as amended at the meeting. If the creditors vote against the consumer proposal, the creditors’ rights are revived, and they may once again commence or continue collection proceedings.
Within fifteen days of creditor approval, the court may be asked to review the consumer proposal. The court shall either approve it or reject it. If the court does not approve the consumer proposal, the creditors’ rights are revived, and they may once again commence or continue collection proceedings. If the court approves the consumer proposal, or the court is not asked to review it, the consumer proposal is deemed, by law, to have been approved by the creditors and the court. The creditors are then bound by the terms of the Consumer proposal.
Once your consumer proposal is approved by the court, you will make payments directly to your LIT. The LIT will work with you to figure out a payment schedule that works for you. The LIT will monitor your payments and distribute the funds periodically throughout the process, as outlined in the consumer proposal.
How Long Does a Consumer Proposal Remain on Your Credit Report?
In Ontario, consumer proposals are removed from your credit report slightly sooner than bankruptcy.
Through Equifax, your consumer proposal is removed from your credit report 3 years after you have completed the consumer proposal and been issued the Certificate of Full Performance.
Through TransUnion, your consumer proposal is removed from your credit report following whichever one of these instances occurs sooner:
- 3 years have passed since the consumer proposal has been completed; or
- 6 years have passed since you filed the consumer proposal.
Debt may seem impossible to pay off. However, working with an LIT can help you reach an outcome where you’re free from debt. Consult with an LIT if you think a consumer proposal maybe right for you.