What is a consumer proposal in Canada?
In short
A consumer proposal is a formal arrangement under the federal Bankruptcy and Insolvency Act. Working with a Licensed Insolvency Trustee, you offer to repay a portion of what you owe over a period of up to five years. If enough creditors accept, the arrangement binds them all and unsecured collection activity stops.
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Who can file one?
Only a Licensed Insolvency Trustee can file a consumer proposal. Trustees are licensed federally by the Office of the Superintendent of Bankruptcy, and their fees are set by regulation rather than negotiated.
The route generally suits someone who owes more than they can realistically repay in full but who has regular income to fund monthly payments. Without income, a trustee will walk through the other options with you at no cost.
How long does it run?
A consumer proposal runs for a maximum of five years. You may complete it earlier by paying the balance sooner. Payments are made to the trustee, who distributes them to the creditors covered by the arrangement.
What does it do to your credit file?
A consumer proposal is a public filing and it is reported to the credit bureaus, generally for three years after completion. Ask the trustee to explain exactly what will be reported and for how long before you agree to anything.
Frequently asked questions
- Does a consumer proposal cover all my debts?
- It covers unsecured debts. Secured debts such as a mortgage or a car loan sit outside it, and some obligations including most support payments and certain court fines are not released. A trustee will go through your specific list with you.
- What happens if creditors reject it?
- Creditors vote on the proposal. If it is rejected, the trustee can discuss an amended offer or explain the alternatives. Rejection does not automatically make you bankrupt.
- Do I pay the trustee up front?
- Trustee fees are set by federal regulation and are paid out of the payments you make into the proposal, not as a separate up-front charge. The first consultation costs nothing.