When filing a consumer proposal in Canada, you are offering a legal contract to your creditors to repay a portion of your debt over a period of up to 5 years.
To get started, your consumer proposal administrator will gather information from you at the initial consultation meeting regarding your debts, as well as any assets that you have and what they are worth. These values are typically factored into the proposal contract so that you are able to keep your belongings.
The next step is to review your budget and be sure that you have the necessary funds to afford a payment plan and the proposal terms that you will offer in your contract.
Once you have made a decision about the payments that you are able to afford, your creditors vote on your offer within a 45 day period. If the majority of your creditors agree – determined by your highest owing debts – it becomes a legally binding contract for both you and all of your creditors, not only those that voted in favour of the proposal.
So you’ve done your research about the basics but you are still left with questions. Below is a list of commonly asked questions that might help to fill in the blanks.
Common Questions about Consumer Proposals
Q. Will a consumer proposal stop the creditor calls?
A. YES. It should stop all calls if you have listed all of your creditors in your consumer proposal. We legally have 10 days to notify them of the contract from the day that you sign your proposal. You will also receive a copy of the signed documents and creditor calls should stop shortly thereafter. If your creditors continue to call, please let us know and we will contact them directly to provide the information that they require.
Q. What additional costs are there? Are there any upfront costs?
A. NO. A consumer proposal includes all fees and expenses in the contract as a kind of “one stop shopping” payment plan. When you make your monthly payment to us, we take a portion for our fees and expenses and a portion will go to your creditors. Nothing extra.
Q. I am being garnished. Can the garnishment be stopped?
A. YES. A garnishment can be stopped on the date that you sign your consumer proposal. It is a legal process, and as such, there is a legal stay of proceedings that stop all garnishments.
Q. Am I locked into the consumer proposal contract?
A. YES AND NO. The consumer proposal is a legally binding contract so you must complete it by making your payments within 5 years. HOWEVER, you can pay it off faster with no penalty. This means that if your earnings increase you could potentially increase your payments to reduce the length of your consumer proposal.
Q. What if my creditors vote against my payment terms, am I bankrupt?
A. NO. You are not automatically bankrupt if your creditors vote against your initial payment terms. Your options include counter offering, walking away and dealing with your debts on your own, or filing for personal bankruptcy.
Q. Can I include student loans or tax debts in my consumer proposal?
A. NO. As a consumer proposal is a legally binding contract, you must declare all debts including student loans and personal taxes. However, student loans must be older than 7 years since your end of study date. Although this loan is a debt, if it has been less than 7 years since you have stopped being a student, it will not be a debt that is paid off once you make the final proposal payment; the debt will survive. Keep in mind that during your proposal they cannot pursue you for the debt and this may give you time to get back on your feet again financially to deal with your student loans.
Q. If I get a better job in a year or two, can the creditors come after me for more money?
A. NO. A consumer proposal is a legally binding contract and a deal is a deal. However, with a better paying job you may consider paying off the proposal faster.
Q. Can I keep any assets I get after the proposal is in place?
A. YES. When you draft your proposal, the value of any assets you have at the time are factored into the contract. Just as if your income increases, anything that happens once you have filed does not affect your proposal terms. Any assets that you acquire after the proposal has begun, are assets that are yours to keep and they do not affect the contract that you made with your creditors.
If you are considering a consumer proposal, our licensed consumer proposal administrators can answer any questions you have as part of your free initial consultation. Contact a consumer proposal administrator in your area today.