The maximum time you can offer a Consumer Proposal over is 5 years.
This does not mean every proposal is 5 years as there is no minimum time set to make payments over. It can be shorter if you wish.
Here in my Brantford office, we’ve done some consumer proposals where the terms were to only make one payment!
One of the critical points to having a consumer proposal accepted is that the proposal offer has to provide the creditors a greater benefit than what they’d receive if you were to otherwise file a bankruptcy instead.
So, let’s take a typical example: Lets say you have $40,000 of debt and your surplus income payments in a bankruptcy were going to total $15,000. It’s reasonable to assume that if their were no other expected receipts in a bankruptcy (from assets, tax refunds) that the creditors may consider accepting a proposal of $20,000.
They’d not be getting the $40,000 you owe, but would consider $20,000 being better than the expected $15,000 from your potential bankruptcy.
Once we know the proposal has to be in the region of $20,000 we can then look at how you’ll pay it. To keep the monthly payment to a minimum, you’d offer $333 per month for 60 months. Alternatively, if you wanted to shorten the time of the proposal, you could offer $555 per month over 36 months. It’s the same $20,000, just a different way of getting there. If you had access to a lump sum of $20,000 you could potentially just offer the one time payment too.
What a lot of people would choose to do would be to set up the proposal over the longer term initially to essentially “lock in” a lower minimum payment because a) it’s easier to pay $333 instead of $555 and b) there’s no rule in a proposal saying you can’t pay it faster if you have the ability to do so. At any time during a proposal, you can make extra payments in an effort to pay it faster.
Is there any benefit to paying it faster?
Yes, the faster you pay, the faster you’re done, and the faster you pay, the faster it comes of your credit report. The note on your credit report stay’s there for 3 years after you’ve completed your payments.
If you’re considering a Consumer Proposal as an option to clear up your debts, contact a licensed consumer proposal administrator who will tell you it’s a good option and how you can arrange flexible payments to suit your circumstances and budget.