FAQ
1. Is a Consumer Proposal the same thing as a proposal to creditors?
Yes, they are the same thing. The legal name is Consumer Proposal.
2. Is filing a Consumer Proposal similar to declaring bankruptcy?
A Consumer Proposal is a solution that is commonly used as an alternative to bankruptcy. It offers several advantages.
A Consumer Proposal allows you to:
- Pay less money each month
- Pay back just a portion of your debts with no further interest charges
- Pay off your debt over a longer period of time or you can choose to pay off the settlement earlier than the scheduled term
3. Will I lose my home if I file a Consumer Proposal?
If you own your home, filing a Consumer Proposal won’t cause you to lose your home. If you’re behind on mortgage payments, a Consumer Proposal may help free up some cash to help with payments.
4. Will I lose my home if I file for bankruptcy?
You won’t lose your house if you go bankrupt as long as you continue making your mortgage payments. The bank cannot foreclose or repossess your house if the payments are current. Secured creditors are prevented from amending your mortgage term solely because you file for bankruptcy.
All your possessions and belongings, including your car and home, are protected from your creditors when you file a Consumer Proposal. By using a Consumer Proposal to consolidate and pay off all your unsecured debts, you might find it easier to continue making car and mortgage payments.
5. Will I lose my car if I file a bankruptcy?
If you have a secured loan outstanding against the vehicle which is higher than the actual value of the vehicle, you may wish to give up the car.
However, if you have a vehicle which you own outright, you can keep the car if you wish as long as you pay the value of the vehicle, which exceeds provincial exemption limits to the Trustee.
6. Will I lose my RRSP and pension in a Consumer Proposal?
No, your RRSP and pension, except for any contributions made in the last year are not available to the creditors.
7. Can my wages be garnished if I file a Consumer Proposal?
No. Upon filing a Consumer Proposal, you are protected from the commencement or continuation of any proceedings by your creditors to collect their debt. Therefore, a wage garnishment and collection calls would stop.
8. Will my creditors keep contacting me after I file a Consumer Proposal?
As soon as you file for a Consumer Proposal or bankruptcy the law will protect you and direct contact from your creditors/collection agencies will stop. They will only be allowed to contact the Trustee office regarding your debts.
9. Do I still have to pay child support and alimony in a Consumer Proposal?
The legislation is designed to protect children and spousal support recipients and ensure those amounts continued to be paid as require. That means spousal support and child support obligations will not be discharged by the filing of a personal bankruptcy or a Consumer Proposal.
10. What happens if I have co-signed a loan?
The person who co-signed with you will have to assume responsibility for paying the entirety of the debt.
11. Will my spouse be affected by my Consumer Proposal?
If you file a Consumer Proposal, it will not affect your spouse’s credit report. The only time they would be obligated to pay your debts is when you have joint debt. If the debt is only in your name, then your spouse will not be affected by your Consumer Proposal.
12. Will I have to go to court if I file for a Consumer Proposal?
No, the Consumer Proposal will stop any proceedings initiated against you by your creditors and the court is not normally involved with the filing of a Consumer Proposal. The Trustee under the proposal will deal with all administrative matters.
13. Can my creditors sue me after I file a Consumer Proposal?
No, there is a stay against unsecured creditors suing you or taking other enforcement actions when you file.
14. Will a Consumer Proposal settle all my debts?
Yes, except for secured debts (e.g., car loans, house mortgages, etc.) and certain debts for court fines, spousal support, debts related to a fraud, and debts for student loans made under the Canada Student Loans Act or by a province, which are not older than seven years.
15. How much does a Consumer Proposal cost?
The Trustee doesn’t charge any upfront fees for the filing of a Consumer Proposal. Trustee fees will come out of your agreed to settlement payments pursuant to a government approved schedule.
16. How long does a Consumer Proposal take?
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.
17. How does a Consumer Proposal effect my credit?
A Consumer Proposal will be reported on your credit report but will be removed quicker than a bankruptcy filing. A Consumer Proposal will only stay on your record for three years after your last payment.
18. Will I be able to get a house after I file a Consumer Proposal?
Beyond having a down payment and re-established credit you will need to qualify like everyone else based on your income, length of time at your job, debt to income ratio, and the cost of the property you are looking at. Buying a home after filing for a bankruptcy or Consumer Proposal is possible if you are committed to making it happen.
19. Will I be able to get a car after I file a Consumer Proposal?
Yes, you’ll be able to get a car after filing a Consumer Proposal. Provided you have good credit, and a steady job, and you meet other requirements.
20. What happens to my credit cards in a Consumer Proposal?
When you file for a Consumer Proposal, you will have to turn in any credit cards.
21.Will I be able to borrow money after I file a Consumer Proposal?
Your ability to obtain and use credit after a Consumer Proposal depends on convincing lenders that you have the financial maturity and ability to repay the debt; there are no guarantees—no one is required to give you credit.
22. How to increase my credit once I file a Consumer Proposal?
Here are some ways to rebuild your credit after filing a Consumer Proposal:
- Make your payments on time
- Get a secured credit card
- Get an RRSP loan
- Stay within your budgets
23. How do I qualify for a Consumer Proposal?
There are no set criteria to qualify for a Consumer Proposal. However, it usually makes sense for persons who have unsecured debts totaling at least $8,000.
24. Can I keep my personal possessions in a proposal?
You can keep all your personal property. Investments, stocks, and savings can be kept if the proposal is accepted by the creditors (by offering them a sufficient settlement payment).
25. How long does a Consumer Proposal stay on my credit report?
Equifax removes a Consumer Proposal from your credit report 3 years after you pay off all the debts included in the proposal. However, if you payout the settlement earlier than the five year term, then it can be removed earlier from your credit report.
26. What happens if I miss my proposal payments?
If you miss three months of payments and do not file an amendment to your proposal, your proposal will be in default. During difficult times, we can help you with other debt management options.
27. Will a Consumer Proposal stop a wage garnishment and collection calls?
Yes. A Consumer Proposal is a legal proceeding under the Bankruptcy and Insolvency Act that provides a stay of proceedings that immediately stops all creditor actions including most wage garnishments and calls from creditors and collection agencies.
28. Can tax deb be settled by a Consumer Proposal?
Yes. Filing a bankruptcy or a Consumer Proposal can be used to settle your tax debts with the Canada Revenue Agency.
29. Can I leave my credit card out of a proposal?
All credit cards must be surrendered, however if you have a credit card with a zero balance on it, then you can discuss with the creditor whether to leave the credit card open or freeze the account.
30. Can I pay off student loan with a Consumer Proposal?
Student loan debt can only be included in a Consumer Proposal if you have been out of school for longer than seven years. Otherwise, you will still be responsible for student loan payments if you file a Consumer Proposal.
31. What happens to my assets in a Consumer Proposal?
You keep all your assets, if your proposal is accepted as well as any pledged assets which are secured as collateral against debt (e.g., vehicle loans) with the permission of the lender and you continue to make the payments.
32. What happens if my Consumer Proposal is rejected?
Although fairly unusual, it is possible that creditors will vote to reject a Consumer Proposal. If this happens, it is important to remember your Licensed Insolvency Trustee will be on hand to support you. The first step would be for your trustee to see if any creditors would like to provide a counteroffer. If they do, your trustee will review with you to see if you could afford the higher payments and therefore worth accepting or rejecting. If there are no counteroffers, your trustee will negotiate the terms with your creditors, depending on what you are able to repay.
33. Will a Consumer Proposal effect my employment?
A Consumer Proposal won’t affect your employment.
34. How long after filing a Consumer Proposal can I get a mortgage?
Without financial assistance, you should normally pay off your Consumer Proposal completely before you take on major new mortgage debt.
If you have at least a 20 per cent down payment, you may even be able to qualify for a mortgage as soon as you complete your Consumer Proposal!
35. Can I pay off my proposal early?
Yes. While your total payments are fixed once your creditors accept the proposal, you can pay off your proposal early and begin the recovery process sooner.
36. Is bankruptcy the only way to get out of debt?
No. You can make informal arrangements with creditors on your own. But most likely that will not stop your balances from growing exponentially as the interest adds up. You can work with a credit counselling agency or a debt settlement firm. They must contact each of your creditors and try to arrange affordable monthly payments with each of them, however each creditor would have to also agree in writing not to garnish your wages, your bank account, or to sue you or to seize your property. This is much different than with a bankruptcy or a Consumer Proposal, which are regulated by federal government legislation, and can only be offered by a Trustee, who is licensed by the federal government.
37. Can I have a bank account during a Consumer Proposal or bankruptcy?
Yes. There are no restrictions on maintaining bank accounts while you are under a Consumer Proposal or are bankrupt.
38. How do I know if a Consumer Proposal is the right option for me?
We are often asked is a Consumer Proposal worth it. The best way to find out is to talk to us. If you’re not sure about your current debt situation, call us for a free consultation.
39. Do I need a lawyer to file for a Consumer Proposal or bankruptcy?
Usually not. If we feel that you have a complicated situation where you may need legal assistance, we may refer you to a lawyer to get advice.
40. Are my discussions with the Trustee confidential?
Trustees are regulated and have a duty to keep your information confidential at all times unless agreed upon by you, or if the law demands that it be disclosed in your bankruptcy or Consumer Proposal.