Proposal FAQ

These answers to frequently asked questions are provided as general information only. Each individual’s situation is unique. Call us at 1-800-665-9965 for a free, no obligation, and confidential consultation.    

Consumer Proposal and Other Debt Solutions

Yes, you can but it depends on several factors including your income, job stability, collateral and debt level. If you cannot reach the debt ratio required by financial institutions, they will likely not consolidate your debt. In that case, we recommend contacting our office to discuss your options.
A consumer proposal administrator at one of our offices will assist you in putting the proposal together. Upon receipt of your proposal, your creditors have 45 days to accept the proposal as filed or request a meeting of creditors to vote on the proposal. If a simple majority (50.1%) of your creditors in dollar value who have proven their claim by the end of the 45 day period accept the proposal, all of your unsecured creditors are bound by the terms of the consumer proposal.
According to the Bankruptcy and Insolvency Act, a person with $1,000 in debts can declare bankruptcy if they are unable to pay their debts on time. In practice, when someone has less than $5,000 in debts other solutions may be considered such as a proposal to creditors.
To be eligible for a consumer proposal your unsecured debts must not exceed $250,000, excluding your mortgage. Further, you must also be able to prove to your creditors that you can reasonably meet the terms you are presenting to them which the administrator of the proposal will assist in demonstrating. For a consumer proposal to be acceptable to your creditors, it must generally give the creditors a greater return or repayment of their outstanding accounts than they would receive in a bankruptcy.
The co-signer is still responsible for the original terms of the loan. The co-signor’s obligation will be reduced by the amount of any dividend received by the creditor from the consumer proposal. If the co-signor pays the debt which they guaranteed then the co-signor assumes the status of the creditor in your proposal after proving to the administrator of the consumer proposal that the debt had been paid.
Most debts, but not all are discharged through the filing and completion of a consumer proposal.
Examples of debts not discharged are:

  • Secured debts (e.g. Mortgage or car loan);
  • Child support, maintenance, alimony
  • Court fines, penalties and traffic offences
  • Debts obtained by fraud or fraudulent misrepresentation
  • Student loans, if less than seven years since leaving university or college
  • Civil claims arising from personal or sexual assault
What is a secured creditor?
A secured creditor is a lender to whom you have pledged one of your assets as collateral to obtain a loan or mortgage. For example, when you purchase a home, it is used as collateral for the mortgage. Or if you obtain a loan, the vehicle you own may be taken as collateral against the loan.
Quite often, when you obtain a loan directly from a secondary lender (high risk) such as Citifinancial or Easy Financial they will grant the loan but also take collateral on a vehicle, if you have one, and your household furnishings. Generally, secured creditors are excluded from a consumer proposal and if you wish to retain the collateral for the loan they provided then you will continue to make payments according to the original terms of the loan. Other terms may be offered in a consumer proposal but the secured creditor is not obliged to accept the terms offered if they are prepared to recover the collateral for the loan. One word of caution: If you decide to retain financed assets and then decide later, after filing the consumer proposal, that you would like to return the asset, the creditor may have to be repaid all amounts due. Finally, no debtor should make arrangements to reaffirm a loan and retain an asset until the secured creditor has filed a claim with the Administrator of the consumer proposal and the security is valid. If you are unsure whether a creditor has collateral against your assets you can do a Personal Property Registry search (available online) or contact our office for assistance.
Bankruptcy and consumer proposals are two ways of stopping seizure proceedings. Contact us to discuss the specifics and for advice. These answers to frequently asked questions are provided as general information only. Each individual’s situation is unique. To speak to someone now call us at 1-800-665-9965 for a free, no obligation, confidential consultation.

Benefits of a Consumer Proposal

Filing a consumer proposal can be an important step towards getting out of debt and regaining control of your financial life.

A consumer proposal allows you to consolidate your debt into a single manageable payment, and offers several advantages:

  • No interest or additional fees
  • Flexible payment periods of up to 60 months
  • Allows for lump sum payments at any time, so you can pay the consumer proposal off sooner
  • Offers protection for assets like your home, automobile, or investments in an RRSP, RESP or TFSA
  • Avoids a lengthy period in bankruptcy, allowing you to rebuild your credit rating fastee
A consumer proposal can help you avoid the stigma of bankruptcy while still providing protection from your creditors, and is often viewed more favourably than bankruptcy in background checks by potential employers or landlords.

It can be used to resolve a single debt, or multiple loans – including ‘cash advance(s).’

Within forty-five (45) days of filing a consumer proposal, you will know whether your creditors have accepted the terms offered.

Payments are usually a fixed amount based on your current income, and will not be affected by salary or wage increases, or bonuses. Potential inheritances are also not affected by the filing of a proposal.

If you own assets like a home or automobile, or investments in an RRSP, RESP or TFSA, a consumer proposal can help you keep them. And if you are the owner of a corporation, a consumer proposal allows you to continue to act as a Director.

It is important to note that a failed consumer proposal does not automatically result in bankruptcy.

To discuss whether a Consumer Proposal may be right for you, contact us at (800) 665-9965.

Consumer Proposal Cost

Our fees are limited by the Bankruptcy and Insolvency Act and by our professional code of ethics. The Bankruptcy and Insolvency Act provides for maximum fees for a consumer proposal as follows,

  • $100.00 paid to the Superintendent of Bankruptcy for the filing of the consumer proposal.
  • $750.00 on the filing of the consumer proposal with the Official Receiver.
  • $750.00 on the acceptance or deemed acceptance by the Bankruptcy Court.
  • 20% of any dividend sent to the creditors.
  • $85.00 for each credit counselling session. Two credit counselling sessions are required for the consumer proposal.

The fees in a consumer proposal are usually paid from the monthly payments offered by you to your creditors under the terms of your consumer proposal. When the creditors of considering the proposal for acceptance they are voting based on the amount they will be receiving after administration expenses of the consumer proposal. The creditors generally understand that the administration expenses are paid first before any dividend is paid to the creditors.

Effects of Filing a Consumer Proposal in Ontario

No. In fact, a consumer proposal in Ontario prevents your creditors from garnishing your wages and protects your income to ensure a reasonable standard of living and an orderly retirement of your debt.
Your employer was already contacted by your creditor by way of a garnishment order. In order to stop this wage garnishment, we have to notify your employer in writing of your filing of a consumer proposal otherwise your employer could be held liable for not enforcing the Garnishment Order of the Court. To avoid this, consider filing a consumer proposal before one of your creditors garnishes your wages.
If you are in default with the payment terms of your consumer proposal, your consumer proposal will be annulled and your creditors can resume their legal collection actions.
Tax refunds are not affected unless specifically stipulated in the a consumer proposal and will continue to be sent to you by the government.
If you finished school more than seven years ago, you will not have to pay off your student loan because it becomes a dischargeable debt upon the completion of your consumer proposal. Otherwise you will have to continue paying off your loan.
Income taxes owed before the date of filing the consumer proposal can be included and are almost always dischargeable, therefore you will not have to pay income tax debt prior to the filing of the proposal if the proposal is accepted by the creditors.
You retain control of your assets in a consumer proposal unless there is a specific provision(s) in the consumer proposal stipulating otherwise.
When you have completed your obligations under the terms of the consumer proposal, you will receive a Certificate of Full Performance from the Administrator of your consumer proposal. You are then relieved of any further obligation to pay the unsecured creditors that had been notified of your filing a consumer proposal.
It varies by credit agency. In general, your credit score will be affected for 3 years after you have completed the terms in your consumer proposal. You may be able to rebuild your credit earlier, though.

Our experts can show you how to fix your credit. See Rebuilding your Credit.

My Assets After Filing a Consumer Proposal

You keep control of your assets when you file a consumer proposal unless a specific asset(s) is mentioned in the consumer proposal.

My Spouse, Partner, Family in Consumer Proposal

A party can only be held responsible for repayment of a debt if they have signed a contract, loan agreement or credit card application. If your spouse or partner never signed a contract or requested a credit card, they cannot be held responsible for the debt. In Canada, marriage alone does not make you responsible for your spouse’s debts.

With respect to credit cards, there are two ways in which the second party can be held responsible for repayment of the debt. One is where the individual actually requests a secondary card and signs an agreement saying they accept full responsibility for current and future debt. The other is where the credit card company sends a card out in the second individual’s name with the primary cardholders number and the second individual actually signs and uses the card. Use of the card will hold the secondary person responsible for any past and or future debt.

Should you wish to remove your spouse or partner from your credit card or loan document, you must get confirmation in writing from the financial institution. If you do not obtain written confirmation, there is no guarantee the institution has removed the second party from their records. Also, responsibility for debt between spouses as listed in a separation or divorce agreement does not legally bind a financial institution or creditor. Unless you obtain concurrence to the division and re-assigning of responsibility of debt from the creditor, they have the right to pursue anyone who signed on the debt.

A consumer proposal does not relieve a debtor of any support obligations.