Consumer Proposal in Canada: The Best Bankruptcy Alternative

A consumer proposal is a legally binding form of debt settlement, in line with the Bankruptcy and Insolvency Act. It is a deal that is put in place with your creditors to repay a percentage of your total amount of debt, in exchange for debt forgiveness for the remainder. For most Canadians, it can reduce your debt by up to 80% while enabling you to keep your assets. Consumer proposals must be filed with the support of a Licensed Insolvency Trustee who will support you through each step of the process, and negotiate with your creditors on your behalf. It is an ideal form of debt relief if you are struggling to make your debt payments each month and would like to stop creditors contacting you with a suitable bankruptcy alternative. At Spergel, we have a 99% acceptance rate on any consumer proposals we file, and we have been supporting Canadians file consumer proposals for over thirty years.

There are many advantages of a consumer proposal. The #1 bankruptcy alternative in Canada, it offers a huge reduction in your debt without the consequences faced in bankruptcy. Here are some of the key benefits of filing a consumer proposal over other methods of debt relief:

• Reduction in your debt of up to 80%
• Debt free within three to five years
• Keep your assets, including your home, equity, and car
• Straightforward, affordable monthly payments that are fixed
• Freeze any interest and penalties on your debts
• Avoid bankruptcy and its consequences on your credit score and employment
• An end to collection calls from your creditors and legal action like wage garnishments, placement of liens, and bank account freezes via a stay of proceedings
• Avoid surplus income should you receive salary increases or additional income

As with any form of debt relief, there are some short-term disadvantages of filing a consumer proposal. If you think a consumer proposal may not be the right form of debt relief for you, a Licensed Insolvency Trustee will support you in finding a more appropriate option for your circumstances.

The first step in filing a consumer proposal is to find an experienced Licensed Insolvency Trustee to support you on your debt relief journey. As the only professionals in Canada legally able to file all forms of debt relief, they can cover all of your available options. At Spergel, we have been helping Canadians gain debt relief for over thirty years. This is the typical process for filing a consumer proposal:

• Your trustee will review your financial circumstances and debts with you to determine if a consumer proposal is the best option for you, or if an alternative like bankruptcy or debt consolidation would be more appropriate.
• Once you choose to file a consumer proposal, you will work together to determine how much you should offer to pay your creditors, based on what you can realistically afford. Payment plans are flexible provided they can be completed in a timeframe of up to five years. 
• Your trustee will negotiate with your creditors on your behalf to have your proposal accepted. At Spergel, we have a 99% acceptance rate on any consumer proposals we file. 
• As a consumer proposal is a legal debt settlement in line with the Bankruptcy and Insolvency Act, it offers full protection from your creditors via a stay of proceedings. This means creditors can no longer chase you for debt via collection calls or threaten legal action.
• There is much less you need to do with a consumer proposal than a bankruptcy – you simply need to make your agreed monthly payments on time, and attend two credit counselling sessions.
• Once you have made your consumer proposal payments, you will receive a Certificate of Full Performance, which indicates completion. From this point, you are free of your debts and can enjoy life after a consumer proposal. Learn more about rebuilding your credit.

See how you can reduce your debt by up to 80% when filing a consumer proposal by using our debt repayment calculator. At Spergel, we have helped Canadians file consumer proposals for over thirty years, and we are here to help you too on your journey to a fresh financial future.

A consumer proposal is an ideal form of debt relief when alternatives do not work for you, including debt consolidation loans, debt management plans, and bankruptcy. Compared to bankruptcy, a consumer proposal is a very affordable debt relief solution. Here are the key reasons many Canadians choose filing a consumer proposal over bankruptcy to reduce their debt:

• To keep assets you might otherwise need to surrender in a bankruptcy, including your home, vehicle, and tax refunds.
• To avoid surplus income payments – with a consumer proposal, the cost of debt relief is not determined by your income.
• To repay what you can on your debts. 
• To secure a credit card more easily than when filing bankruptcy.
• To pay off a consumer proposal early – bankruptcy has an obligatory length and cannot be completed any faster.
• For a less significant impact on your credit score than bankruptcy – consumer proposals remain on your credit report for three years, instead of six years with bankruptcy.
• No need to report your finances each month, or disclose changes to your income, unlike with bankruptcy.

Take a look at our consumer proposal comparisons with other forms of debt relief, including consumer proposal vs debt consolidation loans.

One of the many advantages of filing a consumer proposal is that you are able to keep your assets. This includes the following: 

• Personal belongings
• Property
• Vehicles
• RRSPs (aside from any RRSP contributions made in the last year)

This makes a consumer proposal particularly beneficial to anyone with home equity, a new or second vehicle, or that wants to keep their hard earned savings and investments. This is not the case when filing bankruptcy. The only condition with keeping your property and vehicles when filing a consumer proposal is that you must continue to make your monthly mortgage or car loan payments. They are secured debts and cannot be reduced or cleared when filed in a consumer proposal.

As with all forms of debt relief, a consumer proposal will affect your credit score for a period of time. When you file a consumer proposal, a note will be placed on your credit report. Once you have completed your consumer proposal, this note is removed by Canada’s two primary credit bureaus:

• TransUnion will remove it 3 years after completion, or 6 years after you filed.
• Equifax will remove the note 3 years after completion.

Most individuals notice an improvement in their credit score once they have completed their consumer proposals, even before the note is removed. If you are already struggling with your debt and overdue bills, your credit score is likely already negatively affected by late or missed payments. Drastically reducing your debt with a consumer proposal is often the best step you can take to begin to rebuild your credit. Most often, individuals can rebuild their credit score enough to secure a mortgage or low-interest loan within two years of completion by following the advice of their Licensed Insolvency Trustee.

In order to file a consumer proposal, you first need to appoint a Licensed Insolvency Trustee. They are the only professionals in Canada legally able to file all forms of debt relief. You should be very wary of anyone else claiming to be a debt consultant, or who may be unlicensed, as they will not be able to legally reduce or eliminate your debts. Initial consultations with any reputable Licensed Insolvency Trustee will be free – you should not need to pay for these. At Spergel, our experienced Licensed Insolvency Trustees offer the following:

• Free consultations
• Meetings with you as often as you need
• A review of your financial situation and an explanation of all your debt relief options
• Affordable debt relief solutions
• A 99% acceptance rate on any consumer proposals we file