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Consumer Proposal in Canada

A consumer proposal is the only debt settlement program backed by the Canadian government. It is essentially a deal put in place with your creditors that can reduce your debt by up to 80% while enabling you to keep your assets.

When filing a consumer proposal, you work with a Licensed Insolvency Trustee to determine how much you can reasonably afford to pay back each month. Your trustee will then negotiate with your creditors on your behalf to strike a deal as to how much this monthly payment should be. Immediate protection from your creditors including an end to any collection calls and wage garnishments is triggered as soon as you file. A highly experienced firm in filing consumer proposals, Spergel has helped over 100,000 Canadians become debt free, and we are here to help you too. Unlike other firms, you will be assigned your very own trustee to walk you through the end to end debt relief process.

What is a consumer proposal in Canada?

A consumer proposal is a form of debt relief regulated by the Bankruptcy and Insolvency Act set by the Canadian government. It is a very affordable way to gain relief from overwhelming monthly debt payments including credit card debt, payday loans, and tax debt. An excellent bankruptcy alternative, filing a consumer proposal allows you to keep your assets, meaning you do not need to worry about losing your home or vehicle. Based on the proposal you put forward with your Licensed Insolvency Trustee, you will repay your creditors a percentage of the amount owed, while receiving full clearance from your remaining debt.

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What are the advantages of a consumer proposal?

A consumer proposal offers the benefit of major debt reduction while allowing you to avoid bankruptcy – it is by far the favoured form of debt relief for insolvent Canadians. Here’s a brief overview of some of the many advantages of filing a consumer proposal:

  • Reduce your debt by up to 80% 
  • Spread your payments across five years to make them affordable
  • Keep your assets – unlike when filing bankruptcy, as long as you can make your mortgage and car loan payments, you can keep both your home and car regardless of their value
  • Simplified fixed monthly payments 
  • Avoid bankruptcy and do not worry about the severe consequences on employment and your credit score
  • Debt free within just five years
  • Freeze any interest and penalties once you have filed
  • Full protection from your creditors via a stay of proceedings
  • Avoid any surplus income to allow for any potential income or salary increases
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Why choose a consumer proposal over bankruptcy?

While we know that consumer proposals offer a number of advantages, you may still be weighing up a consumer proposal vs bankruptcy. Here are the key reasons many Canadians choose a consumer proposal over filing bankruptcy:

  • The ability to keep your assets, including any tax refunds or credits, while any non-exempt assets must be surrendered in bankruptcy
  • Consumer proposals have less of a severe impact on your credit score. It will remain on your credit report for three years, instead of six for a first time bankruptcy
  • No need to pay on surplus income, meaning your debt relief is not determined by your income
  • You do not need to report on your finances monthly, or disclose any changes to your income

How do you file a consumer proposal in Ontario?

In order to file a consumer proposal, you will need to find an experienced Licensed Insolvency Trustee – at Spergel, we have been helping Canadians gain debt relief for over thirty years. Your trustee will discuss with you your financial circumstances, and work with you to understand how much you should offer to pay your creditors, based on what you can afford to repay on your debts. They will then negotiate with your creditors to agree on an amount they wish to receive. In most cases, creditors would rather receive some repayment through a consumer proposal than none should a debtor file bankruptcy. Learn more about how to file a consumer proposal.

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Who can file for a consumer proposal?

In Canada, you are eligible to file a consumer proposal if you meet the following criteria:

  • You are unable to pay your debt at the time it is owed; and
  • Your unsecured debt is not worth over $250,000 (separate from a mortgage); and
  • You live or own property in Canada; and
  • You are either a Canadian citizen, a permanent resident, on a Canadian work permit, on a student visa, or have other immigration status.

To learn more about how other Canadians have experienced consumer proposals, take a look at our consumer proposal reviews. To see if you’re eligible to reduce your debt by up to 80% by filing a consumer proposal in Ontario, take our debt freedom calculator.

What assets can you keep when filing a consumer proposal?

In Canada, a consumer proposal is a preferential form of debt relief as you are able to keep most of your assets. This includes personal belongings, property assets, a vehicle, and RRSPs (aside from any RRSP contributions made in the last year). In Ontario, this makes a consumer proposal particularly beneficial to anyone with equity in their home, a new or second vehicle, or that wants to keep savings and investments. The only condition with vehicles and homes is that you must continue to make your monthly mortgage or car loan payments. This makes filing a consumer proposal more advantageous than the restrictions associated with filing bankruptcy.

Which debts can be included in a consumer proposal in Canada?

Debts that can be included in a consumer proposal are most unsecured debts. This is inclusive of the following types of debt:

Types of debt not included in a consumer proposal in Canada include:

  • Secured credit – including mortgages and secured car loans, although these assets may be kept if it is possible to maintain their monthly payments
  • Some types of student loan debt – including for those who have not been out of school for over seven years. An experienced Licensed Insolvency Trustee can help to determine if it is best to eliminate other types of debt to make student loans affordable, or to wait the seven years.

Why do people file a consumer proposal?

A consumer proposal can be declared for various reasons, and primarily as an alternative to bankruptcy. It may be that it is a struggle to make your monthly debt payments, or that your debts have become unmanageable and overwhelming. Often, it can take a trigger to realise that it would be very difficult to pay back your debts without support from a Licensed Insolvency Trustee. Other reasons for filing a consumer proposal include having a lawsuit pursued against you, or being persistently contacted by creditors. Life events like medical bills or going through a divorce can also have huge financial impacts in paying back debt. Learn more about the advantages of filing a consumer proposal with an experienced Canadian debt relief firm like Spergel.

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For easy to understand debt solutions including consumer proposals, contact Spergel to begin rebuilding your financial future. With locations across Canada, our experienced trustees will help you choose the best debt repayment plan for your circumstances.

Eli’s Path to Debt Freedom

After cashing out an RRSP to pay for his wedding. Eli received an unexpected tax bill. With his other debts he could not afford to pay and eventually the debt grew. CRA decided to initiate a wage garnishment. We helped Eli avoid bankruptcy with a Consumer Proposal. Debt consolidation saved Eli’s pay cheque and his Consumer Proposal taught him to plan for unexpected expenses in the future.

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Frequently Asked Questions

Q:

How long does a consumer proposal last?

A:

Generally, consumer proposals in Canada are 3 to 5 years. You may pay off your consumer proposal sooner or even make a lump sum offer. However, the maximum amount of time you have to pay off your consumer proposal is 5 years.

Q:

Consumer Proposal vs. Bankruptcy

A:

A Consumer Proposal gives you the flexibility to consolidate all your debts into one affordable fixed monthly payment. It allows you to keep all your assets, including any equity in your home and freezes any interests on your debts. You decide what you can afford that offers a fair return to your creditors – based on your current earnings, not your future ones.

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