NEW STUDY: DEBT & MENTAL HEALTH

How long does a consumer proposal last?

Posted on 22 May 2024

Written by Alan Spergel

When facing unmanageable debts or financial challenges, a consumer proposal can be a lifeline, offering a structured pathway to debt relief and a fresh financial future. Consumer proposals can reduce your debts by up to 80%, and here at Spergel (‘the get rid of debt’ people), we have a 99% acceptance rate on any consumer proposals we file. If you’re wondering ‘how long does a consumer proposal last?’, you likely want to understand the duration of a consumer proposal, and how long it will impact your financial situation. In this article, we’ll delve into the timeline of a consumer proposal, exploring how long you can expect it to last, its impact, and the process itself.

What is a consumer proposal?

Before exploring the duration of a consumer proposal, let’s understand how a consumer proposal may be able to help you. A consumer proposal is a legal form of debt settlement, that is a formal agreement made between an individual and their creditors, facilitated by a Licensed Insolvency Trustee.  Filing a consumer proposal is the process of suggesting a manageable monthly repayment figure to your creditors, and can reduce your debt by up to 80%. Consumer proposals have a number of advantages, including the ability to keep your assets and avoid filing bankruptcy. You work with a Licensed Insolvency Trustee to determine a reasonable amount to propose, and they will negotiate with your creditors on your behalf. When filed, consumer proposals trigger a stay of proceedings, which means you are automatically protected from your creditors who are no longer able to contact you or pursue any legal action. At Spergel, we have helped over 100,000 Canadians become debt free. Unlike other firms, you will be assigned your very own trustee to walk you through the end to end debt relief process.

How does a consumer proposal work?

When filing a consumer proposal, you will help to determine the amount you will repay your creditors each month over a period of up to five years. The consumer proposal will indicate the terms you need to make, including the amount to pay, how often it must be paid, and any other conditions. All of your interest-free payments will be made to your Licensed Insolvency Trustee, who will then pass this on to your creditors. Your payments will be affected by the amount of debt that you owe, your income, any assets you may own, and the period of time over which you can manageably make your payments. Consumer proposals must be completed within five years, and usually take between one and five years to complete. It is possible to complete your consumer proposal quicker than the original agreement if you have an increase in income or a change in circumstances and wish to pay it off sooner.

How long does a consumer proposal last?

In short, a consumer proposal could last from a minimum of sixty days to a maximum of five years. The duration is dependent on a few factors, including your payment structure across this period of time:

  • The amount of debt you have: what you’re including in your consumer proposal can impact how long a consumer proposal takes. Larger debts might need a longer repayment period to ensure your monthly payments remain manageable.
  • Your income and expenses: a realistic repayment plan will be based on your ability to make manageable monthly payments while covering your essential living expenses. 
  • The acceptance of your creditors: how willing creditors are to accept your proposed repayment terms can affect the length of a consumer proposal. While most creditors will likely be open to negotiation, some might request changes, which can in turn extend the repayment timeline. 

Each of these steps will determine the overall time your consumer proposal might last. Most consumer proposals will last between three to five years in Canada. Once all your consumer proposal payments have been made and the terms met, you will then be discharged from your consumer proposal and free from your unsecured debts once and for all. Consumer proposals are then removed from your credit report earlier than bankruptcy, roughly three years after completion. At Spergel, our Licensed Insolvency Trustees will support you with life after a consumer proposal, and help you to rebuild your credit score

Should I file a consumer proposal?

If you’re looking to reduce your unsecured debts significantly, but would like to retain your assets (i.e. home and vehicle) and income, a consumer proposal is the best form of debt relief for you to file. A reputable Licensed Insolvency Trustee is best placed to advise you on your actions, be it a consumer proposal or another form of debt relief. Consumer proposals have the following advantages:

How long does a consumer proposal last? FAQs

Here are some of the most common questions we receive about the duration of a consumer proposal: 

What is the downside of a consumer proposal?

While a consumer proposal offers significant debt relief and a structured path to financial recovery, it’s important to consider its potential downsides too. One downside is that a consumer proposal will have a negative impact on your credit score. Similar to bankruptcy, a consumer proposal is a formal debt solution that will be recorded on your credit report for a specified period, typically lasting several years after completion. During this time, securing new credit or loans may be more challenging, and you may face higher interest rates. Additionally, while a consumer proposal offers a bankruptcy alternative, it still involves making regular payments towards your debts, which can impact your budget and financial flexibility. It’s essential to weigh the benefits and drawbacks carefully and consult with your Licensed Insolvency Trustee to explore all available options and make an informed decision based on your individual financial circumstances.

How long does a consumer proposal stay on record?

A consumer proposal remains on your credit report for a specified period, typically lasting for three years after the completion of the proposal. During this time, your consumer proposal will be visible to lenders and may impact your ability to secure new credit or loans. While having a consumer proposal on your credit report can make borrowing more challenging, it’s important to note that its impact diminishes over time. After the three-year period, the consumer proposal will be removed from your credit report, allowing you to rebuild your credit history and regain financial stability. It’s essential to practise responsible financial habits during and after the consumer proposal to demonstrate creditworthiness to lenders and improve your credit score over time.

How long is the average consumer proposal?

The duration of an average consumer proposal typically ranges from three to five years. The specific length of a consumer proposal, however, varies depending on individual circumstances, such as the amount of debt, income, expenses, and creditor acceptance of the proposed repayment terms. Your Licensed Insolvency Trustee will work closely with you to negotiate a repayment plan that is manageable and realistic based on your financial situation. While a consumer proposal may last several years, it offers a structured and manageable path to debt relief, allowing you to regain control of your finances and work towards a fresh financial start.

What happens when a consumer proposal is finished?

When a consumer proposal is finished, the individual is granted a discharge, marking the successful completion of the debt repayment plan. This discharge formally releases the individual from the debts included in the consumer proposal, providing them with a fresh financial start. The consumer proposal is removed from the individual’s credit report three years after its completion, allowing them to rebuild their credit history. With the burden of debt lifted, individuals can focus on managing their finances responsibly and working towards their financial goals. It’s important to continue practising healthy financial habits and budgeting effectively to maintain financial stability in the future.

What is the success rate of a consumer proposal?

The success rate of a consumer proposal is generally high, with many individuals achieving significant debt relief and successfully completing their repayment plan. At Spergel, the ‘get rid of debt’ people, we have a 99% success rate on any consumer proposals that we file. Consumer proposals are widely regarded as an effective debt resolution option for those facing financial challenges. The success of a consumer proposal depends on various factors, including the individual’s commitment to making regular payments, the negotiated terms of the proposal, and the support and guidance provided by their Licensed Insolvency Trustee. By working closely with a trusted professional and adhering to the terms of the consumer proposal, individuals can often achieve their goal of becoming debt-free and regaining control of their finances.

While a consumer proposal can last a while, for many Canadians it is the method of debt relief that makes the most sense. At Spergel, our experienced Licensed Insolvency Trustees have helped over 100,000 individuals gain debt relief, and we are here to help you too. Book a free consultation today – you owe it to yourself.

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Alan Spergel

Alan Spergel

Alan Spergel is the founder and President of Spergel. A leader in our industry, he is also a former chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) and has served on Canada's Superintendent of Bankruptcy Management Board. He actively supports multiple charities, ensuring that Spergel gives back to our communities and has recently been appointed as Chairman of the Board of the Humber River Hospital Foundation. Outside of the boardroom, you can find Alan playing golf, tennis, or skiing and enjoying quality time with his grandchildren.

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