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How long does a consumer proposal last?

Posted on 15 October 2022

Written by Alan Spergel

If you are wondering ‘how does does a consumer proposal last?’, you probably want to know how long it will take to successfully complete a consumer proposal, or indeed how long a consumer proposal will remain on your credit report. Consumer proposals are for many an excellent form of debt relief, helping you to reduce your overall debts by up to 80%. For many, it is much needed to enable you to get on top of your finances, without facing overwhelming debt. In this article, we share how long does a consumer proposal last, and discuss all you need to know about the impact of a consumer proposal on your credit report.

What is a consumer proposal?

If you have been struggling with unmanageable debt for some time, a consumer proposal may seem like an ideal solution, even if it does take some time. A consumer proposal is a legal form of debt relief, reinforced by the Bankruptcy and Insolvency Act. It is a formal type of debt settlement, that is legally backed by the Canadian government. Filing a consumer proposal is the process of putting forward a manageable monthly payment to your creditors, which can reduce your debt by up to 80%. Consumer proposals have a number of advantages, including the ability to keep your assets unlike when 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 also 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 a 99% acceptance rate on any consumer proposals we file, and 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 does a consumer proposal affect your credit score?

When it comes to ‘how long does a consumer proposal last?’, it may be that you can repay your proposal in a year. That said, while consumer proposals are excellent for reducing your debts, they do have an impact on your credit score. A credit score is a measure of how well an individual meets their financial commitments, judged by their payment and credit history. Canada has two primary credit bureaus – Equifax and TransUnion – who measure your credit score on a scale. Equifax, for instance, has a scale of R1 to R9. To receive a score of R1, you will be making your payments in full and on time; a R9 score on the other hand means you will have filed for bankruptcy. When you file a consumer proposal, you will receive a R7 rating. Both Equifax and TransUnion will remove a consumer proposal from your credit report three years after you have paid off your debts, or six years from the date the consumer proposal was first filed – whichever is sooner. Learn more about how long a consumer proposal stays on your credit report. Ultimately, the faster you can pay off your consumer proposal, the sooner you can begin to rebuild your credit score.

How long does a consumer proposal last?

If you are interested in filing a consumer proposal, the chances are you want to know how long a consumer proposal will take you to complete. This is dependent on the time taken to complete the following steps:

  • Finding a Licensed Insolvency Trustee. Licensed Insolvency Trustees are the only professionals legally able to file all forms of debt relief in Canada. As consumer proposals fall in line with the Bankruptcy and Insolvency Act, consumer proposals must be filed by a Licensed Insolvency Trustee. Trustees are also mediators between you and your creditor, advise you on the best actions to take for your finances, and negotiate with your creditors on your behalf.
  • Having your consumer proposal approved. Once your Licensed Insolvency Trustee has put forward your proposal, your creditors have 45 days from filing to reject the consumer proposal if they see fit by requesting a meeting. If this time period passes without a meeting request, your consumer proposal will be considered accepted by your creditors. If not, a meeting of creditors will be required to consider and vote on the consumer proposal.
  • Making your consumer proposal payments. Once your consumer proposal has been approved by either your creditors or even the court, the rest is now down to you. You must make your payments directly to your Licensed Insolvency Trustee, in full and on time. Your Licensed Insolvency Trustee will help you with your payment schedule, and will send on your payments to your creditors.

Each of these steps can determine the overall time your consumer proposal may last. The quicker you complete each of these steps, the quicker your consumer proposal will be completed. Consumer proposals are then removed from your credit report earlier than bankruptcy, roughly three years after you complete your consumer proposal.

Should I file a consumer proposal?

If you are looking to reduce your unsecured debt significantly, but would like to retain your assets 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:

  • You only pay what you can afford, not the amount being demanded by your creditors
  • A stay of proceedings is generated when you file, offering full protection from creditors including collection calls, wage garnishment, and bank account freezes
  • No more interest charges
  • Simple monthly repayments
  • You can keep your assets
  • You do not have to pay for a Licensed Insolvency Trustee; instead, fees are factored into what your creditors receive

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.

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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