Eligibility and Debt
What debts can be included in a consumer proposal?
Most unsecured debts qualify, including credit cards, lines of credit, personal loans, payday advances, and unpaid tax balances. Secured debts like a car financing plan or mortgage fall under different rules if you intend to keep those assets. A Licensed Insolvency Trustee will review your specific list to confirm eligibility.
How much does a consumer proposal cost?
There is no separate upfront fee paid directly to a Licensed Insolvency Trustee for administering a consumer proposal. Trustee fees are regulated and are paid from the amount you agree to pay through the proposal. Your monthly payment depends on your income, debts, assets and what your creditors are likely to accept.
How much debt do you need for a consumer proposal?
Under Canadian insolvency law, you must generally owe at least $1,000 and be unable to meet your financial obligations as they become due. A consumer proposal is available to individuals with up to $250,000 in debt, excluding a mortgage secured by a principal residence. Whether it makes sense depends on your overall financial situation.
Can CRA debt be included in a consumer proposal?
Yes. In most cases, income tax debt owed to the Canada Revenue Agency can be included in a consumer proposal. Once the proposal is filed, collection action on included unsecured debts generally stops. Some tax situations can be more complex, so a Licensed Insolvency Trustee should review your specific CRA debt before you file.
Is a consumer proposal the same as bankruptcy?
No. Both are formal debt-relief options administered by a Licensed Insolvency Trustee, but they work differently. A consumer proposal involves making an agreed payment to creditors and generally allows you to keep your assets. Bankruptcy involves different rules around assets, income and discharge. An LIT can explain which option better fits your circumstances.
Consumer proposal vs. debt consolidation, which is better?
It depends on your financial situation. Debt consolidation combines debts into one new loan and usually requires repayment of the full balance plus interest. A consumer proposal is a formal legal process that may reduce how much you repay. A Licensed Insolvency Trustee can compare both options and explain which may be more appropriate.
What happens to my house in a consumer proposal?
In most cases, you can keep your home when you file a consumer proposal, provided you continue making your mortgage payments. Your home equity is considered when determining what creditors may accept, but unlike bankruptcy, a consumer proposal generally allows you to retain your assets while making the agreed proposal payments.
Does a consumer proposal affect my credit?
A consumer proposal will affect your credit record, but it does not remain there permanently. Generally, it is removed three years after you complete the proposal or six years after you sign it, whichever comes first. You can begin rebuilding your credit by establishing responsible borrowing and payment habits over time.
Will collection calls stop if I file a consumer proposal?
Generally, yes. Once a consumer proposal is filed, unsecured creditors included in the proposal must stop most collection action, including lawsuits and wage garnishments. Creditors should deal with your Licensed Insolvency Trustee instead of contacting you for payment on those debts, provided the proposal remains in force.
Does a consumer proposal affect my spouse?
A consumer proposal is filed by an individual, so your spouse does not automatically become part of your proposal and their credit is not directly affected. However, if you have joint debts or your spouse co-signed or guaranteed a debt, the creditor may still pursue them for the amount they are legally responsible for.
