A consumer proposal is an alternative to filing a bankruptcy.  It is a negotiated debt settlement with all your creditors, with the help of a Licensed Insolvency LIT/Administrator. The magic of a consumer proposal is that once approved, it is binding on all your creditors, even if some of them don’t agree. And, as soon as you start the process, there is a legal Stay of Proceedings that gives you immediate legal protection from your creditors or collection agencies and all interest charges immediately stop.

A consumer proposal can result in savings of as much as 70-80% however, the consumer proposal’s cost is based on your personal situation.

A successful Consumer Proposal lets you keep control of your assets once your creditors agree to your proposal. This federally licensed program allows you to pay back only a small portion or what is owed and immediately stops all interest charges. The program allows you to develop an affordable creditor repayment plan that is binding on all creditors – including the CRA.
 

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How Much Do I offer My Creditors in a Consumer Proposal?

The consumer proposal is a negotiated settlement between you (the debtor) and your creditors with the assistance of a Licensed Insolvency LIT/Administrator. Our golden rule of a successful consumer proposal is that the cost of a consumer proposal must work for both the debtor and the creditor.

For creditors to accept your proposal, they will want to receive more than they would recover if you file bankruptcy or the terms of the proposal offer them some other sort of “benefit”. (e.g. Lump Sum offers to settle upfront vs over a longer period of time)

The needs and wants of the creditors are considered along with the affordable and reasonable payment obligations of the debtor – a mediated fair settlement for all.

What Payment Terms are in my Consumer Proposal?

Your proposal amount can be paid over a period of up to 5 years, interest-free.

Most people choose a fixed monthly payment, spreading their settlement offer over three to five years. However, lump sum payments or adjusting your repayment schedule to match your pay period are options.

Consumer proposals can also be paid off early at any time. So, if you receive and inheritance, lottery winnings, or a better paying job, you can accelerate your payments.

Once your debt proposal is accepted you make one, single monthly payment to the LIT/Administrator. This makes a consumer proposal a lower-cost alternative to a debt consolidation loan as the loan will continue to charge interest and you will have to pay 100% of the debt back.

Can A Secured Creditor Be Included In My Consumer Proposal?

Consumer proposals include all unsecured creditors.  Bank debt, credit card debt, lines of credit, CRA Tax Debt, are all types of unsecured debts that are written off under a consumer proposal.

Secured creditors are those that hold some type of “secured asset” as collateral. Think vehicles or houses.  These types of creditors are not compromised and do not generally participate in a consumer proposal.  If you want to file a consumer proposal, and if you can afford it, you can continue to make payments to your secured creditors.  So, if you want to keep your car, you just have to keep making the payments.

Under a consumer proposal, secured debt will continue as though you never filed a consumer proposal. If you continue to make your payments to these creditors, you can keep the asset (you’re your house or car).  If you can’t afford to continue with the secured payments, then you can include these debts in your consumer proposal if there is a shortfall.

Can I File A Consumer Proposal If My Wages Are Being Garnished?

Absolutely! If your wages are being garnished, the sooner you start a proposal the better. A consumer proposal is a very powerful consumer protection tool, and all garnishments immediately stop upon filing.

Additionally, all other legal actions stop when a consumer proposal is filed. That means if your creditors are garnishing your salary or bank accounts, this will stop immediately if you file a proposal. The protection of your assets and wages continues if your creditors accept your proposal.

Who Can File a Consumer Proposal?

In order to file a consumer proposal in Canada, you must be:

• Insolvent (not able to make debt payments when due)
• A resident of Canada
• Not a corporation
• Age of Majority (over 18)
• If your debts below $250,000,

Then you can consider filing a consumer proposal. 

If your debts are over $250,000 you can still file a Proposal, but it is not a Consumer Proposal. This is called a Division 1 Proposal, and it is slightly different then a Consumer Proposal. Division 1 Proposals are options for businesses and individuals who can use this process to shed some of their debt without declaring bankruptcy. 

What Does a Consumer Proposal Cost?

The first consultation is free with C.E. Craig & Associates Inc. At this first Consultation we will go over our personal situation and develop a plan that will work for you.

At C.E Craig & Associates Inc we will sit down with all debtors who are seeking advice. We can meet you in person, over the phone or on video link (see What Info Do I Need for First Meeting with my LIT).

If you decide to file a proposal, we will help you set a proposal payment you can afford and one we think that the creditors will accept.

The amount you will have to repay in a consumer proposal will depend on three factors:
 

• Your income and any surplus income you would pay in a bankruptcy;
• Assets you own that would be surrendered in a bankruptcy, and
• Who you owe money to because different creditors expect different consumer proposal percentage recoveries.

While every situation is unique, a consumer proposal can commonly reduce principal repayment to as low as 20% of the original amount owing, or lower depending upon  your personal situation.

Watch our video below to understand how the cost of a consumer proposal is typically calculated when you meet with a Licensed Insolvency LIT/Administrator.

What Fees Are Associated With Filing A Consumer Proposal?

Because the consumer proposal process is federally legislated, the fees all Licensed Insolvency LIT/Administrators charge are outlined under the Bankruptcy and Insolvency Act.

At C.E. Craig & Associates Inc. the initial filing fee that we charge is $160 to begin the process.  The creditors have 45 days to consider your offer, and in the meantime, you do not have to make any payments to them and interest on your debts stops accruing.  If your creditors accept the offer (which they do the vast majority of the time) the deposits you have paid to us form part of your offer to your creditors.  You won’t owe anymore fees – you just have to pay the offer to creditors each month.

 Example of a Consumer Proposal Costs:

Each situation unique, but consider this example.

Consider that you have $35,000 in consumer debt.

Lets assume you budget will allow you to make debt payments of $200 per month to your creditors. Your Licensed Insolvency LIT/Administrator can help you prepare an offer to your creditor of $200 per month for 60 months, totaling $12,000.  You make a deposit of $200 to the LIT/Administrator when you file the proposal, and an additional $200 in the second month after filing.  
Your creditors have 45 days to vote on the terms of the proposal you have put forward.  After 45 days, you will know if your creditors have accepted your offer or not.  If they say yes, which is the case 90% of the time, then you have already made your first two payments towards the proposal.

As LIT/Administrator under the Consumer Proposal, C.E. Craig & Associates Inc. will collect your payments and then issue a dividend to your creditors.  Our fees are deducted from the amounts you paid before we distribute dividends to creditors  - so there is no additional fee to you for our services. You simply make your monthly proposal payments and we do the rest.

When And How is the Proposal Approved?

Your LIT/Administrator will put a proposal together for you and send it to your creditors. The creditors have 45 days to look over the proposal and to vote on whether they will accept it.  The creditors may request that a meeting be held to discuss the proposal in more detail.

As long as a majority of the creditors who vote on the proposal accept it within the 45-day period, then it is deemed accepted by all your creditors

How Do I Deal With My Creditors After The Proposal Is Accepted?

After your proposal has been filed, you should no longer be dealing with your creditors or making payments to them. Your creditors should be dealing directly with your Administrator/LIT, C.E. Craig & Associates Inc.

If you are contacted directly by a creditor, you should refer them immediately us to ensure that they have been made aware of the proposal. 

What About Creditors Who Are Suing Me?

The court action against you is stopped once a proposal is filed. The creditor is treated like any other creditor in the proposal even if they have received a judgement against you.

What If My Wages Are Being Garnished?

Garnishment of your wages, another type of court action against you, is also stopped immediately once you file a Consumer Proposal. As your LIT, we will notify the garnishing creditor, the courts, and your employer to cease any wage garnishments. 
This is true even for all creditors – even Canada Revenue Agency tax garnishments.

Can I Keep Making Payments on My Car or Mortgage?

A consumer proposal is made to you unsecured creditors.  If you have secured creditors,  you may wish to stop making payments to them prior to filing a proposal so they are forced to act under the terms of their security. Any shortfall on their security can be included in your proposal.

If you want to keep a secured asset, such as  your house or your vehicle, you must continue to make payments to that creditor outside of the proposal.

Before filing a proposal, it is a good time to consider all your payment commitments and if is prudent to keep making payments. You are encouraged to look at all your secured debts and determine if it is in your best interest to continue to make these payments.

What If My Financial Circumstances Change

And I Can No Longer Afford The Payments?

A consumer proposal lasts 5 years (maximum) and things can change in that time.  If you think your income will increase, or if you expect a cash influx form inheritances or increased employment, your payments obligations under a consumer proposal will not change.  Increased income is a bonus to you.  You can always choose to pay off your proposal more quickly (in a bankruptcy, what you pay is based on what you earn (income) or acquire (assets such as inheritances – 100% of which is payable to your creditors in a bankruptcy)

On the other hand,  if your financial circumstances change for the worse under a proposal, you may defer up to two payments during a consumer proposal. But, if you miss three payments, the proposal automatically fails. 
Alternatively, the LIT/Administrator can ask your creditors to accept an amended proposal based on your new circumstances. But this has to be accepted by the creditors by filing an amendment.

If your proposal is not successfully amended, your credit proposal is deemed annulled. Once annulled, your total debts return, and your creditors may begin legal action against you again. You do not, however, automatically become bankrupt.

You always opt to file a personal bankruptcy at any time if you proposal payments become unaffordable or you cannot reach a compromise with your creditors.

What About Utility Companies?

A utility company cannot cut off service if a Consumer Proposal is filed even if you owe them at the time of filing. They could elect, however, not to supply further services unless an arrangement is made for payment for future services.

How will a Consumer Proposal impact my credit score?

The process of filing a Consumer Proposal is intended to help you settle your debts without the long-term consequences of a bankruptcy.  With that said, there will be some immediate impacts to your credit score which you should be aware of. These will affect your ability to borrow money for the first few years after your claim.

A Consumer Proposal is recorded in your credit bureau. This information is available to credit grantors and may affect your ability to get credit in the future. However, if you have currently missed payments to your creditors or find yourself in collections already, this information is most likely already reflected on your credit rating.

Filing a Consumer Proposal is generally reported on your credit rating for shorter period, (usually 3 years) and usually considered a better rating than if you file for bankruptcy (reported for 6 years under a bankruptcy).

Eliminating your debts is the best option to improving not only your credit score, but also improving your true credit worthiness.

For three years after your final payment, a note will appear on your credit report indicating that you entered into an arrangement to settle your debts. This will make it more difficult to secure new loans, credit cards, and other forms of financing. It may cause lenders to require a co-sign to issue new debt or mean you will be charged higher interest rates if you do get approved.

The good news is, that the affect on your credit score is less negative that a bankruptcy.  And there are things you can do during and after the filing of your proposal that will improve your credit score. These include:

• continuing to make payments to other credit granters that report to the credit bureaus during the proposal
• staying current with ongoing credit granters throughout the proposal
• applying for secured credit cards or other approved sources of credit during the proposal

Under a proposal you can accelerate your payments.   the sooner you complete your proposal payments, the sooner your credit score will begin to improve.

What Are My Duties Under A Consumer Proposal?

You must provide the LIT/Administrator with accurate financial information so that a realistic and feasible proposal may be filed on your behalf. You need to comply with the proposed payments, or your proposal may be annulled.

If your proposal is annulled, your creditors will have a claim against you for the amount owed to them, minus the payment received in the Proposal. Your creditors may be able to continue their legal actions against you.

Why Choose C.E. Craig & Associates Inc?

At C.E. Craig & Associates, we have helped thousands of people file Consumer Proposals -  Individuals from Nanaimo, Victoria, and many other locals on Southern Vancouver Island.  We have the professional expertise and experience to help.

The vast majority of proposals we have filed have been accepted by creditors. – saving thousands of dollars for debtors in interest payments alone.  We find that our Consumer Proposals are accepted by the creditors because we understand what creditors will accept in a settlement offer. And creditors know that a Consumer Proposal offers more to them than they would get in a personal bankruptcy.

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