Making a Consumer Proposal is one of the best ways Canadians can consolidate and cut their debt. Read on to learn about key benefits to Consumer Proposal debt consolidation, how the Consumer Proposal process works in BC, and the steps involved in starting and completing your Consumer Proposal.
How Does a Consumer Proposal Work?
A Consumer Proposal is a legal way to consolidate your debt and cut the total you need to repay to your creditors. Combining all your debts into one interest-free payment, your Consumer Proposal allows you to offer to repay what you can afford, with the remaining unpaid balance legally forgiven by your creditors.
- Most people will offer a Consumer Proposal to repay an amount in the range of 20-50% of their total debt, by way of monthly payments for a period of up to 60 months.
In addition to cutting your debt down to what you can afford to repay, some significant advantages to a Consumer Proposal include:
- Virtually all types of debt can be settled, from credit cards to payday loans, student loans to taxes to CERB overpayments and more.
- Your debts are frozen, so balances are no longer a moving target with interest charges continuously being added.
- Creditors who have been pursuing you in collections or even putting through a wage garnishment will be barred from continuing these actions.
- A Licensed Insolvency Trustee will coordinate the entire Consumer Proposal for you, including communications with your creditors.
- Because you don’t need to borrow to consolidate debt in a Consumer Proposal, there are no added financing charges or even additional administrative fees tacked onto your monthly payments.
- The administration costs of your Licensed Insolvency Trustee are essentially covered by your creditors; calculated and payable from the funds your creditors receive. All you pay is what you’re offering to your creditors.
Consumer Proposal Payment Example
Here’s a quick example of a real Consumer Proposal filed by Sands & Associates – significant debt reduction, no added interest, no added fees:
- A person with debt totalling $42,360 and struggling to afford their minimum monthly payment of over $1,200 per month made a Consumer Proposal to cut their debt by 55% – from $42,360 down to $18,600.
- Their new monthly payment was just $310 per month, and they will be debt-free in five years.
Consumer Proposals are very flexible, tailored to your specific situation and needs – and you can pay off your Consumer Proposal early at any time, without penalty!
How Do I Do a Consumer Proposal?
To make a Consumer Proposal the first thing to do is connect with a Licensed Insolvency Trustee local to your province. If you’re anywhere in BC, Sands & Associates can help you – we serve residents across the province and we can help you in person, virtually, or even over the phone.
It’s very important to understand that to do a Consumer Proposal you must work with a Licensed Insolvency Trustee. You do not need a referral to connect with a Licensed Insolvency Trustee.
- You cannot file a Consumer Proposal by yourself, nor can a credit counsellor, debt settlement agent, or any other type of debt management service file a Consumer Proposal for you.
- If anyone is attempting to charge you a fee to speak with a Licensed Insolvency Trustee or telling you they can do a Consumer Proposal for you but are not a Licensed Insolvency Trustee (or an Estate Manager working with a Licensed Insolvency Trustee), this should be a red flag that you are not in the right place!
3 Steps to Starting Your Consumer Proposal
At Sands & Associates we plan to have your Consumer Proposal officially filed in three steps, and this process can be done in person at a local office nearest you, or virtually – whatever is most comfortable and convenient for you.
The timeline here is really driven by you. We understand that once you’ve discovered there is a solution to deal with debt and resolve any debt-stress you’ve been experiencing, you may want to move forward quite quickly.
- Sands & Associates can work with you to get your official Consumer Proposal signed and registered in as little as 24 hours after your consultation should you have an urgent situation.
- Otherwise, most people move through these three steps within a week or two.
Step 1: Have a Free Confidential Debt Consultation
Connect with one of our qualified, non-judgmental experts to talk about your situation. Together we’ll review your personal circumstances, including what your debts are, what sort of income you have, and any goals or specific challenges you are looking for support with.
- We’ll take time to discuss all your options with you including self-directed strategies, borrowing options and legal solutions (including Consumer Proposals).
- If you’re interested in a Consumer Proposal, we will work out an estimate together for a Consumer Proposal that is affordable for you. We’ll take into consideration important factors including the total amount of debt you have, who your creditors are, your family size and income – no two Proposals are exactly alike!
We always aim for a ‘no surprises’ experience, making this first step crucial to ensure you get all the information relevant to your situation so you can make a fully informed decision about how you want to move forward.
Step 2: Collect and Review Your Financial Information
If you’re moving forward with a Consumer Proposal, we will prepare all the required paperwork for you. For us to do this you’ll fill out a basic information form and gather relevant documents detailing your debts, income, and assets.
- We’ll have our second meeting together to review these materials and fill in any missing information. We’re here to help you, so don’t stress if paperwork is not your strong point!
From here, Sands & Associates will prepare your formal Consumer Proposal documents.
Step 3: Sign Your Official Consumer Proposal Documents with Your Licensed Insolvency Trustee
After you sign your Consumer Proposal documents (in-person and virtual appointments are available) your Licensed Insolvency Trustee will register your Consumer Proposal with a branch of Industry Canada called the Office of the Superintendent of Bankruptcy (“OSB” for short).
- No, a Consumer Proposal is not bankruptcy, but it is a type of legal debt solution and the OSB is the government body with oversight of all types of filings that Licensed Insolvency Trustees do.
Three steps done – now your Consumer Proposal is signed, filed and official!
What Happens After my Consumer Proposal Has Been Filed?
Some important milestones happen in the first 60 days after your Consumer Proposal is formally filed.
- If you’re working with Sands & Associates, during the first month after you’ve signed your official Consumer Proposal documents you’ll make one of your regular monthly payments.
For most people this is the first payment they are making in their Consumer Proposal; Sands & Associates does not charge any fees to get your Consumer Proposal started.
- You should have stopped making payments to your creditors by the time you signed your Consumer Proposal documents (the trigger to the 60 days).
During this 60-day period you normally don’t need to do anything else.
- Immediately after filing your Proposal, your Licensed Insolvency Trustee will take over communications with your creditors and send them official notice of your Consumer Proposal – the built-in legal protection has kicked in!
Your creditors included in your Consumer Proposal must now stop contacting you for payment, stop charging interest (or other fees), and cease any legal actions (including wage garnishments or account freezes).
- Your creditors will have 45 days to consider your Consumer Proposal consolidation offer and let your Trustee know if they are voting to accept it.
Your Consumer Proposal will be legally binding on all your creditors if more than 50% of your creditors (by dollar value) vote ‘Yes’ to accept it.
- Consumer Proposals filed by Sands & Associates are almost always accepted by creditors.
- Even if you have a creditor who votes not to accept your Proposal, or any who don’t vote at all, it doesn’t necessarily mean the Proposal can’t succeed – the Consumer Proposal will still be legally binding on all when it is accepted by at least the 50% dollar-value majority.
Another built-in advantage to Consumer Proposals – creditors can’t just change their mind once your Consumer Proposal has been accepted!
- Once day 45 passes and your Consumer Proposal is accepted by creditors, we’ll allow another 15 days to pass, after which your Consumer Proposal will be deemed to be court-approved.
After this deemed court approval (day 60) you can work through the rest of your Consumer Proposal and continue with your monthly payments (assuming that is what your Consumer Proposal offered).
How Long Will It Take to Finish a Consumer Proposal?
How long your Consumer Proposal takes to finish depends on the payment terms you’ve offered. Although most people offer monthly payments, those could range anywhere from one month to up to sixty months and virtually any timeframe in between (24 months, 36 months, etc.).
Some people plan to complete their Consumer Proposal consolidation by other terms however, and in these situations a Consumer Proposal could be finished in just a few months. Some common non-monthly payment Consumer Proposal examples include offering:
- A lump-sum payment (either from yourself, or a third party such as a family member)
- Proceeds from the sale of an asset you no longer want to keep (you can otherwise expect to keep all your assets)
As well as completing the payment terms you offer, as part of your Consumer Proposal you also commit to:
- Keeping your taxes filed and paying any new balances as required
- Doing two private financial counselling sessions with one of our Qualified Insolvency Counsellors
- These one-on-one sessions focus on providing you resources for credit building, budgeting, savings strategies, and other financial skills. We’ll also offer additional support for other financial help areas wherever possible.
- Staying in touch with your Licensed Insolvency Trustee – we’re your resource the entire process
Recap the Basic Timeline for Most Consumer Proposals
Depending on your Consumer Proposal offer, you could be totally debt-free in five years or less following your debt consultation with Sands & Associates:
- Have a consultation, review your financial information, then sign your Consumer Proposal documents – and stop making your regular debt payments
- 60 days after signing you’re underway with your new reduced Consumer Proposal payments
- After your final payment is made, you’ll receive an official Certificate of Full Performance and your unpaid debt balances will be considered forgiven / written-off by your creditors
If you’re looking into options to consolidate debt, forgive debt, or just simplify or lower your monthly payments, a Consumer Proposal can be a great solution. It’s worth taking an hour to explore with a Licensed Insolvency Trustee – debt-free could be a lot closer than you thought possible!
Connect with a local non-judgmental debt expert who cares and get started with your debt-free plan today. Book your free confidential debt consultation now!