A consumer proposal is a formal way to reduce and manage overwhelming debt. Recent data from the Office of the Superintendent of Bankruptcy shows that consumer proposals account for almost half of all personal insolvency filings in Canada. In this article, we’ll have an overview of how consumer proposals work in British Columbia, including their benefits, eligibility requirements, and the filing process.
Understanding Consumer Proposals
As a legally binding agreement, a consumer proposal allows you to repay a portion of your unsecured debts over five years. Once creditors accept the proposal, interest stops accruing, and collection efforts must end. This gives you relief from debt stress while letting you keep control of your assets.
Key benefits of filing consumer proposals:
The total amount owed can be lowered, and interest no longer accumulates.
You typically keep important assets, such as your home and vehicle, provided you remain current on related payments.
Creditors must stop all collection efforts, including legal action and wage garnishment.
Payments are affordable and can be spread over up to five years.
Eligibility Criteria for Filing a Consumer Proposal
In British Columbia, you can file a consumer proposal if your total debts do not exceed $250,000 (excluding any mortgage on your principal residence). You must show you can make reasonable monthly payments. The proposal must be fair to creditors to gain their support. If you cannot pay anything, other insolvency options, such as bankruptcy, may be necessary.
The Filing Process of a Consumer Proposal in B.C.
The process starts with a meeting or phone call with a Licensed Insolvency Trustee. The trustee reviews your income, expenses, and assets. They advise whether a consumer proposal is suitable. You then work with the trustee to draft a proposal that details the amount you will pay and the repayment period. This amount is usually a fraction of your total debt.
After the proposal is filed with the Office of the Superintendent of Bankruptcy, creditors have 45 days to accept or reject it. Acceptance requires a simple majority by dollar value. If any creditors vote against it, the trustee may negotiate adjustments. Most creditors prefer to accept a proposal rather than pursue bankruptcy.
Important Things to Know About Consumer Proposals
If Some Creditors Reject the Proposal
If certain creditors reject the initial proposal, the trustee will try to find terms that satisfy everyone. If the changed terms become too expensive, you may withdraw from the proposal. However, most proposals are accepted because creditors often prefer a structured repayment to a bankruptcy scenario.
Cost of a Consumer Proposal
All trustee fees come out of your single, agreed-upon payment. You do not pay extra fees beyond the negotiated amount. These fees are regulated under a government tariff in the Bankruptcy and Insolvency Act. This means everything is included in the monthly or lump-sum payments you make.
Mandatory Credit Counselling
Two credit counselling sessions are required during the proposal. They focus on budgeting, money management, and preventing future debt issues. These sessions are included in the consumer proposal process.
Fulfilling Your Consumer Proposal Agreement and Its Impact on Your Credit
When you finish all payments and attend the counselling sessions, you receive a Certificate of Full Performance. This document, acting as a Deemed Court Order, releases you from the included debts. The proposal stays on your credit report for six years from filing or three years from completion.
You can also pay off the proposal faster if your income increases. Early completion often helps rebuild credit sooner.
If you live in BC or Yukon and are struggling with debt, consider reaching out to D. Thode & Associates Inc., Licensed Insolvency Trustees. Book your FREE consultation today, and let us help you explore your options. We’re here to guide you on your journey to becoming debt-free!
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