Consumer Proposal FAQs

Wondering if a consumer proposal is the right debt solution for you? Chances are you have many questions about the consumer proposal process.  Find answers below to the most common Consumer Proposal questions.
Who can help me file a consumer proposal?
Only a Licensed Insolvency Trustee (LIT) can help you file a consumer proposal.  Under a consumer proposal, the LIT acts as the consumer proposal administrator.
What is the role of the consumer proposal administrator?
The consumer proposal administrator is responsible for helping you formulate the consumer proposal, preparing and filing the required documents, reporting to the creditors and other stakeholders and monitoring the terms of the proposal.
Can I file a consumer proposal jointly with my spouse, or another individual?
Yes.  A consumer proposal may be filed jointly by two individuals where the debts of the individuals are substantially the same and the administrator of the consumer proposals is of the opinion that it is in the best interest of the debtors and creditors.
How much money to I have to offer my creditors under a consumer proposal?
There is no magic number when it comes to formulating a consumer proposal and we must consider your payment ability, creditors and other factors.  The bottom line is that your consumer proposal must offer your creditors more than they would receive in a bankruptcy scenario.
How does a consumer proposal affect my credit rating?
Filing a consumer proposal will have a negative impact on your credit rating.  Information pertaining to your consumer proposal will stay on your credit reports for three (3) years after completion of your consumer proposal.
When do I start making payments under a consumer proposal?
You and the consumer proposal administrator will decide when your payments begin.  Typically payments begin within 30 days of filing your consumer proposal.
How long does a consumer proposal last?
A consumer proposal may last three months to five years.  The term of a consumer proposal may not exceed five years.
What costs do I have to pay when filing a consumer proposal?
The costs associated with filing a consumer proposal, including fees of the consumer proposal administrator, are set by federal law.  These costs are included in, and are deducted from, your consumer proposal payments.
What types of debt are included in a consumer proposal?
Most unsecured debts are included in a consumer proposal, such as credit card bills, unsecured loans and lines of credit, unpaid income taxes, student loans (unless you were a student in the last 7 years), unpaid utilities, legal and accounting fees, debts owed to individuals and more.
What types of debts are not affected by a consumer proposal?
Generally, secured debts (mortgages and car loans, for example) are not affected by a consumer proposal. 

Moreover, certain types of debts will not be settled, extinguished or released by a consumer proposal, including:
  • Court fines and penalties;
  • Damages for assault;
  • Child support and spousal support;
  • Debt arising from fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity;
  • Any debt resulting from obtaining property or services by false pretences or fraudulent misrepresentation;
  • Student loans where the debtor was a full- or part-time student at any time within the seven year period prior to filing the consumer proposal; and
  • Interest accruing on these debts.
Can I file a consumer proposal if I owe student loans?
Yes, you can file a consumer proposal if you owe student loans.  Even if your student loans will not be extinguished by the consumer proposal, it may still be beneficial to file a consumer proposal if you need a more manageable debt repayment plan, and especially if you have other debts that can be reduced or settled through a consumer proposal.
Is income tax debt included in a consumer proposal?
Yes, a consumer proposal can include personal income taxes and outstanding taxes arising from operating a business, such as GST.
Can an incorporated business file a consumer proposal?
No, an incorporated business may not file a consumer proposal.  However, an incorporated business may file a Division I Proposal.
Will a consumer proposal affect my car loan?
A consumer proposal will have no effect on your car loan.  As long as you keep your car loan payments up to date the lender cannot seize your vehicle for reason that you filed a consumer proposal.
Will a consumer proposal affect my mortgage?
A consumer proposal will have no effect on your mortgage.  If you keep your mortgage payments up to date and do not default on any other mortgage terms, the lender cannot start foreclosure action for reason that you filed a consumer proposal.
Will a consumer proposal affect my spouse?
Filing a consumer proposal will not affect your spouse unless your spouse is a co-signor or guarantor on any of the debts falling under your consumer proposal.  If your spouse has co-signed or guaranteed any of your debts, he or she will have to repay those debts.  This is because your consumer proposal does not protect and/or release other borrowers from your debts.
What type of counselling is required during a consumer proposal?
Two financial counselling sessions are required in a consumer proposal.  These sessions are mandated by federal insolvency regulations and must be conducted by qualified insolvency counsellors.  The focus of the first counselling session is consumer and credit education.  The focus of the second counselling session is identification of roadblocks to solvency and rehabilitation.  Each session lasts 30-60 minutes.  The cost of counselling is included in your consumer proposal payments.
What happens if my consumer proposal is rejected by my creditors?
If your creditors reject the consumer proposal, the proposal administrator will work with you and your creditors to negotiate a consumer proposal that is acceptable.  However, if negotiation is not successful and your consumer proposal is refused, your status is the same as before you filed.  There is no automatic bankruptcy if your creditors reject a consumer proposal. 
What if my income changes after filing a consumer proposal?
Generally speaking, a change in income after filing a consumer proposal will not affect your proposal.  If you have an increase in income, you do not have to pay any more than what was agreed when your proposal was accepted by your creditors.  If you have a decrease in income and can no longer afford to make your payments, have a discussion with your proposal administrator about your options.
What if I inherit money after filing a consumer proposal?
 If you inherit money or receive some kind of windfall after your consumer proposal is accepted, you get to keep that money and you are not required to pay the funds into your consumer proposal,  unless your consumer proposal specifies otherwise.
Can I change my consumer proposal after approval?
After your consumer proposal has been accepted, it may be changed if your creditors agree.  You may file an amendment to your consumer proposal and your creditors have 45 days to vote on the amendment (just like they had 45 days to vote on your original proposal).  You continue to have creditor protection while your creditors consider the amended consumer proposal. 
Who will find out I filed a consumer proposal?
Practically speaking, only your creditors will find out that you filed a consumer proposal.  However, the Office of the Superintendent of Bankruptcy keeps a record of the consumer proposal which can be accessed by the public on payment of a fee.  The credit bureaus (Equifax and TransUnion) will also report the consumer proposal on your credit report.
What happens if I can't finish my consumer proposal payments?
If you can't make your consumer proposal payments, talk to the consumer proposal administrator as soon as possible as you may have some options, such as amending your consumer proposal (subject to creditor approval) or deferring payments if your consumer proposal provides for it.  Ultimately, if the problem is not addressed your consumer proposal will be deemed annulled when your payments are in arrears for an amount equivalent to three months of payments. 
What happens when a consumer proposal is deemed annulled?
A consumer proposal is deemed annulled when the monthly payments are three months behind.  Upon the deemed annulment of a consumer proposal, the rights of the creditors are immediately reinstated and the original amount of your debt is revived plus interest.  In limited circumstances, a deemed annulled consumer proposal may be revived.
When can a deemed annulled consumer proposal be revived?
A deemed annulled consumer proposal may be revived by the proposal administrator within 30 days after the deemed annulment upon providing notice to the creditors.  If the creditors do not object to a revival, the consumer proposal is revived after 30 days.

Otherwise, the Court has the discretion to revive a deemed annulled consumer proposal.  The Court also has the discretion to grant approval to file a new consumer proposal.
If you have questions that were not answered here, please send me an email at lana.gilbertson@mnp.ca.