Consumer Proposals

Consumer Proposals

Consumer proposals are a government approved debt settlement program.

What is a Consumer Proposal

Consumer proposals are a government approved program filed through a Licensed Insolvency Trustee that provides debt forgiveness.

In a consumer proposal, an agreement is made to repay unsecured creditors a percentage of the total balance owed.  Once the agreement is made, the balance of the debt (many times up to 70%) is forgiven.

The payment of the balance is based upon what you can realistically afford to repay on a monthly basis over a 3 to 5 year period.

The amount is based upon an assessment of your financial situation by the consumer proposal administrator (the trustee).

Consumer proposals give debt relief thereby avoid consumers having to consider filing for bankruptcy.

Consumer-Proposal-Puzzle

When You File a Consumer Proposal

Once a consumer proposal is filed you:

The proposal administrator (trustee) notifies the creditors of the consumer proposal.

The administrator gives the creditors a report of the financial abilities of the applicant to pay a reduced amount on the debt(s).

What Consumer Proposals Do

Consumer proposals reduce the amount you owe on debt.

Many times the amount of debt can be consolidated up to 70%, for example:

  • consumer debt of $50,000
    • reduced by 70%
      • after consumer proposal
    • debt reduced to $15,000

This debt management plan provides debt help, consolidating your debts, and there is no interest rate attached.

Consumer proposal payment plans pays off all unsecured debt, including credit card bills in 3 to 5 years.

The proposal solves financial problems for most people, helping them to become debt free.

Debts Included in Proposals

Consumer proposals apply to unsecured credit. Unsecured debt includes:

All unsecured debts and credit cards that are not secured, can be applied to a consumer proposal, getting you out of debt.

★★★★★ My husband was laid off, but our bills kept coming, we were drowning in debt. YanchDey solved our money problems and saved us $18,000. We will be debt free in four years, Thank you Susan N. Oshawa

Debts Not Included

Secured credit like mortgages and car loans (loans that are tied to an asset like a vehicle or property) are not eligible for consumer proposals.

Secured credit is debt such as:

  • vehicle loans
  • home equity loans
  • loans for tangible assets offered for security

Consumer proposals only apply to unsecured credit where no collateral has been offered for the credit.

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How Consumer Proposals Work

In a consumer proposal, the debtor (the person who owes the money) agrees to:

  • pay a portion of the debts owed,
    • to settling the debt with the lender
      • based upon what they, the debtor can afford.

The amount repaid is determined by a proposal administrator (trustee), based upon the financial situation of the debtor.

Creditors and lenders agree to:

  • stop interest and fees
  • reduce the amount owing
  • accept monthly payments over 3 to 5 years

The consumer proposal consolidates all unsecured debt reducing it to one lower payment.

All unsecured debts, credit cards and unsecured loans can be applied to a consumer proposal, getting you completely out of debt in 5 years or less!

Consumer Proposal Advantages

Consumer proposals are advantageous because:

  • debt is reduce up to 70%
  • one low monthly payment
  • collection calls are stopped
  • all interest and fees are stopped
  • wage garnishments are stopped
  • assets including homes, vehicles and personal possessions cannot be seized for sale

Once a consumer proposal is filed you are covered by consumer protection.

Consumer protection means, creditors including credit card companies must stop all actions against you including, harassing calls, garnishments and lawsuits.

Consumer Proposals - Piggy Bank

Qualifying for Consumer Proposals

You qualify for a consumer proposal where:

  • you owe more than $10,000 and
    • less than $250,000 in debt
  • you are working, have a job
  • you’re a Canadian resident

Persons who are permanent residents or living in Canada under a work permit or similar may apply for a consumer proposal.

What is the Cost?

There are no up-front costs to file a consumer proposal.

When you file a consumer proposal, you and a trustee work out what you can reasonably afford to pay on your debt.

The insolvency trustee then takes that amount to your creditors and negotiates a settlement.

The cost of the consumer proposal comes out of the money going to the creditors.

There is no other fee or cost to you.

★★★★★ We spoke to a consumer credit counseling agency that recommended YanchDey. Making payments on our personal loans plus my unpaid student-loan debt left us with little at the end of the month.  The proposal was the best debt management program for us, paying off our debts in 5 years.  We’re even saving money now to make a lump sum payment! Thank you NameWithheld, Oshawa.

What Proposal Payments are Based On

Payments in consumer proposals are based upon:

  • what you owe
    • what you earn, and
      • what you can afford to repay

The trustee, as the proposal administrator works with you to decide what you can reasonably afford to payback on your loans.

After a Consumer Proposal

After filing a consumer proposal:

  • creditors are prohibited from contacting you
  • no interest, late payments or fees can be added
  • all civil actions and wage garnishments are stopped

Instead of making individual payments, one monthly payment is made to the Trustee.

The trustee acts as your representative, distributes the money and deals with creditors in all matters, not you.

Consumer Proposal vs Debt Consolidation

Debt Consolidation and debt-repayment plans consolidate your debt into one payment over 3 to 5 years, but:

  • the amount is not reduced
  • high interest rates can still apply
  • there maybe fees attached to the loan
  • the loan may still be difficult to payoff

Consolidation loans offered by debt settlement companies, can still leave you in debt for years.

When you enter into a consumer proposal:

  • loan amount is reduced
  • no further interest is applied
  • there are no fees to the consumer
  • easy reduced payments for 3-5 years

Consumer proposals can reduce and pay off your debt over 3-5 years with payments and terms that are affordable to you.

For example, a debt of $20,000 could be reduced to $6,000, payable over 5 years without any interest at $100/month.

Bankruptcy vs Consumer Proposals

Consumer proposals are an alternative to bankruptcy.

In bankruptcy the borrower may lose property, where no property is taken in a consumer proposal.

The consumer proposal is a debt settlement, negotiated between the creditor and debtor, payable over a maximum of 5 years.

Debt relief services usually prefer a consumer proposal because:

  • bankruptcy does not remove all debts
  • bankruptcy is more expensive than a consumer proposal
  • bankruptcy stays on the record longer

Payments and the total amount paid are less in a consumer proposal than the full amount of the debt owing at the end of the term.

The creditors are encouraged to accept the deal—because if they do not, the next alternative may be personal bankruptcy.

In bankruptcy most creditors would receive little or nothing in bankruptcy proceedings.

How Credit Scores are Affected

People contemplating insolvency may already have a poor credit rating and debt problems.

Where a person declares bankruptcy or submits a consumer proposal they are assigned the lowest possible credit score.

  • Equifax removes a consumer proposal from your credit report 3 years
    • after you pay off all the debts included in the proposal.

TransUnion removes a consumer proposal from your credit report either:

  • 3 years after you pay off all the debts included in the proposal, or
    • 6 years after you sign the proposal (whichever is sooner)

Your ability to obtain and use credit after a consumer proposal depends on convincing lenders of your personal financial maturity and ability to repay the debt; there are no guarantees—no one is required to give you credit.

Once you have fulfilled the terms of your consumer proposal, you will receive a “certificate of full performance” to present credit-reporting agencies.

★★★★★ I was maxed out with credit card debt, when I was laid off and there was no way I could pay the monthly minimum.  We did a consumer proposal that saved me $22,000! Many thanks, Bernice Power Whitby.

How to file Consumer Proposals

File a Consumer ProposalMaking that first phone call is the first and hardest part of the process.

The first step to debt relief and filing a consumer proposal is to speak with us.

Consumer proposals are filed through an Insolvency Trustee, who are licensed to work as a “Proposal Administrator” by the federal government.

Every year thousands of people have financial issues, it happens, but let’s get together and fix this issue.

There is no cost or obligation to speak to a trustee and you can start today by calling us at 905-721-7506.

★★★★★ The consumer proposal got us out of debt we could never afford to pay back, we owed $33,000, just the interest was hundreds of dollars per month.  We now owe $9,000 with 5 years to pay, no interest added at $150 per month.  YanchDey saved us and are forever grateful.  Danny Drake, Ajax.

Step 2 - Creating a Debt Reduction Plan

Your first meeting with the trustee is a discussion about your debts and unsecured credit including:

Many times our clients find it easier to bring in the documents or bank statements for each debt so we have accurate amounts.

During this discussion the trustee will be looking to create a repayment and financial plan based upon:

  • your income,
    • what you own, and
      • who you owe money to
        • what you can afford to pay

The trustee is looking to:

  • determine how much to offer your creditors, and
  • how much your monthly payments should be

Step 3 - Preparing the Documents

The trustee takes the information about your debts. This information will include:

  • your current finances
  • how long the proposal will last
  • how much you’re able to pay on the debts
  • the monthly payments you’ll make

The trustee completes all of the paperwork and submits the proposal on your behalf.

Step 4 - Submitting the Proposal

Once the proposal is completed the trustee files it with the office of the Superintendent of Bankruptcy.

After the application is accepted a stay of proceedings is issued.

A stay of proceedings means that any creditors must:

  • deal only with the trustee
  • cannot contact you for collection
  • any wage garnishments are stopped

Step 5 - Notification to Creditors

After the proposal is filed the trustee sends notice to the creditors.

The creditors may ask for a meeting to discuss the terms of your proposals and ask any questions.

This does not always happen but if it does the trustee will hold the meeting and guide you through the process.

The creditors have 45 days to decide whether they will accept the proposal or ask for a creditors meeting. If no meeting is requested after 45 days the proposal is deemed to be accepted.

Should any creditors contact you, they should be directed to speak to the trustee.

Step 6 - Creditor Meetings

Where a meeting has been requested the creditors have an opportunity to:

  • ask you questions
  • reject the proposal, or
  • negotiate for a better offer

The trustee will chair the meeting, report to the creditors on your affairs and explain why the trustee feels the proposal deserves their support.

Where the creditors vote no, your options are to:

In a renegotiation the creditors may ask for higher payments or reduce the term of the payments, e.g from 5 years to 4 years.

Where a meeting is not requested the proposal is deemed to be accepted after 45 days.

Step 7 - Consumer Proposal is Accepted

Where the proposal is accepted you start making the monthly payments on the proposal.

You are required to attend two credit counseling meetings with the trustee and an online program. The counselling is to help you going forward dealing with credit.

After the proposal has been completed you receive a certificate of completion.

The certificate of completion shows that the terms of the proposal have been completed and that the debt(s) have been cleared.

Step 8 - Rebuilding Credit

After completing the consumer proposal, Equifax credit reporting agency removes the consumer proposal from your credit report 3 years after you’ve completed all of the payments.

TransUnion removes a proposal from your credit report either:

  • 3 years after you’ve paid off all of the debts included in the proposal, or
  • 6 years after you sign the proposal (whichever is sooner)

While in the proposal you can obtain a secured credit card.  We suggest that you look for a credit card with a maximum credit limit of $500.

The credit card has to be paid off each month completely. The proposal will affect your credit score, but where you’re paying off the balance each month the credit rating will improve.

We also suggest that clients use this time to try to build up savings, as they do not have the high loan payments they were making previously.

★★★★★ YanchDey did all the paperwork and dealt with our creditors.  The garnishment was stopped and we can sleep at night, we now have a fresh start. Many thanks, Debbie S. Ajax

Consumer Proposal Calculator

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