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Filing a consumer proposal is often one of the best ways to recover from burdensome debt. A consumer proposal is a legal agreement that enables you to get out of debt for less than the full amount you owe. Consumer proposals filed by Remolino & Associates have a success rate of 96% and reduce your unsecured debts by up to 75%.
Read on to get answers to all your consumer proposal questions, including what a consumer proposal is, the pros and cons of filing a consumer proposal, how a proposal would affect your credit score, and more.
What Is A Consumer Proposal In Canada?
A consumer proposal is a legal agreement negotiated between you and your creditors. The consumer proposal is administered by federally regulated professionals called Licensed Insolvency Trustees (LITs) on your behalf.
A Licensed Insolvency Trustee works with you to create a proposal – a detailed offer to repay your creditors over the course of up to five years. Consumer proposals offer immediate relief from collection efforts while reducing your debt and outlining a payment arrangement for your remaining balance.
The exact amount of your total debt that will be forgiven depends on your ability to pay the balance. It’s not unusual for consumer proposals to reduce your total debt by 75%, but the outcome varies from case to case.
Popularity Of Consumer Proposals in Ontario
According to the Office of the Superintendent of Bankruptcy (OSB), there were 90,092 consumer insolvencies filed in Canada in 2021, with a little over 30,000 of them only in Ontario. Out of the 30,327 filings in Ontario, 74.3% were consumer proposals. 96% of the consumer proposals filed by our office were successful.
Pros And Cons of Consumer Proposal
Consumer proposals offer multiple benefits, including:
- Stops all collection efforts.
- Reduces your unsecured debt by up to 75%
- Helps you avoid bankruptcy
- Consolidates all your debts into a single fixed monthly payment
- Enables you to legally settle all unsecured debts, including those held by the Canada Revenue Agency (CRA)
- Helps you recover faster from overwhelming debt
- Is less damaging to your credit rating than other debt-relief options
However, filing a consumer proposal also has some disadvantages, which may make the process unsuitable for certain debtors. Some of the disadvantages include:
- Doesn’t cover your secure debt – Your secured loans won’t be included in the payment plan.
- Affects your credit rating – Filing a consumer proposal affects your credit rating.
- Higher borrowing rates – You become a high-risk borrower after filing a consumer proposal.
- May not include your student loans – The consumer proposal may not include your student loans if you haven’t been out of school for more than seven years.
- Shows up in your credit report for up to 6 years – The consumer proposal will show up in your public record for up to 6 years from the filing date.
Consumer Proposal Process in Toronto
- Contact a Licensed Insolvency Trustee for a free assessment. The LIT will help you identify the best debt-relief option for your particular situation.
- The LIT will go over your debts and assets and come up with a proposal offer for your creditors.
- Sign some documents, including the proposal offer.
- Your LIT files the paperwork with the court, starting the stay of proceedings and putting an end to all collection efforts.
- Your creditors decide whether to accept or reject your proposal within 45 days.
- If accepted, your proposal obtains court approval within 15 days. If it’s not accepted, your LIT will work with you to improve the proposal and file it again.
- Once accepted, you start making your agreed-upon payments.
- You start rebuilding your credit and attend two credit counselling sessions.
- Once you make all your payments and meet your conditions, you receive a Certificate of Completion and will be legally released from the debts you included in the proposal.
How To Qualify For A Consumer Proposal?
You will need to meet certain requirements in order to file a consumer proposal:
- Your total unsecured debts are between $5,000 and $250,000
- You have the income needed to make a lower fixed monthly payment
- You are insolvent, which means that your total debt exceeds your assets
- You want to avoid bankruptcy to protect important assets like your home
- You are a Canadian resident or property owner
Filing A Consumer Proposal in Toronto
Filing a consumer proposal is a regulated process in Ontario that includes several mandatory steps.
Book a free consultation and one of our trustees will go over your debts and assets. If you can’t pay off your debt through other means, such as debt consolidation, a consumer proposal may be an ideal solution if you neet the legal requirements:
- You are a Canadian citizen or own property in Canada
- Are in a state of insolvency
- Your total unsecured debt is less than $250,000
- Your income allows you to make long-term monthly payments
- You don’t have other insolvencies in progress
Your LIT drafts the proposal and payment terms and you sign the necessary documents. The trustee files your consumer proposal with the Official Receiver and notifies your unsecured creditors. Once the papers are filed, you are safe from all collection efforts, including wage garnishments and debt collector calls.
Your trustee sends copies of your proposal to your creditors and they have to respond within 45 days. If they don’t respond within that time, the Official receiver accepts the proposal. If the creditors respond on time, they may request a creditor meeting. Your creditors can vote to accept or reject your proposal during this meeting.
Once the creditors accept your consumer proposal, you start making the monthly payments you agreed upon. When you complete your final payment, you receive a Certificate of Full Performance which is proof that you completed the proposal and your debts are forgiven.
How Much Does A Consumer Proposal Cost?
The cost of a consumer proposal is based on your specific circumstances. You have to pay
- A filing fee of $100 to the OSB
- Two mandatory credit counselling fees of $85 each
- A $1,500 proposal fee to your trustee plus 20% of the creditor distributions
- 5% of the creditor distributions to the OSB
At Remolino & Associates, we don’t perceive additional taxes, such as up-front or set-up fees. When you let us handle your consumer proposal, you don’t have to make any payments until we officially file the consumer proposal.
Why Are Consumer Proposals Rejected?
Even though it rarely happens, your creditors may reject your consumer proposal if they believe that the amount you offer is too low. However, most of the time they will make a counter-proposal for you and your trustee to consider. You can either accept the proposal or come up with a counter-proposal of your own.
Our financial experts leverage their experience to create consumer proposals creditors cannot refuse. That’s why 96% of the consumer proposals we file are accepted.
What Debts Can Be Included In Consumer Proposal?
Consumer proposals can include multiple types of unsecured debts, including:
- Personal loans
- Payday loans
- Credit cards
- Lines of credit
- Unpaid utilities
- Store cards
- Income taxes
- Student loans (if you’ve been out of school for more than seven years)
- Mortgage or car loan
- Highway or bridge tolls
How Does A Consumer Proposal Affect Credit Score?
Filing a consumer proposal usually takes your credit score down to an R7 rating for up to six years from the filing date.
Where To Get A Consumer Proposal in Toronto?
The Licensed Insolvency Trustee at Remolino & Associates can help you file a consumer proposal and get out of debt. Our experts will examine your financial situation and recommend the best possible solution to your debt. Together, we’ll help you move toward a debt-free future.
Consumer Proposal Alternatives
Consumer proposals are not the only debt solutions we recommend. Other solutions we can advise you on include
- Debt management plan
- Debt consolidation loan
- Personal bankruptcy
Book a free consultation with one of our experts and see which solution is right for you.
Debt Repayment & Consumer Proposal Calculator
Our debt calculator provides a comparison of what your monthly debt repayment might look like under different debt relief options including a debt consolidation loan, debt management plan and consumer proposal. Actual results may vary as each situation is unique. Your actual payments will be based on your income, assets and debts but this calculator provides a comparison of the potential savings of each option.
Simply enter your total unsecured debt, including credit card debt, bank loans, lines of credit, payday loans and tax debts. Do not include mortgage or secured car loans.
Enter Your Total Unsecured Debt
To Eliminate Your Debt
|Monthly Payment (approximate)
Over 5 Years
Over 5 Years
Over 5 Years
Settlement For Less Than Principal debt amount
No Negotiate principal reduction
With on going applied interest cost
Repay Debt on Your Own
Monthly payment with on going interest cost
Consumer Proposal FAQs
Yes, a consumer proposal will stop collection calls, wage garnishments, and all other actions carried out by collection agencies. Consumer proposals are legal proceedings under the Bankruptcy and Insolvency Act.
You will gain protection from debt collectors immediately after your LIT files your signed proposal documents with the OSB.
Yes, you can. While you won’t be able to change the total sum of your payments because that’s negotiated between you and your creditors before you start your payments, you can pay off your proposal early to begin your financial recovery process.
Yes, you have some duties. During a consumer proposal, you have to make all the required payments and attend two credit counselling sessions.
Unlike filing for bankruptcy, you don’t have to report your income and expenses when you file a consumer proposal, and you won’t lose any assets.
You are allowed to defer up to two payments if you can’t afford them, but your proposal will be ‘deemed to be annulled’ if you fail to make three payments. If this happens, your debts are immediately reinstated and you lose your creditor protection.
Yes, it can. Your unsecured tax debts can be included in your proposal and CRA is limited by the terms of the accepted proposal.
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