Understanding the Timeline of a Consumer Proposal

Understanding the Timeline of a Consumer Proposal

A consumer proposal is a formal, legally binding process that is aimed at providing individuals with a way to manage their unsecured debt under the guidance and administration of a Licensed Insolvency Trustee (LIT). This debt relief option offers an opportunity to avoid bankruptcy, while still allowing an individual to settle debts for less than what is owed. For those considering this financial remedy in Canada, understanding the timeline of a consumer proposal is crucial. Let’s break down the key stages and what you should expect.

Initial Consultation

The first step in the process of filing a consumer proposal is to undergo a free initial consultation with a Licensed Insolvency Trustee. During this meeting, the trustee will evaluate your financial situation, including your debts, assets, income, and expenses. The goal is to determine whether a consumer proposal is the best option for your circumstances. This initial consultation generally takes about an hour.

Preparing and Filing the Proposal

If it’s concluded that a consumer proposal is the right path for you, the next step involves preparing and filing the proposal with the Office of the Superintendent of Bankruptcy Canada. The LIT will work with you to develop an offer that outlines how much you can afford to pay your creditors, the duration of your proposal (which cannot exceed five years), and the frequency of payments. This preparation and filing process can take a few days to a couple of weeks, depending on the complexity of your financial situation.

Creditor Voting Period

Once your proposal is filed, it is sent to your creditors for consideration. From the date it is filed, creditors have 45 days to accept or reject the proposal. During this voting period, all collection actions against you are stopped, and interest on your debts ceases to accumulate. If the majority of your creditors (by dollar value) accept the proposal, it becomes legally binding for all parties. If the proposal is rejected, you may have the option to revise and resubmit it, convert it into a bankruptcy filing, or explore other debt relief solutions.

The Repayment Period

After your proposal is accepted, you commence making payments according to the terms agreed upon. This period cannot exceed five years. Throughout this time, you will also need to attend at least two financial counselling sessions. These sessions are designed to help you manage your finances more effectively in the future. Regular, timely payments are crucial; failure to meet the terms can result in the annulment of the proposal.

Completion

Once you have made all of the payments under your consumer proposal and attended the mandatory counselling sessions, your debts (with a few exceptions) are considered to be fully settled. Your LIT will provide you with a Certificate of Full Performance, and your credit report will reflect your completion of the proposal, which stays on your record for three years after completion or six years from the date of filing, whichever comes first.

Conclusion

The timeline of a consumer proposal varies depending on individual circumstances, from the preparation and filing stage to the final repayment. It provides a structured, manageable path to debt relief but requires compliance and dedication to the process. Understanding each phase and what is expected of you can help prepare for what lies ahead, ultimately leading to a fresh financial start.

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