We will give you the disadvantages first. If a consumer proposal is wrong for you, it is better that you find out today, on this page, than eighteen months into one.

The disadvantages of a consumer proposal, plainly

It stays on your credit report. Three years after your final payment, or six years after you sign it, whichever comes first. That is years, not months. The rule is on the Financial Consumer Agency of Canada’s page.
Your unsecured credit is closed. Every card and line of credit in the proposal goes. Banks often close a card with a zero balance at the same bank too.
It is a public record. The Office of the Superintendent of Bankruptcy keeps a searchable insolvency database. Anyone can search it.
You have to finish it. On a monthly plan, fall three payments behind and the proposal is annulled automatically. Your debts come back, less what your creditors were paid, interest can start again, and you have paid into something that no longer protects you. An annulled proposal can sometimes be revived, but not by default, and not on your say-so alone.
Your creditors can say no. A proposal is an offer, not a right. One creditor holding more than half the dollar value of the claims can call a meeting and vote it down on its own. If creditors holding at least a quarter of the claims do not ask for a meeting within 45 days, and the official receiver does not call one, the proposal is deemed accepted.
It usually takes longer than a bankruptcy. Up to five years of payments, against nine months for a first bankruptcy with no surplus income, if no one opposes the discharge. You are choosing the longer road to keep what you own.
You need income. A proposal is usually paid from income, every month for the whole term. Without income or a lump sum to offer, a proposal is rarely workable.
It does not cover everything. Secured debts survive it. In most cases, so do support payments, most court fines, debts from fraud, and government student loans where fewer than seven years have passed since you stopped being a student. It also does not release a co-signer or a guarantor.
There is a ceiling. Above $250,000 of total debt, not counting the mortgage on your home, a consumer proposal is not the instrument. Car loans and other secured debts count toward that limit. Spouses with mostly the same debts can file their proposals together. Ask a trustee how the limit applies to the two of you.
Two counselling sessions are mandatory. It is a small thing, but people are surprised by it. The rules, including this one, are on the Superintendent’s page.

An example of the credit report rule: Say you pay your proposal out early, two years after filing. Three years after that final payment is year five. Year five comes before the six-year mark, so the record clears at year five.

How bad is a consumer proposal, really?

Compared with a clean credit report and no debt, it is bad. But that is not the comparison you are actually facing.

Your real comparison is with what is already happening to you: missed payments piling up, interest running, the collection calls, and the chance of a wage garnishment. None of that has a set end date. Each account sent to collection can sit on your report for up to six years, on its own clock. A proposal is worse than being debt free and better than a problem with no end. The honest question is which of those two your situation looks like.

What not to do before a consumer proposal

This is where people hurt themselves, usually with good intentions.

Do not move an asset. Putting the car in your brother’s name or the savings in your spouse’s account does not protect it. If the proposal fails and you go bankrupt, a transfer made to keep something away from creditors can be reversed. Your creditors also see it when they vote.
Do not pay one creditor ahead of the others. Paying off your mother’s loan or your favourite card the month before you file can be a preference. If the proposal fails and you go bankrupt, the trustee can undo it, and your creditors see it when they vote.
Do not run up the cards. A balance built in the weeks before a filing is something a creditor looks at when it decides how to vote.
Do not guess on the forms. How you answer the questions is very important. Take the inheritance question: some people write “yes” on a guess, without knowing what is in the will. Answer truthfully, with what you actually know. If you are not sure what a question is asking, ask first.

The advantages, since they are real too

The payment is fixed. It is agreed at the start, and it does not go up if your income does. In a bankruptcy the payment is recalculated against your income, so a raise or a bonus can increase what you pay.
You usually keep your assets. Your home equity, your vehicle, your savings, as long as you keep up the payments on secured loans such as the mortgage and the car. Protecting those is usually why people choose it.
Interest on the unsecured debts in it stops on the day it is filed. So does most legal action by those creditors, including a wage garnishment that is already running. Secured lenders and family support enforcement are not stopped.
It is not bankruptcy, and it clears your credit report sooner.
You can pay it out early with no penalty, which can move your credit report date forward.
The cost is inside the payment. The administrator’s fees are set by federal tariff. They and the other costs of the proposal come out of what you are already paying, not on top.

When a consumer proposal is the wrong answer

We would rather tell you when your situation points somewhere else.

There is no income to repay from. A proposal is a repayment plan. Without income or a lump sum to offer, it is usually the wrong tool, and bankruptcy is likely the honest answer.
The debt is small. Below roughly ten thousand dollars, with income, there may be simpler routes that cost you less.
You could clear it in a couple of years anyway. Then the credit report cost may not be worth paying.
Almost all of it is secured or non-dischargeable. A proposal cannot compromise what it cannot include.
You are about to renew a mortgage with a lender that will not renew during a proposal. That is a timing question, and it is worth asking before you file rather than after.

Is a consumer proposal a good idea? The pros and cons together

It is worth it when you have income, you have assets you want to protect, and you face a balance you cannot realistically clear on the terms you are on now. It is not worth it as a way to avoid a conversation you have been putting off. And it is not worth it if a simpler route would work. The side-by-side with bankruptcy is on our consumer proposal or bankruptcy page.

Every file is different. Your buddy’s proposal is not yours. How you answer the questions on the forms matters too. Understand each question before you answer it, answer it truthfully, and ask us when you are not sure what it is asking.

Questions people ask

What is the catch of a consumer proposal?

There is no hidden one. The catch is on this page: the credit mark, the closed cards, the public record, the years of payments, and the fact that a creditor can say no. If someone tells you there is no downside, they have not read the file.

Can I keep my credit card?

Not one that is in the proposal, and usually not one from a bank that is. A card from a bank you owe nothing to is sometimes kept. Ask before you file. Our page on your credit during and after a proposal goes through it.

Is it private?

No. It is a public record in the federal insolvency database. It is not published anywhere, and your employer is not told unless a garnishment of your wages has to be stopped, but anyone who pays the search fee can find it.

What happens if I miss payments?

On a monthly plan, three payments behind and it is deemed annulled. The stay ends, the debts come back less what your creditors were paid, interest can start again, and the money your creditors received buys no further protection. If money gets tight, say so before the third missed payment, not after it.

Where we fit

Get Total Debt Relief is a debt consulting and representation firm, not a Licensed Insolvency Trustee. Only a Licensed Insolvency Trustee can file your documents for a consumer proposal or a bankruptcy with the Superintendent of Bankruptcy. However, he is not the only one you should get your information from. Unlike a Trustee, we look to preserve your equities and assets, not liquidate them. What we do is make sure you only pay what you have to pay, not what someone thinks you can pay. We use every tool available to make sure you protect your home, your business and other equities as well as Spousal rights. Once you’re ready to move forward with whichever process you choose, that’s when it’s time to move on to the selection of a Trustee. Please keep in mind that if for any reason, you have to deal with a legal matter during your Bankruptcy or Proposal, a Trustee can NEVER legally represent you. However, he CAN act against you. Choose your representation wisely!

If a proposal is wrong for you, we would rather say so at the start. You can read more about proposals and bankruptcy.

DISCLOSURE:

Get Total Debt Relief is a debt consulting and representation firm. We are not a Licensed Insolvency Trustee, and we are not connected to the Canada Revenue Agency or any government body.

Only a Licensed Insolvency Trustee can file your documents for a consumer proposal or a bankruptcy with the Superintendent of Bankruptcy.

OUR SERVICE:

However, any Trustee you choose can’t legally represent you over your Creditors nor can he give you any advice that will benefit you over your Creditors. The Trustee’s job is to maximize how much he can get from you and your estate for the benefit of your Creditors and the more he collects in a Proposal, the more he makes.

What we do is the work before the filing and the path you choose will come from the advice and information that goes with it. More importantly, we use tools that are not available to the Trustee because of who’s interests he represents. We go through your whole situation with you. We answer your questions, for as long as it takes and as many times as you need to ask them. Every consultation is free and if or when you decide to move forward, you’ll know which option best suits you, your family and or your business. And, unlike the Trustee, we will NEVER use the information you’ve given us against you in Court. The bottom line is that we don’t look to liquidate your assets and equities, we look to protect them.

Every consultation is free, and you can call as many times as you need. Call 647-276-8844 or talk to us.