How long does a consumer proposal last?
The consumer proposal is an increasingly popular debt solution amongst Canadians1. This effective solution for reducing debt raises many essential questions for those in financial difficulty. This article examines the duration, monetary implications, and protections offered by a consumer proposal.
Consumer proposal overview
A consumer proposal is a formal agreement between a debtor, the person who owes money, and their creditors, those to whom the money is owed. Proposed through a licensed insolvency trustee, this agreement allows the debtor to keep their assets, if they wish, and to repay a portion of their debts without interest according to a repayment plan agreed upon and approved by an insolvency professional, based on their financial capacity.
Repayment period of a consumer proposal
A consumer proposal can last up to 60 months. However, this period can be negotiated and adjusted depending on the financial circumstances and capacity of the debtor and the requirements of the creditors. It is also possible to repay a consumer proposal faster than originally agreed. When possible, this option is strongly recommended as it reduces the impact on the credit file.
Financial commitment of a consumer proposal
Throughout the duration of the consumer proposal, the debtor is required to make payments to the trustee according the terms agreed upon by the creditors. Depending on what was negotiated, these payments can be monthly or according to another schedule determined in the proposal. The law allows a small margin of up to less than 3 months of non-payments without consequence. However, if the proposal is in default for 3 months or more, the proposal will be canceled.
Protection offered during the consumer proposal
It is important to note that during this period, the debtor is protected by Law from any collection measures (legal action, seize property, etc.) and calls by creditors for the debts included in the proposal, that is, all debts other than those secured by assets (e.g., house, car, ATV).
What happens to debts when the consumer proposal is completed?
Once all the conditions of the consumer proposal are fulfilled and the payments are made in full, the debts included in the proposal are considered settled. This means that the debtor is released from any obligation to repay them and can regain a more stable and healthy financial situation.
How to make a consumer proposal?
If you are interested in a consumer proposal, you must first consult a Insolvency professional such as Jean Fortin & Associés, for an informative and free consultation. They will be able to explain the advantages and disadvantages, the steps of a consumer proposal, analyze your financial situation, and find the solution best suited to your needs.
By Pierre Fortin
Jean Fortin & Associés
Personal Finance Advisor
Licensed Insolvency Trustee