Discover how to offer your creditors a lower settlement based on your ability to repay.
What is a Consumer Proposal?
A consumer proposal is an agreement that your trustee negotiates with your existing creditors to reduce the amount to be repaid. The new monthly payment will be based on your financial capacity rather than the total amount of your debt plus interest. Unlike a debt consolidation, you are not obligated to repay 100% of your debts. Furthermore, since the law states that the interest rate for a consumer proposal is 0%, on an offer of $20,000, for example, you would save a minimum of $6,700 in interest compared to a debt consolidation loan.
Creditors are generally open to such agreements as long as they are convinced of your good faith, your ability to meet the new promised amount, and that the proposal offers them a higher amount than what they could expect to receive if you were to declare bankruptcy.
Why file a consumer proposal?
Payment reduction: If your financial situation justifies it, you are not obligated to repay 100% of your debts. Additionally, the interest rate on your unsecured debts (personal loans, credit cards, lines of credit, etc.) is automatically limited to 0%, significantly reducing the monthly amount you will have to pay.
Easier to manage: All debts are consolidated into a single payment that you make to the trustee, making it easier to manage your finances and reducing the risk of payment defaults. Furthermore, the trustee acts as the intermediary between you and your creditors and is responsible for negotiating (and all communications) with them.
Majority vote: A simple majority of your creditors is sufficient for all creditors to be bound by the proposal. Therefore, there is no need to convince each individual creditor. Additionally, if creditors do not respond within the 45-day period they have to vote following the filing of your proposal, they are presumed to have accepted the proposal.
Protection and peace of mind: A consumer proposal provides protection from your creditors, allowing you to breathe easier. Once your proposal is filed by the trustee, all collection actions, including calls and seizures (with rare exceptions), will cease. The trustee will handle all communication with your creditors.
Your assets: You have the choice to keep the assets you want, such as your house and car, and surrender to your creditors those you no longer wish to keep. For example, if your car is too expensive for your budget or you prefer not to keep it, you can surrender it to the creditor, and any loss they incur will be included in your proposal.
How much should I offer to my creditors?
After analyzing your financial situation (assets, debts and budget), your advisor at Jean Fortin will help you determine a reasonable amount for the creditors that you can afford. It is a combination of the value of your assets and the amount you have available each month for your creditors that will determine the amount and duration of your proposal offer. Your advisor will be responsible for presenting this offer to your creditors and negotiating with them, if necessary.
Who can administer a consumer proposal?
Only licensed insolvency trustees, such as the professionals at Jean Fortin, are authorized to file a consumer proposal. We are experts in personal finance and can help you choose the best option.
If a consumer proposal is determined to be the best solution for you, it will be prepared and negotiated by your trustee. It is also to your trustee that you will make the monthly payment as agreed upon, and who will distribute the funds to your creditors.
Once your proposal is filed, you are protected by law, and all communication with your creditors will be handled by your advisor at Jean Fortin.
The consumer proposal is a good option for you if...
- You are able to repay at least part of your debts.
- You have already filed for bankruptcy before and you want to avoid the inconveniences of a 2nd bankruptcy.
- You have assets that are worth substantially more than the amounts owed to your secured creditors.
- You want to avoid bankruptcy for reasons other than financial.
- You are a professional or have a license and you do not want to be affected by bankruptcy.
The 5 steps of a consumer proposal:
- Schedule an appointment with one of our personal finance advisors for a review of your financial situation. This is an opportunity to ask questions and learn about all possible options available to you.
- Based on the recommendations of your advisor, we will prepare a proposal with monthly payments that are in tune with your financial capacity.
- Filing of your proposal, distribution to the creditors, and final vote on the proposal on the 45th day.
- Begin making your monthly payments and have 2 budget consultations with your advisor.
- Upon making the final payment, your proposal is completed, and you can start your debt-free life!
Sometimes, the financial advantages and disadvantages of these 2 options are quite similar, making your decision even harder. If you’re unsure which of the 2 options is best for you and you are wondering about the differences between bankruptcy and a consumer proposal, we invite you to read our articles At any time, please feel free to consult with one of our advisors. He or she will take the time to have an open and honest discussion with you to help make the best choice, free of charge and with no obligation.
Once you all well-informed, the final decision will then depend on factors that are more personal and aligned with your values.
The impact of a consumer proposal on your credit report
1st stage: In the context of a consumer proposal, the credit rating associated with each debt included in your proposal will be R-9. Debts that you continue to pay, such as your car loan or mortgage, will have a rating of R-1 (or M-1) if you remain up to date with those payments.
2nd stage: Once your proposal is fully paid, the debts included in it are «discharged», meaning that creditors cannot demand repayment from you anymore. The credit rating for each of these debts will increase to R-7, the balance owed on them will be reduced to zero, and with no more debts, your credit file begins to recover more rapidly.
3rd stage: The mention of your consumer proposal and the debts included in it will be permanently removed from your credit report 3 years after the completion of the proposal.
Better than doing nothing
While it is true that a consumer proposal has a negative impact on your credit report, often, when people are heavily in debt, their credit is already tarnished. In such cases, the proposal is not the problem but rather the solution, as the most damaging factors for a credit report are payment delinquencies and excessive debt.
A consumer proposal allows you to consolidate your debts into a single payment, eliminates all interest charges, and reduces, in most cases, the total amount of debts to be repaid. Often, it is the only way to balance your budget and regain control of your debt. And that is what your creditors will appreciate. Therefore, the impact of a consumer proposal on your credit report should be evaluated in the medium and long term, particularly in relation to your overall financial well-being.
Recently Accepted Proposals
|Client||Debts||Proposal||Savings (incl. interest) %||Creditors|
|#1||40 180 $||24 000 $||39 540 $||NBC-President's Choice, Canadian Tire|
|#2||28 550 $||6 000 $||35 300 $||Telus, Visa-RBC, BMO, Hydro-Quebec|
|#3||37 500 $||9 000 $||44 850 $||Canadian Tire, Visa-Desjardins, Scotia Bank|
|#4||85 200 $||51 000 $||71 000 $||Visa-TD, Scotia Bank, Revenu Quebec, Visa-Desjardins|
|#5||42 000 $||15 000 $||34 000 $||Canadian Revenue Agency, Revenu Quebec|
If you are struggling to repay 100% of your debts but can offer a reasonable amount to your creditors, a consumer proposal is an excellent alternative to balance your budget and regain your financial freedom.
The discharge from bankruptcy will erase all debts, except those listed in Section 178 of the Act which reads as follows:
- Any award of damages by a court in respect of bodily harm intentionally inflicted, or sexual assault, or wrongful death resulting therefrom;
- Any debt or liability for alimony;
- Any debt or liability under an order for the maintenance and support of a spouse or child living apart from the bankrupt;
- Any debt or liability arising out of fraud, embezzlement, misappropriation while acting in a fiduciary capacity;
- Any debt or liability for obtaining property by false pretences or fraudulent misrepresentation;
- Any liability for the dividend that a creditor would have been entitled to receive on any provable claim not disclosed to the trustee;
- Any debt or obligation in respect of a student loan guaranteed by the government where the date of bankruptcy occurred before the date on which the bankrupt ceased to be a student or within 7 years after the date on which the bankrupt ceased to be student;
- Any debt for interest owed on any of the above noted non-dischargeable debts.
Under the Act, you have the right to have or open a personal bank account even if:
- You are unemployed;
- You do not have money to deposit in it immediately;
- You have declared bankruptcy.
However, the Bank is entitled to refuse to open an account if:
- It believes that you will use the account in an illegal or fraudulent manner;
- You have ever engaged in illegal or fraudulent activity at a bank over the past seven years;
- You have provided it with misleading information;
- You do not agree that it verify the information described above;
- You are unable to present proper identification.
If you are dissatisfied with any decision or action taken by a financial institution, you can complain to the Ombudsman for the bank. His role is to analyze the situation objectively and make corrections when necessary. Here’s how to reach them:
CIBC Bank : 1-800-308-6859
Bank of Montreal : 1-800-371-2541
Laurentian Bank : 1-800-479-1244
National Bank : 1-888-300-9004
Royal Bank : 1-800-769-2542
Scotia Bank : 1-800-785-8772
TD Bank : 1-888-361-0319
Desjardins Group : 514-281-7434
Ombudsman of the Canadian Bankers Association : 1-888-451-4519
Financial Consumer Agency of Canada (FCAC) : 1-866-461-2232
Can a consumer proposal stop legal proceedings including the seizure of my property or the garnishment of my wages ?
In declaring bankruptcy or filing a consumer proposal, you place yourself under the “protection of the law”. All seizures or judicial proceedings are stopped except for three exceptions:
- A secured creditor may continue his proceedings (ex. a mortgage creditor), but the proceedings are limited to the repossession the assets subject to a lien (ex. mortgage, conditional sales contract);
- A garnishment of wages for alimony or child support payments;
- A creditor who has obtained a judgement of the Court. This is an extremely rare exception and usually involves fraud.
English version to come.
If you declare bankruptcy, you are required to turn in all of your credit cards, whether or not amounts are owed. On the other hand, although you are not required to turn in your credit cards if you file a proposal, the issuer will likely cancel said card if there is an amount owed or if the issuer is otherwise informed of your proposal.
English version to come.
Your credit rating score will be an R-9 during the period of your proposal and an R-7 for a period of three (3) years after the end of your proposal. Whereas in the case of a bankruptcy, your credit rating score will be an R-9 for six (6) years following your discharge from the bankruptcy. Most people refer to the time period as seven (7) from the date you declare bankruptcy.
Yes. One of the primary goals of the consumer proposal is to allow the debtor to keep all its assets. However, the more assets you have, the more your proposal will have to offer in order for it to be interesting for the creditors.
English version coming soon.
If your former spouse declares bankruptcy, it does not release you in any way from continuing to pay alimony, child support, or any arrears. As well, if you owe your former spouse alimony, or child support payments, you could have your wages garnished notwithstanding the bankruptcy. Alimony, child support and arrears are very well protected and these debts will live on after the bankruptcy.
It goes without saying that if, just prior to your declaring bankruptcy, you used your credit cards and made purchases knowing full well that the charges would not be paid back, such actions are not acceptable under the Act. In such cases, the Act provides that the creditors may oppose your discharge, or they may ask the court to have you pay additional amounts to the trustee or to have the debt declared non-dischargeable. This last recourse would mean that the debt would have to be paid back after your discharge from your bankruptcy, with interest. This type of behaviour is not recommended.
English version coming soon.
English version coming soon.
The only requirement is that a business, whose sole proprietor is in bankruptcy, must give notice to those with whom he deals that he is in personal bankruptcy. On the other hand, you no longer can be an administrator of an incorporated company so long as you are not discharged from your bankruptcy.
90% of proposals filed by Jean Fortin & Associés are accepted.
Find out how bankruptcy will put an end to your financial difficulties by quickly unloading the weight of your debts.
Loan Payment Calculator
Use the loan calculator to determine the monthly cost of a loan.
Other than the lack of work, arrears in income and sales taxes are, in our experience, a self-employed person’s greatest risk.
Talk to one of our personal finance experts
We are happy to answer any questions and help you see things more clearly.
Call us toll free—we’re here to listen.
Monday to Thursday from 8:00 am to 8:00 pm and Friday from 8:00 am to 5:00 pm.
Find a Jean Fortin office near you
Identify your nearest Jean Fortin office by region, location or geolocation.
Book an appointment
Complete a short appointment form directly online to contact one of our financial recovery counsellors.