Use this calculator to get an estimated idea of what your monthly payments could look like under a consumer proposal, based on common repayment scenarios. This is an estimate only and not a guarantee.
Understanding the Consumer Proposal: Your Path to Debt Relief
Are you struggling with overwhelming unsecured debt? A consumer proposal might be the solution you've been searching for. It's a legally binding agreement between you and your creditors, allowing you to pay back a portion of what you owe, typically over a period of up to five years, without declaring bankruptcy.
What is a Consumer Proposal?
A consumer proposal is a formal debt restructuring option available in Canada. It's administered by a Licensed Insolvency Trustee (LIT) and offers individuals a way to avoid bankruptcy while still significantly reducing their debt burden. Instead of paying back 100% of your unsecured debt, you propose to pay back a percentage of it, or extend the time you have to pay, often with no interest on the outstanding amount once the proposal is filed.
- Alternative to Bankruptcy: It's often preferred over bankruptcy as it allows you to keep your assets.
- Legally Binding: Once accepted by creditors and approved by the court, it protects you from collection calls, wage garnishments, and legal actions.
- Fixed Payments: Your payments are fixed and affordable, structured to fit your budget.
How Does a Consumer Proposal Work?
The process begins with a consultation with an LIT. The LIT will review your financial situation, including your income, expenses, assets, and debts. Based on this assessment, they will help you formulate a proposal to your creditors. This proposal outlines how much you are offering to pay, and over what period.
Here’s a simplified breakdown:
- Consultation: Meet with a Licensed Insolvency Trustee (LIT) to assess your eligibility and options.
- Proposal Preparation: The LIT helps you draft an offer to your creditors, detailing the total amount you can repay and the monthly payment schedule.
- Creditor Vote: Your LIT files the proposal, and creditors have 45 days to vote on it. If creditors representing more than 50% of the dollar value of the proven claims vote to accept, the proposal is legally binding on all unsecured creditors.
- Payments: Once accepted, you make regular payments to your LIT, who then distributes the funds to your creditors.
- Completion: Upon successful completion of all payments, you are legally released from the debts included in the proposal.
Benefits of a Consumer Proposal
Choosing a consumer proposal comes with several significant advantages for individuals facing financial hardship:
- Debt Reduction: You typically pay back only a portion of your unsecured debts, often 20-40%.
- Stop Interest: All interest on your unsecured debts stops accruing the moment your proposal is filed.
- Protection from Creditors: A "stay of proceedings" immediately stops collection calls, lawsuits, and wage garnishments.
- Keep Your Assets: Unlike bankruptcy, you generally retain all your assets, including your home, car, and investments.
- Affordable Payments: Payments are structured to be manageable within your budget.
- Avoid Bankruptcy: It's a less severe option than bankruptcy and has a less significant impact on your credit history.
Who is a Consumer Proposal For?
A consumer proposal is suitable for individuals who:
- Have unsecured debts (credit cards, lines of credit, personal loans) totaling between $1,000 and $250,000 (excluding mortgage on principal residence).
- Have a stable income that allows for affordable monthly payments.
- Want to avoid bankruptcy and keep their assets.
- Are looking for a structured, legal way to resolve their debt issues.
How Our Calculator Can Help You
Our Consumer Proposal Calculator provides a quick, preliminary estimate of what your monthly payments and total repayment could look like. By inputting your total unsecured debt, monthly income, and expenses, you can get a clearer picture of the potential benefits and affordability. Remember, this tool is designed for educational purposes to give you a starting point. Your actual consumer proposal details will be tailored to your unique financial situation by a professional LIT.
Important Considerations
While a consumer proposal offers significant relief, it's essential to consider all aspects:
- Credit Score Impact: It will affect your credit score, but typically less severely than bankruptcy. The proposal will appear on your credit report for three years after it's completed or six years from the date it was filed, whichever comes first.
- Licensed Insolvency Trustee (LIT): You must work with an LIT; they are the only professionals legally authorized to administer consumer proposals in Canada.
- Financial Education: You will be required to attend two financial counselling sessions during your proposal.
If you're considering a consumer proposal, the next step is always to consult with a Licensed Insolvency Trustee. They can provide personalized advice and guide you through the entire process.