Consumer Proposal

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What Does Debt Consolidation consist of?

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What is it?

A consumer proposal consists of modifying your obligations to your creditors by offering to make lower monthly payments over a longer period of time. Alternatively, you could also offer to repay your creditors only part of what you owe them.

It is also possible to submit a joint proposal. This situation occurs when certain consumer debtors (for example, a husband and wife) who have a close financial relationship submit several agreements so that they can be dealt as one. However, a proposal can be jointly submitted only if the consumer debtors’ total amount owed does not exceed $250,000 per person, or any other amount indicated.

Who can request a consumer proposal?

Any individual who is insolvent (including a bankrupt person) and who has debts not exceeding $250,000 (excluding a mortgage on the principal residence) may make a consumer proposal. In general, creditors appreciate the fact that you are willing to make efforts to repay them, at least in part.

In most cases, it will be easier to rebuild your credit rating if you choose a consumer proposal. You should also bear in mind that this option will be better regarded by your creditors than a bankruptcy. In addition, it will enable you to keep all your belongings. Our team will also provide you with the necessary help to acquire good budget management habits.

Also note that your unsecured creditors (such as credit cards and personal loans) will not be able to seize your property or wages (except at the time of the administrator’s withdrawal, rejection, cancellation or discharge before the proposal is fulfilled in its entirety).

However, creditors will be able to continue to recover debts that would not be extinguished by an order of discharge if you had opted for bankruptcy (unless the order explicitly provides for a compromise with regard to creditors and they vote in favor of this option).


Debt consolidation could enable
you to benefit from a lower
interest rate than what your
creditors charge?

Why choose this option?

Frequently Asked Questions about Consumer Proposals

Are you drowning in debt and now sure how to escape it? Are your debt problems so severe that they keep you up at night? A consumer proposal could be the solution to your debt woes. Poupart Syndic is a licensed insolvency trustee serving Montreal, Laval, Longueuil and the surrounding areas. Our advisors can help you address your debt issues, no matter what they may be. You can make an appointment for a free initial consultation with one of our advisors to start solving your debt problems today. 

To help you make an informed decision about your debt situation, we will address the most frequently asked questions about consumer proposals and the other insolvency options available to you. Do not hesitate to contact us to learn more about this solution or if you have any other insolvency-related questions.

Frequently Asked Questions (FAQ)

A consumer proposal is a payment agreement between you and your creditors. It is a contract for the payment of your debts. A consumer proposal allows you to set up payments that fit your budget, even if they are less than the amount you currently pay. You need to negotiate with your creditors through a licensed insolvency trustee, who will help you reach an agreement that benefits both parties.

After you enter a consumer proposal, you cannot take more than five years to pay off your debts. When you are negotiating, you must reach an agreement that does not last longer than five years. Our insolvency trustees can help you establish the best repayment term based on your budget and debts.

A consumer proposal offers several important advantages for dealing with debt problems. First, it allows you to avoid filing a first or second bankruptcy. You also get the priceless feeling of regaining your financial freedom more quickly.

A consumer proposal allows you to pay your debts more quickly or over a longer period, depending on your ability to pay and your situation. In other words, you can negotiate a debt repayment plan that fits with your budget. This lowers the amount of stress tied to high monthly debt payments. A lower monthly payment can ease your overall financial burden. 

Another advantage is that you will no longer have to pay interest on your outstanding debt. By law, the interest stops accruing when our insolvency trustee files your proposal, and it gets accepted by the Office of the Superintendent of Bankruptcy (OSB). Often, the accruing interest is the primary source of stress for someone suffering through insolvency problems. They must pay the interest each month, so the principal amount of their debt does not decrease. A consumer proposal allows you to pay down your debt without the burden of interest.

A consumer proposal can be useful if you have filed for bankruptcy before and would like to avoid the negative impact of a second bankruptcy. Also, if you are a professional and want to avoid damaging your reputation with bankruptcy, a consumer proposal offers an attractive alternative. Our advisors can help you decide if this solution is the best option for your specific situation. 

No, your property does not get seized as part of a consumer proposal request. Unlike bankruptcy, a consumer proposal does not involve the seizure and liquidation of property, or the garnishment of wages. This is yet another advantage of the consumer proposal. 

Furthermore, the consumer proposal prevents your creditors from suing you or demanding additional payment monthly. Stopping creditors from pursuing you can help reduce the stress associated with your debt situation. There is nothing more stressful than having to answer phone calls following up after a late or missed payment that you cannot afford to make. Once the OSB accepts your consumer proposal, your creditors can no longer contact you. Our team will take care of all communications during the entire process and act as the intermediary between you and your creditors.

Unfortunately, a consumer proposal does not help you get rid of all your debts. As with bankruptcy, there are certain debts that you will still have to pay separately after filing your consumer proposal. You will, however, be able to get rid of most of your debts, which is a major advantage. The debts that you cannot include with your consumer proposal include: 

  • Student loans
  • Alimony debts
  • Debts related to fraud
  • Debts from a commitment or surety bond related to a criminal case 

There are a few exceptions to these rules. For example, if you have been out of school for more than seven years, your student loan could be included in your consumer proposal. If you would like to know if your debts qualify, contact our licensed insolvency trustee. At Poupart Syndic, we understand that each situation is unique. For this reason, we always offer personalized solutions. Our experts can help you see a clear way out of your debt situation. 

Recent purchases may be the subject of negotiation. Some creditors may object to recent purchases being included in the request. Their argument is that you knew you would make the request when you bought these items. In these cases, you may not be able to include these recent debts in your consumer proposal. You would be liable for them and would have to pay them off separately at the end of your proposal term. 

Anyone who resides and owns property in Canada has a right to request a consumer proposal. Here is a closer look at the conditions that you need to meet to be eligible for a consumer proposal. 

  • You must have debts worth at least $1,000 CAD.
  • The sum of your debts cannot exceed $250,000 (excluding a mortgage on your property).
  • You must be in an insolvency situation. This means that you cannot make the payments your creditors require each month, or you are delinquent on utility, bank, credit card, or cell phone accounts. 
  • The total amount of your assets must be less than the total amount of your debt. In other words, even if you sell all your property, the proceeds from the sale would not cover your debts. 

Yes, the law requires that you work with a licensed insolvency trustee. Only Licensed Insolvency Trustees (LITs) accredited by the OSB, like Poupart Syndic, can file a request for a consumer proposal on your behalf. It is necessary to contact a licensed insolvency trustee if you wish to make a consumer proposal. 

The role of an insolvency trustee is to examine your financial situation and determine the reasonable amount that you can repay each month. Based on your budget, they will help you draft a consumer proposal. The trustee will support you as you gather all the necessary supporting documents and meet any other requirements. They will also handle all the negotiations with your creditors, so you will not have to communicate with them anymore. In other words, the insolvency trustee is extremely helpful because they act as the intermediary between you and your creditors throughout the process. 

You may be concerned that you will not have enough money to pay the insolvency trustee when applying for a consumer proposal. You do not need to worry because the fees for this insolvency solution get included in the monthly payments that you make to your creditors. You will make one monthly payment to the licensed insolvency trustee, and they will disburse the money as needed for fees and debt payments. This monthly payment also includes any service fees related to your consumer request for proposal. 

In some cases, your creditors may refuse your consumer proposal request. If this happens, you will have to go back to your original payment arrangement and make monthly payments as required. 

If this is not an option, you may have to declare bankruptcy. Don’t worry if you have reached this stage. One of the main advantages of bankruptcy is that it allows you to eventually resolve your debt issues and get back on your feet again. The Bankruptcy and Insolvency Act was made to offer a second chance to those in debt who want to make a fresh start while getting protection from their creditors. Our advisors will be able to assist you regardless of your situation. If you are not sure about what steps to take, contact us. 

When applying for a consumer proposal, make sure you can meet monthly payment requirements. If you default, the proposal could get canceled. If these cases, you must then return to the original payment agreement that you had with your creditors before you filed the consumer proposal. Also, if you miss three consecutive payments, the consumer proposal gets canceled. As you can see, it is essential to ensure that you can make the monthly payments. If you fail to do so, you will have to go back and start from scratch. Our insolvency trustees will help you create a manageable budget and also rebuild your credit score after you complete the process. 

Are you concerned that your bank account will get seized or closed when you apply for a consumer proposal? You need not worry; your bank accounts will remain active. You have the right to open a new account or retain your existing accounts. After your consumer proposal or bankruptcy, you may even be able to borrow money again. With a little patience, things will return to normal. 

Yes, you will be able to borrow money after bankruptcy or a consumer proposal. Many people manage to get out of debt and get back on their feet within two or three years after taking action to correct their financial problems. 

Most creditors do not like to lend money to people in the midst of a consumer proposal period. However, you may be able to borrow money if you make payments on time and if your consumer proposal has been in effect for a while.

You will be able to keep most of your belongings when making a consumer proposal. The exceptions may be a house or a car that you are not able to repay. Sometimes handing over a home or vehicle to a creditor can be a source of relief for someone suffering through insolvency. The financial losses that you incur after handing over these high-value assets will get included in your proposal. This will allow you to get rid of some of your heaviest debt right away and ease your overall financial burden. 

A consumer proposal will appear on your credit report and will remain there for several years. A consumer proposal gets you an R-9 on your credit report and an R-7 for three years following your release from the proposal. 

An R-9 credit score is the worst you can get (R-1 is the best), but the consumer proposal offers a significant advantage over bankruptcy for your credit rating. After your release from a consumer proposal, your score immediately moves to R-7. However, with bankruptcy, the R-9 mark will remain on your report for up to seven years after release. As you can see, the R-9 period is much shorter for consumer proposals. 

You should be aware that bankruptcy is not the only situation that could result in an R-9 on your credit report. If one of your debts gets referred for collection or if you move and disappear “without a trace,” your credit report could also get an R-9. 

The point is that you need not panic if you see an R-9 on your report because of a consumer proposal. It will only be temporary. Other situations, such as a debt-to-income ratio of more than 40%, could prevent you from accessing financing even if you have an excellent credit history. More good news is that your credit score will increase if you make on-time payments and stick to the terms of your agreement with creditors. 

Certain tips can help you increase your credit score after debt problems. For example, you could apply for a secured credit card that allows you to increase your credit score by making monthly payments on time. 

Rebuilding your credit after a consumer proposal will take time, but it is achievable, and our Licensed Insolvency Trustee will be there to assist you as you get on your feet again. 

If you make a consumer proposal, and you have a common-law partner, a trustee will analyze your case to decide whether your partner is liable for your debts. If they are, your creditors may require them to pay some or all your bills, depending on the details of the situation.  

If you and your spouse do not have debts in common, then your consumer proposal will not affect their credit report. If the situation is reversed and your spouse files the proposal, you will need to help repay the debts that you have in common. One of the ways to avoid an adverse effect on your credit report is to offer creditors a deal similar to the original agreement. If you do this, the proposal should not affect your credit report, and your spouse can still continue with their effort to repair their finances.

At Poupart Syndic, we have an excellent acceptance rate. Most of our consumer proposals get accepted, so yours has a good chance if you rely on us. You should be aware that not all your creditors have to sign off your consumer proposal. However, if more than 50% of them refuse it, your application could get rejected. If this happens, our Licensed Insolvency Trustee may be able to negotiate a new agreement that suits both parties. 

There are other alternatives to a consumer proposal if you are in insolvency. One of the options is debt consolidation. With this solution, you move all your debts to one place, such as a bank, and you make a single payment each month. 

Basically, you are borrowing money from your bank to pay off your other debts all at once. The consolidation loan works like any other type of loan, with interest accruing on the amount borrowed. The interest gets added to the monthly principal payments until the debt gets paid off. 

Debt consolidation is a good option because it puts all your debts into one place. It allows you to get rid of debts from creditors, and you only have to deal with your bank. Your creditors won’t harass you, and you will only have one payment to manage each month. 

Another advantage of debt consolidation is that it won’t ruin your credit report. Creditors won’t seize your property or garnish your wages. Unlike a consumer proposal or bankruptcy, debt consolidation does not require the services of an insolvency trustee. A financial advisor at a bank may be able to help you with a debt consolidation loan and with deciding your monthly payments and repayment capacity. 

Do you have questions about debt consolidation or a consumer proposal? Our advisors are here to help you make informed decisions about your debt situation. You can also refer to our frequently asked questions page on debt consolidation. Contact us today to set up a free consultation. 

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