FAQ

A consumer proposal is a formal debt repayment agreement administered by a Licensed Insolvency Trustee. It allows you to offer your unsecured creditors repayment of part or all of what you owe, over a period of up to five years.

If accepted and approved, the proposal sets out the payments and conditions you must meet. It can be an alternative to personal bankruptcy, depending on your income, assets and debts.

A Mallette Licensed Insolvency Trustee can assess whether a consumer proposal is suitable for your situation.

A consumer proposal may be available if you are insolvent and your total debts do not exceed $250,000, excluding debts secured by your principal residence.

Eligibility is only part of the assessment. You also need to be able to make the proposed payments, and the offer must be acceptable to your creditors.

If your debts exceed the consumer proposal limit, a Licensed Insolvency Trustee can explain other options, including a Division I proposal.

Consumer proposal payments are based on your financial situation and the offer your creditors are willing to accept. There is no single repayment percentage that applies to everyone.

Your Licensed Insolvency Trustee considers your debts, income, household expenses and assets, as well as the amount creditors could receive in a bankruptcy.

The goal is to develop an offer you can realistically afford while providing creditors with an acceptable repayment arrangement.

No. A consumer proposal payment calculator can provide an illustration, but it cannot determine the amount your creditors will accept.

An accurate assessment requires a review of your debts, assets, income and expenses. The proposed payment may also change during discussions with creditors.

For an estimate based on your circumstances, speak with a Mallette Licensed Insolvency Trustee.

A consumer proposal cannot last longer than five years. It may provide for monthly payments, a lump-sum payment or another agreed payment schedule.

The length depends on the terms accepted by your creditors. Your trustee will explain the schedule and the obligations you must meet to complete the proposal.

You can generally complete a consumer proposal ahead of schedule by paying the remaining amount required under its terms.

Contact your Licensed Insolvency Trustee before making an additional payment. They can confirm the balance and explain the steps required to complete your file.

Early completion does not immediately remove the proposal from your credit report.

Contact your Licensed Insolvency Trustee as soon as you expect difficulty making a payment.

For monthly payment arrangements, a proposal is generally deemed annulled when arrears reach an amount equal to three payments, unless an amendment has been filed beforehand. Different timing rules apply to less frequent payment schedules.

An annulment can allow creditors to resume collection. Your trustee can explain whether an amendment or revival is available in your circumstances.

An individual consumer proposal does not release the other borrower from a joint debt.

If you and another person are both responsible for a loan or credit account, the creditor can generally seek payment from the other borrower for the unpaid balance, taking account of amounts already recovered.

For example, if you file a proposal but your spouse does not, your spouse may remain responsible for your joint line of credit.

Tell your trustee about every joint debt and co-signed account before filing.

A joint consumer proposal allows the proposals of two eligible individuals to be administered together as one file.

It may be appropriate when their debts are substantially the same and the trustee considers a joint filing to be in the best interests of the debtors and creditors.

Being married or living together does not automatically make a joint proposal appropriate. A Licensed Insolvency Trustee must assess each person’s finances and the debts they share.

No. You do not have to file together simply because you are married or in a relationship.

An individual proposal may be suitable when only one person has debt problems. A joint proposal may be worth considering when both individuals are eligible and their debts are substantially the same.

Your trustee can compare the options and explain their effects on each person.

Your filing does not automatically make your spouse responsible for debts held solely in your name.

However, your spouse may be affected if they co-signed a loan, share a credit account or jointly own assets with you. Household income may also be relevant when assessing bankruptcy payments.

Your trustee should review joint ownership and shared obligations before you choose a solution.

A co-signer or guarantor generally remains responsible for the debt even if you file a consumer proposal or bankruptcy.

The creditor may seek payment from them under the loan or guarantee agreement. Your filing protects you within the applicable legal framework; it does not automatically extend that protection to another person.

A separation or divorce does not, by itself, remove either borrower’s obligations to a creditor.

Even if a separation agreement assigns a joint debt to one person, the creditor may still pursue the other person if they remain liable under the original credit agreement.

Before filing a consumer proposal, have your trustee review your joint debts. A lawyer can advise you on the separation agreement and your rights between former partners.

Contact your Licensed Insolvency Trustee promptly. A separation can change household income, expenses and the ability to maintain the agreed payments.

The proposal does not automatically end or divide into two separate files because you separate.

Your trustee can review the existing terms and explain whether an amendment or another step is appropriate. Legal advice may also be needed concerning support obligations and the division of property.

According to the Financial Consumer Agency of Canada, Equifax and TransUnion remove a consumer proposal from your credit report three years after you have paid off the debts included in the proposal, or six years after you sign it, whichever comes first.

Completing your proposal does not immediately restore your credit score. Rebuilding credit takes time and depends on how you manage credit and payments afterward.

For a first bankruptcy, Equifax generally removes the record six years after discharge. In Quebec, TransUnion generally removes it seven years after discharge.

If you have declared bankruptcy more than once, the record can remain for 14 years.

The date of discharge matters: these periods are not simply counted from the day you file. Check with the credit bureaus to confirm the information in your own file.

Yes. Rebuilding credit is possible, but improvement is gradual and new credit is not guaranteed.

Start by maintaining a realistic budget, paying current obligations on time and checking your credit reports for errors. If appropriate for your situation, a secured credit card may help establish a new payment history.

Avoid borrowing more than you can repay. Your trustee can discuss practical steps during the financial counselling sessions.

You may be able to keep your bank account. However, if you owe money to the same financial institution, ask your trustee whether you should move your day-to-day banking elsewhere before filing.

This may help avoid problems involving account access or the bank’s right to offset funds against debts.

Review payroll deposits and automatic payments before changing accounts.

It may be possible, but approval depends on the lender, your income, credit history and ability to repay. Interest rates and borrowing costs may be higher.

If you are still an undischarged bankrupt, the law requires you to disclose your bankruptcy when obtaining credit of $1,000 or more.

Before taking on a car loan, review the full cost and discuss its effect on your budget with your trustee.

A consumer proposal generally allows you to retain your assets. However, it does not normally replace your obligations to secured lenders.

To keep a financed home or vehicle, you generally need to continue making the required mortgage or loan payments and comply with the agreement.

Your trustee will review the equity in your assets, the secured debts and whether the ongoing payments are affordable.

No. Bankruptcy does not mean that you lose everything you own.

Certain assets are protected by applicable exemptions. However, non-exempt assets or their value may have to be made available to creditors.

Your ability to retain a home, vehicle or other valuable property depends on ownership, equity, financing and the exemptions that apply. Ask your trustee for an assessment before assuming that an asset is protected.

RRSP funds are generally protected in bankruptcy, subject to exceptions. Contributions made during the 12 months before bankruptcy are generally not protected by the federal exemption.

The type of retirement arrangement and other applicable rules can also matter.

Provide your trustee with recent statements and contribution records so they can determine which funds are protected.

An inheritance, lottery winnings or certain other assets acquired before discharge may have to be made available to your bankruptcy estate.

Tell your Licensed Insolvency Trustee promptly if you receive or become entitled to an inheritance or another significant asset.

A consumer proposal operates differently, but you should still review its terms with your trustee before assuming that a financial change has no effect on your obligations.

Filing generally stays collection activity by unsecured creditors for debts covered by the proceeding.

However, exceptions apply, including certain secured creditor remedies and support-related proceedings.

If a creditor continues contacting you about a covered debt, provide your trustee’s contact information and notify your trustee.

Filing generally stops wage garnishments used to collect ordinary unsecured debts covered by the proceeding.

Some garnishments, including those relating to support obligations, may continue.

Give your trustee the garnishment documents promptly so they can determine whether the stay applies and take the appropriate steps.

Do not ignore it. Contact a Licensed Insolvency Trustee promptly to review your debt options, and obtain legal advice where needed.

If you have already filed a consumer proposal or bankruptcy, send the document to your trustee immediately.

Whether an action can continue depends on the debt, the creditor’s rights and the type of proceeding. A filing does not stop every legal action.

Many unsecured tax debts can be included in a consumer proposal or bankruptcy.

However, the outcome may differ if the tax authority has registered security, the debt involves fraud or other special rules apply.

Provide your trustee with notices of assessment, collection correspondence and details of any registered claims so they can assess your obligations.

Government student loans generally survive bankruptcy if you file before or within seven years after you ceased to be a full-time or part-time student.

After five years, a court may grant relief in qualifying hardship cases.

A consumer proposal does not automatically eliminate a student loan protected by these rules. Your trustee must review your study dates and the type of loan.

Some obligations are subject to special rules and are not automatically discharged. Examples include:

• Child and spousal support.

• Certain fines and court orders.

• Certain debts arising from fraud.

• Certain damages for intentional bodily harm or sexual assault.

• Government student loans that fall within the applicable time limits.

A consumer proposal can compromise certain protected debts only under specific legal conditions. Your trustee will explain which obligations may remain in your case.

A consumer proposal is an agreed repayment arrangement with your creditors. It generally allows you to retain your assets while making the payments set out in the accepted proposal.

Bankruptcy involves different obligations, including the treatment of non-exempt assets and possible surplus income payments.

Both affect your credit. The appropriate option depends on your income, debts, assets and ability to maintain payments.

For a first bankruptcy, you may qualify for an automatic discharge after nine months if you have no surplus income payment obligation, complete your duties and no opposition or other exception applies.

If surplus income payments are required, the usual period is 21 months.

Previous bankruptcies, objections and other circumstances can extend the process. Your trustee will explain the timeline that applies to you.

The cost depends on your income, household circumstances, assets and the administration of your file.

You may need to make surplus income payments under federal rules. Non-exempt assets may also form part of the bankruptcy estate.

Your trustee will explain the estimated payments and other consequences before you decide to file.

An employer cannot dismiss, suspend or discipline you solely because you filed a consumer proposal or bankruptcy.

However, certain regulated professions or positions may have disclosure requirements or other rules.

Tell your trustee about your profession and any licensing obligations so they can identify issues that require further advice.

Consumer proposals and bankruptcies are not completely private. Records are maintained by the Office of the Superintendent of Bankruptcy, and the filing is reported to credit bureaus.

Your creditors are notified. Your employer is not usually contacted solely because you file, although communication may be necessary to stop a wage garnishment or address another legal requirement.

A Licensed Insolvency Trustee is a federally regulated professional who assesses financial difficulties and administers consumer proposals and bankruptcies.

They review your debts, income and assets, explain available solutions and describe the consequences of each option.

At Mallette, our trustees help you understand your situation so you can make an informed decision.

You generally do not need a lawyer to file a consumer proposal or personal bankruptcy. A Licensed Insolvency Trustee administers the process.

Legal advice may nevertheless be useful if you face a dispute, an objection to discharge, a separation or another issue involving legal rights.

Your trustee can explain when consulting a lawyer may be appropriate.

Bring the information you have about your finances, including:

• A list of debts and recent account statements.

• Proof of income and a summary of household expenses.

• Tax notices and collection letters.

• Information about your home, vehicle, savings and investments.

• Details of joint debts, guarantees and co-signed loans.

• Any court documents or garnishment notices.

You can contact us even if you do not have every document ready.

No. Meeting with a Licensed Insolvency Trustee does not commit you to bankruptcy or a consumer proposal.

The purpose is to understand your financial situation and compare the available options. Depending on your circumstances, these may include budgeting changes, arrangements with creditors, debt consolidation, a consumer proposal or bankruptcy.

Mallette does not provide debt consolidation loans or personal loans. You can contact your financial institution to discuss those borrowing options.

Our Licensed Insolvency Trustees can review your budget and explain how a loan compares with other debt solutions.

A consolidation loan may simplify payments, but it remains a debt that you must repay.