While this shouldn’t be complicated, terminology can lead to a lot of confusion. This is no truer than with the concept of a consumer proposal in Canada. Part of the problem is that non-licensed, non-registered debt consultants have created a whole series of ways to describe what is really just a consumer proposal in order to sign people up for their services. To help, we are going to define several common terms around the consumer proposal business.
What does ‘registered’ mean?
All consumer proposals in Canada are ‘registered’. When you sign your consumer proposal documents, they are filed with the federal government. Most Licensed Insolvency Trustees file the paperwork online the day you sign. This official filing provides your proposal start date, and specifies the beginning of your creditor protection. Any debts owing up to that date are included in your proposal.
Read More: How a Consumer Proposal Works
There are many other terms to that refer to a common consumer proposal in Canada:
- Consumer debt proposal
- Canada government debt relief program
- Consumer proposal bankruptcy
- Credit proposal
- Bankruptcy proposal
- Debt proposal
- Proposal to creditors
- Creditor proposal
Don’t let anyone fool you. These all mean the exact same thing. Here’s what you need to know about ‘registered’ consumer proposals in Canada:
- A consumer proposal can only be filed with a Licensed Insolvency Trustee.
- It is a debt proposal and repayment plan than can last up to 5 years.
- You settle your debt for less than you owe.
- You make one, single, monthly payment to your trustee.
- A proposal provides protection from collections and creditor actions.
- You can pay them off early, or even in one lump sum.
Read More: Benefits of a Consumer Proposal
Who Is Licensed to Provide Consumer Proposal Services?
Only a Licensed Insolvency Trustee can legally provide consumer proposal services in Canada. No-one else is registered to be able to file a formal proposal to creditors through the Bankruptcy & Insolvency Act. In a consumer proposal, the trustee acts as the Consumer Proposal Administrator. They will communicate with your creditors and help you work through the process; from assessment all the way through completion until your debts are eliminated.
NEVER pay anyone else for consumer proposal advice. You do not need help collecting or filing any paperwork. Licensed Insolvency Trustees are experts in both bankruptcy and consumer proposals. They work with debtors every day, so they understand how to craft the best plan to ensure that you can afford the monthly payments and that the plan will be accepted by your creditors.
There are many unregistered debt consultants in Canada who offer to help you with your debt and will promote a consumer proposal program. They earn their money by charging you administration fees ahead of the signup and sometimes earn a commission from the trustee through some form of arrangement. Hoyes Michalos does not work with these types of agents as we do not believe you should ever pay for support in filing a consumer proposal. Our consultations, as many as you need, are always free.
Formal or Informal Debt Proposal?
There are debt management programs other than a consumer proposal. An actual Debt Management Plan, filed with a legitimate credit counselling agency is a program to repay 100% of your debts, often with interest relief. If this is a better option for you, we can refer you to an accredited agency.
An informal proposal, or debt management plan, is not for everyone. That is because not all debts can be included. Also, if you have several creditors, it is hard to get a legal binding agreement from everyone.
Informal debt proposals also do not stop wage garnishments or other legal collection activities. Creditors must volunteer to participate, and they may not. Collection agencies may still call to collect on debts not included in the program.
In contrast, a consumer proposal is a formal, legally binding debt proposal. Almost all unsecured debts, including tax debt and certain student debt, can be forgiven through a legal consumer proposal.
If you need to make a proposal to your creditors, do so through a formal, legal, registered consumer proposal. Talk to a Licensed Insolvency Trustee to see if this is the right option for you.