Duration Of A Consumer Proposal
How Long Is The Average Consumer Proposal?
By law, consumer proposals may be up to 60 months long.
The government agency that oversees consumer proposals does not produce public statistics on the average proposal term offered, or the average time taken to complete a proposal.
In our own practice, the average payment term offered is 47 months and the average length of time to actually pay off a consumer proposal is 42 months. The difference lies in the fact that once you have filed a consumer proposal your finances improve to the point that people find that they are able to make a few extra payments to complete their proposal sooner.
How Long Should You Offer?
A more important question to ask when you are considering a consumer proposal is how long a term should you offer?
I am of the opinion that you should ask for 60 months to pay off your proposal. This produces the lowest possible payment over time. Another reason to pick the maximum term of 60 months is if you offer your creditors less than 60 months your creditors might simply ask you to pay the same amount for 60 months instead of the shorter term you have offered. If you start at the maximum term you eliminate one variable – if your creditors want to ask for a change to your offer they may ask you to increase your monthly payment. If your payment is reasonable based on your income and expenses they are less likely to do this.
This does not mean however that you will be ‘stuck’ with a 60 month proposal if your financial circumstances change.
By law consumer proposals are “open” which means you have the right to pay them off more quickly, which is what most people do.
The exception to the rule of offering a 60 month payment term might be if you expect a lump sum to be available to offer your creditors. Perhaps you expect to receive a bonus soon or proceeds from the sale of an asset. In these circumstances you can make a lump sum or even partial lump sum offer to your creditors. The same rules apply however as to what realization your creditors will expect in total.
Other Payment Considerations
It is also important that you select a trustee that handles enough consumer proposals to be familiar with all of the nuances associated with filing.
What you want is a trustee that tracks voting patterns for each of the major banks and the government.
You want a trustee that uses pre-authorized payments.
You want a trustee that can tell you how many consumer proposals they filed last year, how many were approved as filed, how many were changed by the creditors, how many have already failed.
How Much Time a Consumer Proposal Takes From Filing Until Completion
If you’re interested in filing a consumer proposal, you might be wondering how long the process takes. Below, we’ll walk you through each step.
Getting Started
If you want to file for a consumer proposal, find an LIT. The federally-regulated professionals are licensed to act as a third-party between you and your creditors. They know the ins and outs of debt management and will be able to come up with an acceptable consumer proposal for you to offer to your creditors.
The process begins with an initial assessment, in which the LIT will ask questions about your debt, assets and income in detail. You are required to fully disclose all details to the LIT so they can provide you with the options available to resolve your debts.
Upon signing the consumer proposal documents, the LIT will file the documents with the OSB and then send the consumer proposal documents to your creditors.
Approval of the Consumer Proposal
The creditors have 45 days from the date your consumer proposal is filed with the OSB to reject the consumer proposal and request that the LIT convene a meeting to consider the consumer proposal. Upon expiry of the 45 days, if less than 25% in dollar value of the creditor claims received by the LIT requests a meeting, the consumer proposal is deemed to have been accepted by the creditors.
If, within the 45 day period, at least 25% in dollar value of the creditor claims received by the LIT request a meeting or the OSB requests a meeting, the LIT must call a meeting of creditors to consider and vote on the consumer proposal. At the meeting, the consumer proposal will be accepted if a simple majority of creditors, as determined by the dollar value of the claims present and eligible to vote, accept the consumer proposal as filed or as amended at the meeting. If the creditors vote against the consumer proposal, the creditors’ rights are revived, and they may once again commence or continue collection proceedings.
Within fifteen days of creditor approval, the court may be asked to review the consumer proposal. The court shall either approve it or reject it. If the court does not approve the consumer proposal, the creditors’ rights are revived, and they may once again commence or continue collection proceedings. If the court approves the consumer proposal, or the court is not asked to review it, the consumer proposal is deemed, by law, to have been approved by the creditors and the court. The creditors are then bound by the terms of the Consumer proposal.
Making Payments
Once your consumer proposal is approved by the court, you will make payments directly to your LIT. The LIT will work with you to figure out a payment schedule that works for you. The LIT will monitor your payments and distribute the funds periodically throughout the process, as outlined in the consumer proposal.
How Long Does a Consumer Proposal Remain on Your Credit Report?
In Ontario, consumer proposals are removed from your credit report slightly sooner than bankruptcy.
Through Equifax, your consumer proposal is removed from your credit report 3 years after you have completed the consumer proposal and been issued the Certificate of Full Performance.
Through TransUnion, your consumer proposal is removed from your credit report following whichever one of these instances occurs sooner:
- 3 years have passed since the consumer proposal has been completed; or
- 6 years have passed since you filed the consumer proposal.
Conclusion
Debt may seem impossible to pay off. However, working with an LIT can help you reach an outcome where you’re free from debt. Consult with an LIT if you think a consumer proposal may be right for you.