Are you considering a consumer proposal as a solution for your debt problems? If so, you might wonder how long it takes to file one and kickstart the process.
The simple answer is that filing the required documents with the federal government takes just one day (your Licensed Insolvency Trustee will take care of this). However, your proposal technically becomes a legally binding agreement after 60 days. For that to happen, your unsecured creditors must vote in favour of it, and the court needs to approve it.
In this guide, we explain the steps involved in getting your proposal filed and approved and how long each takes to complete.
The consumer proposal filing process from start to finish
Here’s what you can expect during the consumer proposal filing process:
Step 1: Meet with your trustee
Timeline: One day
Before pursuing a consumer proposal, it’s important to know how it works and ensure it’s the option that will help you find lasting debt relief. Therefore, the first step is meeting with your trustee to review your financial situation and explore your options. Your trustee will explain the pros and cons of a consumer proposal and alternative debt relief programs like personal bankruptcy. They will help you choose the best options based on your needs, preferences, and comfort level.
Note: You’re not obligated to decide if you want to file a consumer proposal during your first meeting. At David Sklar & Associates, you’re in the driver’s seat – we give you all the time you need to decide how and when to proceed. Our goal during that first session is to learn where you stand financially and help you find the best path forward. However, if your debt situation is dire, we can have your proposal registered in as little as one day.
Step 2: File your proposal with the OSB
The next step is for your trustee to file your proposal with the Office of the Superintendent of Bankruptcy (OSB). The OSB is the federal government agency that regulates and oversees the administrations of consumer proposals and bankruptcies in Canada.
Once the government agency approves your proposal, you’ll be granted a stay of proceedings. A stay of proceedings is a court ruling that prevents your unsecured creditors from taking legal action against you to recover the money you owe. These include wage garnishments, liens, and bank account freezes. It also requires creditors to halt all collection actions, including those intrusive phone calls.
At this stage, your unsecured debts also stop collecting interest, and you can legally stop making payments. Your trustee will take over communications with your creditors at this point. They can no longer contact you to demand payment or negotiate a debt settlement.
Step 3: Submit your proposal to your creditors
Once your creditor protection is in place, your trustee will inform your unsecured creditors of your proposal. Your creditors will have an opportunity to review your terms and decide whether they agree with them.
Step 4: Wait for your creditors to review your proposal and vote
Timeline: 45 days
Your unsecured creditors have 45 days to accept or reject your proposal, starting from the filing date.
Creditor voting is a crucial part of the consumer proposal process. For your proposal to receive approval from the court, more than 50% of your creditors (based on the dollar value of the debt) must vote in favour of it. That means your proposal can still succeed even if some vote against it (or don’t vote at all). Once your proposal is accepted, all your unsecured creditors are bound by the terms, even those that oppose it.
Your trustee will notify you of how your creditors respond to your proposal and whether a meeting of creditors is required (where the votes are actually counted). A meeting is held if only 25% of your creditors (based on the dollar value of the debt) ask for one. Otherwise, no counting of the votes occurs, and your proposal will automatically be approved.
At David Sklar & Associates, we have a 99% Approval Rating for Consumer Proposals.
Step 5: Obtain court approval
Timeline: 15 days
Once 45 days pass, and creditors have voted “Yes” to your proposal, there’s a 15-day waiting period before it becomes a legal contract. During this time, your creditors will have one last chance to voice their objections, ask for additional information, or request revisions to the proposal terms.
After 15 days, it’s official: your proposal is deemed a legally binding agreement by the court! That means you and your unsecured creditors must abide by the terms and conditions. For you, that means submitting monthly payments to your trustee, who will disperse the funds to your creditors. You must also attend two credit counselling sessions.
Once you’ve made all your payments and fulfilled all the terms under the agreement, you receive a certificate of completion. You’re then legally released from the debts included in your proposal.
Step 6 (if needed): Amend your proposal and resubmit to your creditors
Occasionally, creditors may deny a consumer proposal. This situation may arise for various reasons, but usually, it’s because they feel you didn’t present a fair offer. They may argue that you can afford to pay more based on your income and assets.
The good news is that you can alter the terms of your proposal and resubmit it to your creditors for consideration. Another option is exploring other ways to deal with your debt, such as applying for a debt consolidation loan or filing for bankruptcy. Your trustee can help you determine the most reasonable path forward and guide you in eliminating your debts.
The bottom line on the consumer proposal filing timeline
Filing a consumer proposal can take as little as one day. Your trustee just needs to register the necessary documents with the OSB. However, before your proposal is a legal agreement, you need approval from your creditors and the court. This process takes about 60 days to complete.
There could be delays if your creditors oppose your proposal’s terms, in which case you may need to amend it. However, from our experience, very few creditors reject consumer proposals as they risk receiving less money (or no money) if the debtor were to file for bankruptcy.
If you’re looking for a debt relief solution that lowers your monthly payments and eliminates interest charges, a consumer proposal can be the answer. At David Sklar & Associates, our experienced and passionate staff will guide you through the process from beginning to end. Book a free consultation today to learn if a consumer proposal is the right option for you – a future free of high-interest debts is closer than you think!
