How long does a consumer proposal last?
A consumer proposal must be completed within five years, but you can complete it in a much shorter time by making larger or additional payments if you can afford to pay more.
The time limit is set by the Bankruptcy and Insolvency Act, not by your Licensed Insolvency Trustee or your creditors.
Source: Government of Canada – Bankruptcy and Insolvency Act, Section 66.12(5)
How long your consumer proposal lasts depends on how much you owe and what you can afford to pay monthly. Once filed, your payments don’t change, even if your income increases during the proposal period.
What affects the length of a consumer proposal?
The length of a consumer proposal depends on the total amount you need to repay, the monthly payment you agree to, and whether you make extra or lump-sum payments along the way.
The monthly payment is determined by what you can afford to pay. Paying more each month speeds up the time it takes to complete your consumer proposal, while a lower payment takes longer. As a result, you can free up money every month that you pay towards your debts.
Making monthly payments allows you to make an acceptable offer to your creditors while also ensuring your payments are affordable each month by stretching them out over a longer period.
Your Licensed Insolvency Trustee assesses the terms based on your income, expenses, and what creditors are willing to accept.
Can you pay off a consumer proposal early?
You can pay off a consumer proposal as early as you want without incurring any additional fees. If you receive a pay rise, a lump sum of money, or a tax refund, you can put it toward your consumer proposal to pay it off faster.
Since a consumer proposal does not charge interest, it’s up to you whether you want to pay it quickly or spread the payments out for a longer period.
If your income goes up during your consumer proposal term, you can voluntarily increase your monthly payment. You can also use a lump sum from a tax refund, an inheritance, or a work bonus to settle the entire amount.
In some cases, a lump-sum payment or a combination of a lump sum and monthly payments could suit you better, especially if your employment is seasonal or you are self-employed.
How long does a consumer proposal stay on your credit report?
Equifax removes a consumer proposal three years after you’ve paid off all the debts in it, or six years from the date you filed, whichever comes first. TransUnion removes it three years from the date you satisfied it, or six years from the account default date, whichever comes first.
The faster you pay off your consumer proposal, the quicker you’ll be able to take steps to improve your credit score and rebuild your credit.
Sources: Equifax Canada – How Long Does Information Stay on My Credit Report?, TransUnion Canada – Frequently Asked Credit Questions
Find out how a consumer proposal affects your credit.
What happens if you miss payments?
If you miss a payment, your trustee will contact you to help you catch up. Under the Bankruptcy and Insolvency Act, your consumer proposal will be annulled if you fall behind on three monthly payments. This includes any partial payments, as they all add up towards the total.
Source: Government of Canada – Bankruptcy and Insolvency Act, Section 66.31
If a consumer proposal is annulled, creditors can resume collection. Wage garnishments, lawsuits, and interest charges restart.
If your situation changes and you cannot make payments, notify your Licensed Insolvency Trustee immediately. The trustee can modify the consumer proposal if creditors agree.
A free consultation with a Licensed Insolvency Trustee works out the monthly payment your budget can carry, and that payment is what decides how long your proposal runs. Take the two-minute debt assessment to get started.
What happens when your consumer proposal ends?
Your consumer proposal ends once you’ve made the final payment and completed both credit counselling sessions. Your trustee will then issue a Certificate of Full Performance, confirming that you’ve met the terms.
Any remaining balance on debts in your consumer proposal will be eliminated, and creditors cannot pursue you for it. Keep your certificate as proof if a collector contacts you about a settled debt.
How do I find out if a consumer proposal is right for me?
Find out how long a consumer proposal will take by arranging a free consultation with a Licensed Insolvency Trustee.
At Moses Advisory Group, our Licensed Insolvency Trustees have helped thousands resolve their debt problems and achieve debt relief in Canada.
We’ll review your debts, income, and expenses to determine whether a consumer proposal is right for you. The consultation is confidential with no obligation to proceed.
Frequently asked questions
How long after a consumer proposal can I get a credit card?
Once your consumer proposal is accepted, you may apply for a secured credit card, which requires a cash deposit equal to your limit. Keep the balance low and pay it off in full each month. After completing your proposal, it becomes easier to qualify for unsecured credit cards within a year.
Does paying it off early remove it from your credit report right away?
No, but it can speed up its removal. Credit bureaus will remove a consumer proposal from your credit report three years after you complete it, so finishing early starts that process sooner.
Can a consumer proposal last longer than five years?
No, a consumer proposal cannot exceed five years as set by the Bankruptcy and Insolvency Act.
Can I increase my monthly payment to finish a consumer proposal faster?
Yes. Contact your trustee to arrange higher payments. There is no penalty for repaying a consumer proposal early.
