Debts That Can Be Included In A Consumer Proposal

When making a Consumer Proposal, you can’t pick and choose which creditors to include. You must include all of your eligible creditors, offering everyone the same deal. Here's a non-exhaustive list of the types of debts that are typically eligible to be included:

1. Credit Cards: Credit card debt is one of the most common types of debt included in Consumer Proposals.
2. Personal Loans: Whether from banks, credit unions, online lenders, or family/friends, personal loans can usually be included in a Consumer Proposal. This includes payday loans.
3. Lines of Credit: Lines of credit (LOCs) are revolving accounts that allow borrowers to access funds up to a predetermined limit. The funds you’ve borrowed from a line of credit can usually be included in a Consumer Proposal.
4. Income Tax Debt: Whether stemming from personal income taxes or resulting from your liability as a director of an insolvent corporation, taxes can be included in a Consumer Proposal provided you’ve brought all required filings up to date.
5. Utility Bills: Outstanding utility bills, such as electricity, gas, and phone bills, can be included in a Consumer Proposal.
6. Secured Loan Deficiencies: If you have had an asset seized or a property foreclosed on, there may be a balance left outstanding on the secured debt (such as a mortgage or car loan) after the property is sold and the proceeds applied to the balance. The remaining amount is a deficiency which you may still be responsible for, but it can usually be included in a Consumer Proposal.
7. Business Debts (Non-Secured): Debts incurred through failed business ventures undertaken as a sole proprietor, or stemming from a personal guarantee of a corporation, can often be included in a Consumer Proposal.

It’s important to note that you will no longer be able to access any remaining credit from any of the above sources after filing a Consumer Proposal. You will be essentially starting from scratch.

Certain obligations can’t be included in a Consumer Proposal. It’s important to be aware of these exceptions:

1. Secured Debts: Secured debts are backed by collateral, such as a home or car. Examples include mortgages and car loans. These debts typically are not included in a Consumer Proposal, which means you can keep the collateral asset as long as you continue to make the payments. However, if you know you won't be able to keep up with the payments, you may be able to surrender the asset and include any deficiency (as discussed above) in the proposal. The decision to surrender must be made when you start the Consumer Proposal.
2. Child Support and Spousal Support Payments: Court-ordered support payments generally are not eligible for inclusion in a Consumer Proposal and must be maintained separate from any debt consolidation efforts.
3. Student Loans: Student loans generally can only be included in a Consumer Proposal if you've ceased to be a student for at least seven years before filing.
4. Court Fines and Restitution Orders: Legal obligations resulting from offences, such as court fines and restitution orders, cannot be included in a Consumer Proposal.

This is not an exhaustive list, and there are exceptions to all of the above, depending on the specific circumstances. Therefore, it’s important that you consult a Licensed Insolvency Trustee to get advice about handling your debts before deciding if a Consumer Proposal is right for you.

Charla Smith & Company is a Calgary-based Licensed Insolvency Trustee, serving the southern Alberta region. We regularly help individuals review their options for dealing with overwhelming debt, including determining whether a Consumer Proposal is their best option. If you'd like to explore your options, please reach out to us.

Disclaimer: This publication provides general information and should be seen as broad guidance only. The information contained herein cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon this information without obtaining specific professional advice relating to your particular circumstances. Charla Smith & Company Ltd. does not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.