Consumer Proposal Archives - Fresh Start Now

How does a consumer proposal affect your credit score?

Kathy Lenart — Mon, 08 Sep 2025 17:37:13 +0000

There are two credit agencies in Canada; Equifax and TransUnion. They are public companies and not run by any branch of government.

Every time you take out a loan, credit card or borrow money from a financial institution, the lender reports the activity on these to one or both of the credit agencies. They choose which one(s) they wish to use. The purpose of these agencies is to maintain financial data on each individual as a resource for financial institutions to decide if you will be a good customer if they were to lend you money. I.e. are you a good credit risk and they will be repaid in full?

The credit bureaus keep information on payments made and whether they were paid on time or late. Each loan/credit card is assigned a risk rating with R1 being the highest (pays on time as agreed) to R9 (debt written off in a bankruptcy) An R5 debt rating is the lowest rating where payments are being made and current. A consumer proposal rates an included debt as an R7.

What is a Credit Score?

Based on your credit report, the credit agencies calculate a number called a credit score by using a complex computer algorithm. A credit score is not a measure of how financially successful you are, it is an indication on how responsible you are using credit. They range from 300 to 900; the higher the score indicating that you are more responsible. With a higher credit score, banks and lenders will be more open to lending you money and at lower interest rates. A lower credit score will indicate that you are less responsible with money and a bank may be unwilling or less willing to lend you money. It may also be at a higher interest rate to compensate them for the perceived increased risk.

Generally, when people visit a Licensed Insolvency Trustee they have been struggling financially for some time; likely obtaining and relying on higher amounts of credit and possibly missing some payments. As a result, the average credit score of someone filing a bankruptcy or consumer proposal is generally on the low to mid-range, depending on how long they have been struggling.

Filing a Consumer Proposal

Filing a consumer proposal with a Licensed Insolvency Trustee is a legal filing and will be noted on your credit report under the legal notices section. This will inevitably cause your credit rating to drop, however filing a Consumer Proposal should be viewed as a positive step towards fixing your finances and you have the opportunity to improve your credit rating as you move forward through the proposal term.

During your mandatory credit counselling sessions, the Licensed Insolvency Trustee will carefully explain to you how your credit score works and what actions you can take to improve it. If you follow their advice, you should notice a gradual improvement over time so you complete the Consumer Proposal with a healthier credit score for your new financial future.

Taylor Leibow Inc. are Licensed Insolvency Trustees and have been helping individuals and businesses with their financial and debt issues since 1947. If you would like to talk to Kathy Lenart or Jeff Lewis about your financial issues and how they can help you, reach out them at freshstartnow.ca

By Jeffrey Lewis – Vice President, Licensed Insolvency Trustee
CPA, CA, CAIRP, LIT

Email: jlewis@taylorleibow.com
Phone: 905-523-0003 ext. 322

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How does a consumer proposal work?

Kathy Lenart — Mon, 11 Aug 2025 16:03:53 +0000

A consumer proposal allows you to offer a settlement to your unsecured creditors payable over a maximum of 60 months. The filing of a consumer proposal gives you immediate protection from your creditors and no further payments are made directly to your unsecured creditors during the process. A proposal works as follows:

You meet with a Licensed Insolvency Trustee to review your financial situation in detail (assets, liabilities, income and expenses, any transfer of assets, etc.). The trustee will explore many solutions with you – one of which is a consumer proposal.
To file a consumer proposal, you must owe less than $250,000.00 and be insolvent. This means that if you sold all your realizable assets you wouldn’t be able to pay your debt in full and are struggling to make payments as they become due.
The trustee will explore what would be realized in a bankruptcy and then you offer more to your creditors in the proposal. The amount you offer to your creditors includes the administrator’s fees and no further interest is payable.
The creditors have 45 days to vote and a majority of the creditor voting must accept the terms offered. If the original proposal is not accepted, the trustee will negotiate with the creditors and yourself to an amount you can agree on.
Once the proposal is accepted by the required majority of creditors, all of your unsecured creditors are bound by the proposal.
You make monthly payments to the trustee and the trustee will distribute the funds to your creditors typically every 6-12 months.
You will have to attend two counselling sessions which will teach you about budgeting and rebuilding credit.
The proposal is reported on your credit report as an R7 for 3 years from completion of the proposal.

Debts that survive a proposal under S178 of the Bankruptcy and Insolvency Act

Amounts that you owe for support or maintenance, debt incurred by fraud or misrepresentation or a student loan if you have not been out of school for at least 7 years will survive your proposal and you will be responsible to pay any remaining debt owing. These creditors can continue to accrue interest during the proposal term.

Consumer proposal help in Hamilton, Burlington and St Catharines

If you can afford some payment to your creditors but are not reducing your principal debt, reach out to Taylor Leibow Inc. to see if a consumer proposal could give you a fresh start financially. Our trustees would be happy to personally meet you in one of our offices or virtually.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)

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Consumer Proposal vs Bankruptcy – What is the Best Solution for You?

Kathy Lenart — Sat, 12 Apr 2025 20:13:59 +0000

The best solution for you will depend on your individual circumstances and personal morals. Both a bankruptcy and a consumer proposal are formal filings pursuant to the Bankruptcy and Insolvency Act and both provide you protection from your unsecured creditors. They both impact your credit rating and stop a garnishment of your wages by Canada Revenue Agency and other creditors. You must attend two credit counselling sessions in either solution. The similarities end there.

Bankruptcy

Assets with a value that exceeds a secured loan and are not exempt from seizure (e.g. furniture, vehicle up to $7,117) must be realized by your trustee for the benefit of your creditors. You can offer to buy the assets back from your trustee, but they must be paid for over a shorter period of time.
Income tax refunds, GST and some other benefits are assets the trustee will directly receive.
Surplus income payments may have to be paid to your trustee if your income exceeds a threshold based on your family size.
You will be required to submit monthly income and expense statements and your surplus income payment may increase if your income increases during your bankruptcy.
The trustee has the right to realize on after acquired assets which consist of inheritances, lottery winnings, etc.

Consumer Proposal

An offer is made to your creditors to compromise your debt over a maximum of 5 years.
The proposal must offer more to your creditors more than they would receive in a bankruptcy but because you are extending the payments over 5 years, the monthly payment is lower and more affordable.
Future increases in income will not impact your creditor and Court approved proposal.
Receipt of a future asset (inheritance) will not impact your creditor and Court approved proposal.
You can always pay the proposal off sooner which removes the reporting from your credit report sooner.

Based on my experience, individuals with significant assets, the potential to receive an inheritance from a sick family member, high surplus income payments or the potential for their income to increase significantly typically prefer a consumer proposal. I have also filed consumer proposals for individuals who have no assets and minimal income because they felt “it was the right thing for them”.

Taylor Leibow Inc. will review your financial situation in detail at a free consultation to educate you on solutions so you can make the right decision for you.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)

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What happens if you lose a lawsuit and can’t pay in Canada?

Kathy Lenart — Fri, 15 Nov 2024 15:15:31 +0000

To clarify, I am not a lawyer, and thus, I am not giving anyone legal advice. If you disagree with the outcome of your lawsuit, you should consult with your lawyer on your right to appeal.

As a Licensed Insolvency Trustee (LIT), I meet with many people who have a judgment against them as they failed to file a defence to a statement of claim or had judgment awarded against them at trial. Once a creditor obtains a judgement, they can then take enforcement steps to collect their debt by obtaining a garnishment order or a writ of seizure and sale of personal property. If you are unable to pay the debt in full but can afford monthly payments, contact the creditor to try to come to agreeable repayment terms over time.

If you are struggling with all of your debt, consult with a Licensed Insolvency Trustee to review your full financial situation and potential solutions. The LIT will review the following solutions:

Obtaining a consolidation loan to pay the judgement and any other debt in full and be left with one loan at hopefully a lower interest rate.
Debt management program through an accredited not-for-profit credit counselling agency. They negotiate with your creditors to accept payments over a 4-year time period and may be able to reduce the interest paid on your debt. A judgement creditor may not be willing to step back and participate in the program when they have the right to enforce their judgement.
A consumer proposal offers a compromise to your creditors to settle the debt you owe them over a maximum 5-year time period. A proposal can only be filed with a LIT who will review your financial situation in detail to determine how much you can offer that is affordable to you. On the filing of a consumer proposal, your creditors are immediately stayed from taking any further collection proceedings against you. It stops a judgement creditor who has already commenced a garnishment of your wages.
Filing an assignment in bankruptcy. In a bankruptcy, your realizable assets vest in the trustee to realize for your creditors, and you may have to make surplus income payments, but it will also stay your creditors from their enforcement of a judgement and any collection proceedings.

Most LITs offer a free consultation to review solutions. If you have lost a lawsuit and are unable to pay, educate yourself on solutions by reaching out to Taylor Leibow Inc. today.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)

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What is the right amount to offer in a consumer proposal?

Kathy Lenart — Fri, 15 Nov 2024 14:49:09 +0000

Contrary to the advertisements that may pop up on your social feeds, there is no quick fix to reduce your debt by 80%. There is a consumer proposal, which is a formal filing under the Bankruptcy and Insolvency Act to compromise the amount that you owe to your creditors, payable over a maximum of 5 years. The proposal, once accepted, is all that you will pay – there is no additional interest, and the trustee’s fees are included.

How do you determine how much to offer your creditors in a proposal?

Based on personal circumstances, some people want to pay the least amount possible, while others feel a moral obligation to pay the most they can afford.

So, what is the right amount to offer?

A consumer proposal must offer your creditors more than they would receive in a bankruptcy. A proposal can only be filed with a Licensed Insolvency Trustee (LIT) who will consider:

The realizable value of any assets that you own. Savings, investments, vehicles and real property are all assets. The trustee will look at the value compared to any exemptions or secured loans to determine if there is excess value realizable in a bankruptcy.
Surplus income payments – based on your income and family size, you may be required to make surplus income payments in a bankruptcy. The number of months you will be required to make the payments will depend on whether this is a first or second bankruptcy filing.
The amount that you owe and who you owe money to. LITs have experience in filing proposals and have a general idea as to how much each financial institution may accept in a proposal.
If you have sold or transferred any of your assets in the last five years, and how you disposed of the proceeds.

Based on the above, the LIT has the experience and knowledge to recommend an amount you can offer your creditors in a consumer proposal. If the terms are not initially accepted by the majority of your creditors, the LIT will negotiate with you and your creditors to try to come to an agreement on the terms. f you feel a consumer proposal could provide you the relief needed to deal with your debt, reach out to Taylor Leibow Inc. today for a free consultation.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)

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What to do when you receive a collection notice from the Canada Revenue Agency (“CRA”)

Kathy Lenart — Tue, 15 Oct 2024 20:36:59 +0000

Amounts owing to the CRA for personal income tax and HST sometimes get pushed aside to concentrate on paying your everyday living expenses. The CRA does charge interest on the amount owed to them, but it is usually lower than the interest rate on credit cards and payday loans. Eventually, the CRA will send a collection notice to demand repayment.

Do not ignore the collection letter. The CRA has higher rights than most creditors and can garnish your wages, freeze your bank accounts and put a lien against your assets without serving you with a Statement of Claim. If you receive a collection letter, you should:

Communicate with the CRA so they know that you take this debt seriously. Call the CRA representative assigned to your account, who is referred to in your letter. If you are not able to pay the debt in full, ask them to allow you a couple of weeks to review your finances and come up with a payment plan.
Make a list of all income that you receive in a month and all of your living expenses. Analyze if you can cut back on any discretionary expenses (dining out, streaming services, entertainment) to increase the amount available to pay off your CRA debt. Divide your CRA debt by the amount that you can afford to pay every month to see how long it will take you to pay off the debt. Contact the CRA to see if they would agree to your monthly payment plan. The CRA will likely be looking to have their debt paid in full in 12-18 months.
The CRA may grant relief from penalty or interest if extraordinary circumstances or financial hardship prevent you from paying your taxes. More details are available at Taxpayer relief provisions—Canada.ca.
If the CRA does not agree to a payment plan, do you have any assets that you could liquidate to pay off the debt? Funds in a TFSA are likely earning less than the interest you are being charged by the CRA, so it may make sense to collapse it to pay the debt and then rebuild the TFSA later.

If the debt to the CRA is too overwhelming for you to negotiate a payment plan on your own, seek professional advice. Amounts owing for income tax and HST can be discharged in a bankruptcy or proposal. Contact Taylor Leibow Inc., Licensed Insolvency Trustees, to review your financial situation in detail and discuss solutions.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)

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The Meaning of Insolvency

Kathy Lenart — Fri, 28 Jun 2024 16:11:08 +0000

If you are in debt, you may hear the word “insolvency” being used. What does this mean, and how does it affect the options available to you for dealing with your debt?

The Bankruptcy and Insolvency Act (the “BIA”) is the legal framework used by all Licensed Insolvency Trustees (the “Trustee”) for administering how they help companies and individuals who find themselves in financial difficulty due to having an unmanageable amount of debt.

According to the BIA, an Insolvent person is a person who, for any reason, is unable to meet their obligations as they fall due. Simply put, this means that if you have stopped paying your debts due to a lack of available funds or feel that you are unable to pay your debts, then you are insolvent.

In addition, you may also find yourself in the position that you have more debts than the value of any assets you own, and this can also cause you to be insolvent.

Insolvency is, therefore, a state of being, and if you are insolvent, you may feel like you have fallen into a deep hole that you are unable to crawl out of. Some people call this the debt spiral. Having unmanageable debt can cause anxiety, health issues, and can affect your family relationships and have an impact on your work performance.

The test for insolvency is important because it allows a Trustee to be able to help you. Most people who see a Trustee have more debt than assets, and in this situation, the Trustee will craft a solution that could see you just repaying a percentage of what you owe to your creditors without any interest.

Because of the current higher interest rates, many people who have more assets than debts (because they may own their own house) are now seeking the advice and assistance from a Trustee. In these situations, a Trustee can still help by filing a repayment plan with your creditors; however you may end up paying back the full amount of the debt over a five-year period. Importantly, in these situations, the interest also stops, which adds up to a very large saving compared to trying to repay the debts yourself.

If you are feeling overwhelmed by your current debt payments, whether you own your own house or not, reaching out to a Trustee can provide you with some free no obligation advice that may just be what you need to get back on track.

Taylor Leibow Inc. has been helping people get out of debt in the Hamilton-Niagara area for over 75 years. To book a free consultation with one of their Trustees Kathy Lenart or Jeffrey Lewis, please visit www.freshstartnow.ca or call 905 523 0003.

By Jeffrey Lewis
CPA, CA, CIRP, LIT

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Is a Consumer Proposal a Loan?

Kathy Lenart — Tue, 23 Apr 2024 18:08:06 +0000

Many people reach out to a Licensed Insolvency Trustee (“LIT”), thinking that we pay their debt in bankruptcy or that we provide a consolidation loan to pay off their debt in a consumer proposal. Both of these assumptions are false.

A consumer proposal is not a loan and, accordingly, has no interest on the payment terms. A proposal is a formal, legally binding agreement to compromise the amount that you owe your creditors. A proposal can offer payment in full, but typically offers a percentage of the total amount of your unsecured debt. The proposal must offer to your creditors a higher return than they would receive in a bankruptcy and must be completed in 5 years. The terms of the proposal can be creative and flexible to provide you with the best chance of successful completion.

A consumer proposal can only be filed through a LIT who works with you to develop the terms of your proposal. The LIT will review your financial situation in detail and advise you on a reasonable amount that you can offer to your creditors based on their experience.

A consumer proposal is filed under the Bankruptcy and Insolvency Act and will be reported on your credit report as an R7 for 3 years from completion of your proposal. The benefit of a proposal is that you can retain your assets, keep your tax refunds and GST and know that you will be debt free in 5 years.

Please feel free to reach out to us for a free consultation or refer to the Office of the Superintendent of Bankruptcy website at https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/you-owe-money/you-owe-money-consumer-proposals for more information.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)

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Income Tax Debt and Insolvency

Kathy Lenart — Tue, 05 Dec 2023 14:45:55 +0000

Based on the number of inquiries I have received recently, the Canada Revenue Agency (“CRA”) is getting more aggressive in their collection proceedings. The CRA has the right to freeze and seize bank account funds, garnish income and send third-party demands to recover their debt. If you owe money to the CRA for personal income tax, CERB, HST or source deductions that you are struggling to repay, reach out to a Licensed Insolvency Trustee to discuss solutions.

Solutions

Amounts owing to the CRA can be discharged in a personal bankruptcy or consumer proposal unless they have previously registered a lien on the title of your property.

Further, a bankruptcy or consumer proposal will stop a garnishment of your wages or pension.

If you operate a business and deduct withholdings from your employees, the CRA may have a deemed trust claim against your assets. If you are a director of a corporation and the company does not pay outstanding HST and source deductions, the CRA can assess you personally for the outstanding amounts. This director’s assessment liability can be included in a personal bankruptcy or proposal.

Bankruptcy isn’t the only solution to deal with overwhelming tax debt. The CRA will accept a proposal to compromise your debt if the terms are fair and reasonable and you are current on all outstanding tax returns.

Taylor Leibow Inc. offers a free initial assessment to review your financial situation in detail and explore solutions. Don’t let your wages continue to be garnished or hide from tax debt – reach out to us today. We are ready to talk when you are.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)

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Settling debts on your own versus filing a consumer proposal

Kathy Lenart — Wed, 19 Jul 2023 20:49:22 +0000

If you have fallen a couple of months behind on your minimum monthly payments, your creditors have likely sent your debt to a collection agency. The collection agency will make every attempt to get you to pay the debt, with multiple telephone calls trying to convince you to get the money from family or a loan from another source.

Collection agencies get paid if they collect money from you, so they may be relentless and sometimes a little harsh in their calls. They also may be willing to settle the debt at a lower amount to at least recover some funds.

You may receive a letter offering to settle a $5,000.00 debt for $2,000.00.

This sounds like a good deal, but the issue is they will want the funds in a lump sum amount immediately. If you are able to come up with a lump sum amount, you will want to make sure that you have proper documentation that they are accepting the lump sum payment in full and final satisfaction of their debt.

You could deal with each of your creditors individually to try and get them to accept a settlement, but if one refuses, you may find yourself struggling again.

There is no protection from your creditors taking legal action while you are attempting to negotiate with them.

Filing a Consumer Proposal

A consumer proposal is a formal filing under the Bankruptcy and Insolvency Act and will provide you immediate protection from all unsecured creditors taking any legal action. A proposal can offer monthly payments over a maximum of 5 years, and you only need 50.1% of the creditors that vote on the proposal to accept the terms. If a majority of your creditors agree with the offer or a negotiated amount, then all of your unsecured creditors are bound by the terms.

A Licensed Insolvency Trustee will work with you to determine a reasonable amount to offer your creditors at a monthly amount that you can afford.

Five years may seem like a long time to be debt free, but the proposal payments are interest free and include the trustee’s fees. Once the proposal is paid and you have completed two counselling sessions, the trustee will issue a Certificate of Full Performance and the proposal will stay on your credit rating as an R7 for 3 years from completion.

Reach out to a Licensed Insolvency Trustee today for a free assessment to see if a consumer proposal can provide you a 5 year plan to be debt free.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)

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