Consumer Proposal and Car Loan Rules for New Brunswick Drivers

A consumer proposal gives you a way to deal with debt without declaring bankruptcy. For most drivers, one of the first questions is simple: what happens to my car? You still need to get to work while the proposal runs.

The answer depends on how your car loan is set up, how well your payments stay on track, and what you plan to do next. This guide explains how a consumer proposal treats a car loan, what rights New Brunswick law gives you as a borrower, how a proposal shows up on your credit report, and what to watch for when you finance your next vehicle. It is general information, not legal or financial advice.

Consumer Proposal and Car Loan Rules at a Glance

How a Consumer Proposal Works

A consumer proposal is a formal, legally binding process under the federal Bankruptcy and Insolvency Act. A Licensed Insolvency Trustee works with you to prepare an offer to your creditors. That offer can pay back part of what you owe, give you more time to repay, or both. The proposal cannot last longer than five years, and there is a limit on the total debt you can carry to qualify.

Your creditors have 45 days to accept or reject the offer. Votes count by the dollar value of each creditor’s claim. If no creditor asks for a meeting within that window, the proposal is treated as accepted.

Once you file, a stay of proceedings takes effect. Unsecured creditors, such as credit card companies, can no longer take action against you or your property to collect what the proposal covers. You also attend two financial counselling sessions during the process.

Stay on top of your proposal payments. If you fall behind by an amount equal to three monthly payments, the proposal is automatically cancelled, which the law calls a deemed annulment. Revival is possible through your trustee, but it is far easier to avoid missed payments.

Keeping Your Current Car During a Proposal

The stay of proceedings protects you from unsecured creditors, but it does not stop a secured creditor from acting on its security. If your car loan is secured by the vehicle, the lender keeps its normal rights under your loan agreement.

In practice, that means your car payments carry on outside the proposal. The Office of the Superintendent of Bankruptcy states that you keep your assets as long as you continue making payments to your secured creditors. If your car payments stay current, you keep your car. If they fall behind, the lender can act on the default just as it could before you filed.

If your vehicle is leased, or if someone co-signed your loan, raise it with your Licensed Insolvency Trustee before you file. Your trustee reviews your agreements and explains how the proposal affects each one.

Your Rights if Car Payments Fall Behind in New Brunswick

New Brunswick’s Personal Property Security Act gives you two important rights if a lender repossesses your vehicle after a default.

The first is the right to redeem. Before the lender sells the vehicle, you can get it back by paying what you owe on the loan plus the lender’s reasonable expenses. The second is the right to reinstate. You can put the loan agreement back in good standing by paying the missed payments, fixing any other default and covering reasonable expenses.

The lender’s notice before selling a repossessed vehicle has to tell you about both rights. If you receive one, read it carefully and act quickly.

How a Proposal Shows Up on Your Credit Report

Equifax and TransUnion both record a consumer proposal on your credit report. While it is on file, the accounts it covers show an R7 rating, which means you are making regular payments under a consumer proposal or a similar repayment plan.

• Removal date: the proposal comes off your report 3 years after you finish paying, or 6 years after you sign it, whichever comes first
• Finishing early: paying off your proposal sooner moves the 3-year clock forward
• Your certificate: when you complete the proposal, send your certificate of full performance to both credit bureaus so your file is updated

Financing a Vehicle During or After Your Proposal

There are no guarantees when you apply for credit after a consumer proposal. Lenders look for signs that you manage money well: steady income, on-time payments and a clear plan. Each month of on-time payments helps rebuild the picture a lender sees.

If your proposal is still active, speak with your trustee before you take on new credit. A new car loan adds a monthly payment, and your proposal payments still come first.

When you do finance, New Brunswick’s Cost of Credit Disclosure and Payday Loans Act protects you. Lenders must disclose the true cost of borrowing in the contract and in their advertising, and the Act covers car loans and vehicle leases. The Financial and Consumer Services Commission of New Brunswick (FCNB) licenses credit grantors, credit brokers and lessors under this Act.

Red Flags to Watch For

Federal regulators warn that some unlicensed debt advisors charge fees for services they cannot legally provide, or suggest they offer debt relief directly. Keep these points in mind:

• Check the licence: only a Licensed Insolvency Trustee files a consumer proposal, and it is an offence for anyone else to act as a trustee
• Confirm the lender: credit grantors, brokers and lessors in New Brunswick register with FCNB, so verify before you sign
• Know the collection rules: collection agencies in New Brunswick need an FCNB licence, cannot threaten you, and can only call Monday to Saturday between 7 a.m. and 9 p.m., or Sunday between 1 p.m. and 5 p.m., with no calls on holidays

Talk to Atlantic Credit Centre About Your Next Vehicle

A consumer proposal is a step toward a fresh start, and the right vehicle financing supports that plan. Once you know where your proposal stands, reach out to the team at Atlantic Credit Centre to talk through your financing options. Our specialists work with drivers across Atlantic Canada to find a path that fits your budget and your timeline.