What is a Consumer Proposal?
Being in debt is difficult and stressful but it's important to know that help is available, and understanding your options is the best place to start.
A consumer proposal is an arrangement that's negotiated with your creditors through a consumer proposal administrator (who is a licensed bankruptcy trustee). A legally binding agreement is put in place to arrange for a partial repayment of your total unsecured debt owing. You'll pay a portion of what you owe, and your creditors will agree to forgive the balance.
If you would like information about consumer proposals, your first step is to contact a proposal administrator. He or she will discuss with you the benefits of filing a proposal, your responsibilities, and determine if you qualify.
There's no need to hesitate; very often your first appointment is free and you'll walk away with trusted advice from a professional in the area of personal debt reduction.
Consider these 5 main benefits of a consumer proposal
- Most wage garnishments cease immediately
- Interest stops accumulating from the date you file
- Collection companies and creditors can no longer contact you for payment; it's the law!
- You are not in jeopardy of losing your house or other assets, as in bankruptcy
- You repay only a portion of your debt owing, with a maximum repayment period not exceeding 5 years
Advantages to You
If a consumer proposal is a viable option for you, it can be beneficial in the following ways:
"Surplus income" is not a consideration, as it is in bankruptcy. Your assets are not at risk, and they will not have to be surrendered to the administrator as part of your proposal agreement. Also, once your proposal has been accepted your payments will not increase if your income increases. You will owe nothing more than in the agreed upon terms of the proposal.
The negative effect on your credit score is generally not as severe as in a bankruptcy. Consumer proposals typically produce an R7 rating, whereas personal bankruptcy will produce an R9, which is the lowest rating, and why you should investigate all other options prior to choosing to file for bankruptcy.
If you file a consumer proposal, you have the opportunity to repay a portion of your debt. The sense of control you regain can bring a dramatic improvement in self esteem.
Advantages to Your Creditors
Why would your creditors accept a consumer proposal and accept less than the full amount they are owed?
Most creditors don't want you to go bankrupt. In this case, they may expect to receive nothing at all. A proposal will generally allow them to recover more than they would in a bankruptcy.
A Consumer Proposal may be a viable solution if:
- You have debts over $5,000, but not over $250,000 (not including your home mortgage).
- You've got a good job, and can afford to make some payments each month.
- You just can not afford to repay everyone in full with interest.
- You can't get a debt consolidation loan because your debts are too high, even with your steady job.
- You don't want to go bankrupt, because:
- With your income, you would be subject to surplus income payments; and
- You don't want to lose any of your assets, such as your home or car.
What a consumer proposal won't do for you:
A consumer proposal will not:
- Allow you to pick and choose the debts to be included.
- Eliminate your support and alimony obligations.
- Eliminate certain student loan obligations.
- Deal with your secured debts, such as your house mortgage and car loan. The administrator can advise how to deal with these
Could a consumer proposal help me?
If you are looking for help in getting out from debt booking your free personal consultation with a bankruptcy trustee is an easy next step.