Consumer Proposals – The Solution For You?

What exactly is a consumer proposal, and could it be the right solution for you?

Nothing seems simple when you're dealing with money problems. It's important to know that help is available, and understanding your options is the best place to start.

Basically, a consumer proposal is a contract that's negotiated with your creditors on your behalf, by a consumer proposal administrator (also called a bankrutpcy trustee). A legally binding agreement is put in place to arrange for a partial repayment of your total unsecured debt owing. You'll pay portion of what you owe, and your creditors will agree to ignore the balance owing.

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 submitting a proposal, your responsibilities, and determine if you could qualify.

There's no need to hesitate; very often your first appointment costs you nothing, and you'll walk away with trusted advice from a professional the area of personal debt reduction.

Consider these 5 main benefits to 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

More information about the benefits and advantages of a consumer proposal.

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. This means that your assets are not at risk, and there is no danger that they may have to be surrendered to the administrator as part of your proposal agreement. Also, once your proposal is in place, it makes no difference if your income goes up! You will owe nothing more than in the agreed upon terms of the proposal.

The effect on your credit score is generally less than a bankruptcy. Consumer proposals typically produce an R7 rating, whereas personal bankruptcy will produce an R9. This 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.

• Having trouble paying all your bills, even though you have a good job?
• Thinking about filing bankruptcy, but not really wanting to?
• Simply looking for more information about ways to deal with your debt?

What do you do?

If you find yourself in this situation month after month, a Consumer Proposal may just be what you're looking for.

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 suruplus income penalties.
  • You don't want to lose any of your assets, such as a valuable 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 your student loan obligations.
• Deal with your secured debts, such as your house mortgage and car loan. Your trustee can advise how to deal with these.

Could a consumer proposal help me?

Click here a free assessment, and to access our directory of trustees in your area.