What is a Consumer Proposal?
A consumer proposal is an alternative to declaring personal bankruptcy. It's an arrangement that's negotiated with your creditors through a consumer proposal administrator (who is also a licensed bankruptcy trustee). A legally binding agreement is put in place to provide you with immediate protection from debt collectors. and arrange for a partial repayment of your total unsecured debt owing.
When you file a consumer proposal you agree to pay a portion of what you owe, and your creditors agree to forgive the balance.
What Happens When I File A Consumer Proposal?
When you file 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
Here are the Main 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.
Here are the Main 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.
What are the Qualifications to File a Consumer Proposal?
A Consumer Proposal may be a viable solution for you 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
Are you Ready to Talk with an Expert?
If you would like some more information about consumer proposals, or to determine if you qualify, an easy next step is to contact a proposal administrator for a free personal consultation. 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; your first appointment is always free and you'll walk away with peace of mind knowing you've gotten trusted professional advice on personal debt reduction.
If you are looking for help in getting out from debt booking your free personal consultationis an easy next step.