How Does Consumer Proposal Affect Families?

May 2nd, 2016 by Wendy O.

Effect of consumer proposals on families

Effect of consumer proposals on familiesFamilies, like individuals and couples, have a wide range of expenses that draw on their financial resources. But for families with children, expenses are often larger and more varied than anticipated.


Kids Can Be Expensive!

Children are the proverbial “wild cards” when it comes to family spending. Parents are motivated to provide well for their kids, purchasing as much as possible that might benefit their growth and development. This natural selflessness, that is part of parenting, can ironically lead to a financial pinch that affects the whole family negatively.


Insolvency and Family Tension

What happens when a family feels that financial pinch? Frayed nerves, arguments and raw emotions. Being short on necessary funds while raising a family is nothing sort of scary, and causes a lot of tension. Many children grow up and say, “my parents rarely fought, but when they did, it was always about money.”


Consumer Proposal To The Rescue!

For families where the adults have become insolvent (can’t pay all their regular monthly bills), the most important effect of Consumer Proposal is to solve and relieve these tensions, and simplify budgeting.

With Consumer Proposal, rather than having multiple credit card and (unsecured) loan payments to make every month, the family will typically make one monthly payment towards the completion of the Proposal. Payments typically last for 4-5 years. And, although a Consumer Proposal may in some cases pay off the creditors in full, in most cases they will be satisfied with a fraction of what they are owed.

Consumer Proposal provides relief for “honest but unfortunate” debtors. Over 120,000 Canadian consumers became insolvent in 2015, and almost half of them filed Consumer Proposals. It’s nothing to be embarrassed about, but it’s a step you should consider carefully (with the help of a Licensed Insolvency Trustee).


What’s the Down Side?

All of your credit cards and unsecured loans (not including your mortgage if you have one) will be included in the Proposal, and those accounts will be closed. If your bank is among the creditors affected, you may need to open a new account at a different bank.

For those who have a mortgaged home, the amount of equity that exists in the property will affect how the Proposal is structured. If there is a great deal of equity, it may be necessary to sell the home. A Licensed Insolvency Trustee can advise.

Consumer Proposal will negatively affect your credit rating for a number of years. But the good news is, credit bureaus remove information regarding your Proposal from your credit report 3 years after you complete your Proposal.

If your family has been accustomed to many luxuries, these may need to be reduced. As an example, while you would probably still be able to budget for kids’ swimming lessons, boarding a horse at a riding stable would likely be too luxurious to afford while making Proposal payments.

On the other hand, many families who realize they need financial assistance have already cut out all luxuries, and actually feel their budget ease once the Proposal is in place.


Next Step: See a Trustee – It’s Free and Confidential

If you’ve read this far, you are likely seriously contemplating your next financial step. The information in this article is very general.

A Licensed Insolvency Trustee can listen to your specific situation and outline options for you. There will be no pressure – just lots of solid information, and probably some reassurance. Your first appointment is free of charge – act today to reduce your worries.

Wendy O.
My name is Wendy and I finished my consumer proposal in 2013. My goal is to help provide hope to Canadians in debt by sharing my experience, and advice as a consumer – and also to help eliminate the stigma and embarrassment surrounding people who file a consumer proposal or bankruptcy.

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