Consumer Proposals in Ottawa

 

Household debt is on the rise in Ottawa. According to a recent report from CTV News, Ottawans’ debt to income ratio ras risen to an eye-watering 176.9%. That’s $1.77 of non-mortgage debt for every dollar of disposable income earned in Ottawa households. In this light, it’s easy to see how so many families struggle to budget effectively or pay enough into their savings. As such, when unforeseen circumstances (and expenses) present themselves, they have no choice but to rely on more forms of credit and adding to their debt. And as their credit ratings slide downwards, only extremely high-interest forms of credit like cash advances and payday loans become available. 

All over Canada, it’s plain to see that many households struggle with debt. The average Canadian household has over $20,000 of non-mortgage debts, and over 14% of their disposable income goes towards debt repayments, with 7.1% of going towards interest payments alone.

But there’s good news for Ottawans struggling to get out from under their debts. Consumer Proposals in Ottawa are a great way to escape your debts. Get ready to say goodbye to intimidating letters from your creditors, wage garnishment and sky-high interest placing a chokehold on your household cash flow. 

Here we’ll take a close look at how Consumer Proposals work, and how they measure up against other popular forms of debt relief…

What is a Consumer Proposal?

A Consumer Proposal is a debt relief plan for Canadians who have significant debts (over $10,000) and owe to multiple creditors.

Unlike most debt relief and consolidation options, it can be leveraged against all kinds of non-mortgage debts, as long as they do not exceed $200,000. They can help you to get completely free of your debts in just 5 years. You can find out more information about Consumer Proposals here

How do I submit a Consumer Proposal?

You can’t Consumer Proposal on your own. You need to go through a Licensed Insolvency Trustee. Click Here to find one near you. 

They will look closely at your finances, assets, and circumstances and let you know the benefits and risks of Consumer Proposals in Ottawa, as well as letting you know what alternative options are available. 

If you decide to opt for a Consumer proposal, your Trustee will act as a Proposal Administrator. They will work with you to put together a proposal that will be agreeable to your creditors and manageable for you. As long as a 51% majority of your creditors agree to the terms of the proposal, they will all be bound by it… whether they originally agreed to the terms or not.

A Consumer Proposal takes 3-5 years to repay, and remains on your credit report for a further 3 years. 

Why choose a Consumer Proposal?

While Ottawa Consumer Proposals are a less well known option than, for instance, Personal Bankruptcy or Debt Consolidation, they may be beneficial to you in a number of ways.

A Consumer Proposal allows you to…

Reduce your principal

As you lean on more and more credit sources to help you get by, the principal (the amount that you’ve borrowed) gets higher and higher. And if you’re paying a lot in interest, it can take years, or even decades to repay.

Under a Consumer Proposal, you can reduce your principal debt by as much as 80%. This may allow you to get free of your debt much faster.

Stop wasting money on interest

Credit card companies and lenders love to lure us in with attractively low interest rates. But after the brief introductory “honeymoon period” these rates can climb substantially, making your debts harder and harder to repay. Especially if you’re only making the minimum repayments. In fact, doing this may mean that you’re only paying off $10 of your principal per month with the rest of your monthly repayments going straight to your creditor in the form of interest. 

Sky high interest rates prolong your debts, and make it much harder to see just how much you’re wasting every month. When you set up a Consumer Proposal, interest and other fees go straight out of the window, so that you only pay down your principal.

Put a stop to wage garnishment

In most provinces, if you struggle to make good on your monthly repayments, your creditors can petition the courts to take what they’re owed directly from your employer before they pay you. This is known as wage garnishment. If you’re self-employed, they can even take what they’re owed from your clients and other debtors. 

A Consumer Proposal puts an instant end to wage garnishment, as well as harassment over the phone, in the post or via email.

Get relief from government debts

Debt Management Plans and other forms of debt consolidation and relief cannot be leveraged against government debt. A Consumer Proposal can. This includes student loan debt (as long as it has been 7 years or more since your studies ended. It even includes money owed to the CRA. 

Save assets that would be lost to Bankruptcy

When you file for Personal Bankruptcy, some of your assets may be seized by your creditors. Some will be exempt. Many will not. A Consumer Proposal allows you to keep more of your assets which might otherwise be lost.

Help you to get into better financial habits

For many Ottawan families, debt can quickly become a slippery slope. As their debt repayments put more pressure on their cash flow, they come to rely more and more on different forms of credit. Before they know it, households can find themselves living from one payday loan to the next.

Ottawa Consumer Proposals help to make monthly repayments smaller and more manageable, easing your household cash flow so that you can focus more on saving and budgeting. This will help you to remain debt-free for life.

Consumer Proposals vs Debt Consolidation

Debt Consolidation is often used by households that are trying to make their debts more manageable. There are lots of ways to consolidate your debts from commercial Debt Consolidation Loans to Mortgage Refinancing and entering into a Debt Management Plan with your creditors.

Yet, while these may be helpful for smaller debts, a Consumer Proposal is far more advantageous when your debts have escalated above $10,000 and you have multiple creditors. Debt Consolidation Loans might have more favourable rates of interest (around 10%) but you may still find that you’re paying a lot in interest every month. Plus, because they’re designed to be repaid over around 5 years, you may find that your monthly repayments are actually higher.

Unlike Ottawa Consumer Proposals, Debt Management Plans are entered into voluntarily by creditors. Meaning that you have no guarantee that they will stick to the terms.

When you enter into a Consumer Proposal, however, you can rest assured that it is legally enforceable. As long as you continue to make monthly repayments, your creditors are obliged to stick to the terms of the proposal.

Like a Consolidation Loan, a Debt Management Plan can only reduce your interest. Only rarely will they forgive interest completely. And you will not be able to reduce your principal debt under these arrangements.

Consumer Proposal vs Personal Bankruptcy

Declaring Bankrupcy may help you to get all, or most of your debt forgiven. However, while this can potentially give you a financial fresh start, it is a serious arrangement that should be considered only as a last resort. 

In order to ensure that your debts are automatically discharged you will be expected to meet certain obligations within the first 3 months of filing. While the Trustee will be able to guide and support you, failing to do this will result in your case going to Bankruptcy Court. Here, your creditors will be given an opportunity to dispute the automatic discharge of your debts. 

Under a Consumer Proposal, you’ll also be able to keep non-exempt assets that you might lose in Bankruptcy like your vehicles or your home if you have more than $10,000 equity in it.

Consumer Proposals are also more advantageous to your credit rating, as they only remain on your credit report for 3 years rather than 6 years for a first Bankruptcy or 14 years for a second.

If you want to know more about the relative benefits of Consumer Proposals and Personal bankruptcy, you may find this article useful.

Let us help you find the right solution

Don’t let the name fool you. At Bankruptcy Canada we can help you with all kinds of debt relief solutions when you are insolvent.

We can put you in touch with a Licensed Insolvency Trustee who can ensure that you get the help you need in escaping debt and living your best financial life. Since 1999, we’ve helped over 200,000 Canadians from all walks of life to find the right solution for their needs and circumstances.

Want to know more? Call us today on (877)879-4770. We’ll be delighted to arrange a risk-free, zero-obligation and completely confidential callback.