Consumer Proposals in Toronto
If you’re in Toronto and are looking for a way to consolidate your debts in a way that’s suitable for your financial situation, the first option you may turn to is a consumer proposal.
Debt is ever-increasing in the city, so it’s vital to find a solution as soon as possible.
A popular debt relief option, a consumer proposal is a legal process that is governed directly through Canada’s Bankruptcy and Insolvency Act.
Suitable for those with debts below the $250,000 mark, it’s an agreement between the debtor and creditor that’s arranged by an Ontario-based Licensed Insolvency Trustee.
Laying out exactly how much you’ll repay each month, it’s typically based on the amount that you can afford to repay (decided by looking at your income), along with the assets you own.
An effective alternative to filing for personal bankruptcy, it gives you flexibility and comes with several notable advantages.
If you’re looking for assistance surrounding consumer proposals in Toronto or want some guidance as to the steps of filing for one, get in contact with one of our partnered Licensed trustees now by either calling (877) 879-4770 or filling out the online email form.
How much does a consumer proposal cost?
Unfortunately, a consumer proposal isn’t free – it comes with several costs that you’ll need to factor in.
Once the initial setup fee is paid and the proposal is sent off to your creditors, you’ll have to wait and see if they accept it – within a period of 45 days.
You’ll then have up to 5 years to repay what you owe.
If they then accept the proposal and you are ok to proceed, you’ll have to pay the remaining balance.
Alongside this, you’ll have to keep in mind that 20% of your payments go directly to your trustee as an administration fee.
Eligibility requirements for filing a proposal
It’s also vital that you’re aware of the eligibility requirements that consumer proposals in Toronto come with.
These include the following:
- You must be insolvent to apply.
- You must be a Canadian resident or at least have a property in the country.
- You must have the income to be able to repay your creditors what you owe.
Types of debt a consumer proposal can help with
When deciding whether a consumer proposal is the right choice for you, it’s important to pay attention to the types of debt that they can assist with.
Although they can prove to be invaluable in eliminating a portion of your unsecured debt, secured debts aren’t included.
They can, however, work on the following unsecured debts:
- Tax debt,
- Student loan debt,
- Credit card debt,
- Payday loans,
- Bank loans.
As well as these debts, it can be an effective way of dealing with debt in Toronto, if you’re in the following situation:
- You are able to make the monthly repayments due to a stable income.
- You can’t afford to pay all of the debt and are looking for a more affordable solution.
- You want to avoid bankruptcy.
What are the key advantages of consumer proposals in Toronto?
Before taking the leap, it’s vital that you look at the key advantages and disadvantages that come with the process.
To help guide you, here is a brief list of some of the top ones you can reap:
- You can keep all of your assets.
- Stops wage garnishments.
- It reduces the amount of debt you repay.
- Consolidates your debt into one affordable monthly repayment with low or no interest rates applied.
- It’s a worthy alternative to a debt management program or debt consolidation loan (if you don’t qualify for them).
- Actively prevents creditors from harassing you for repayments.
- It can help you to avoid bankruptcy.
- It will pause collection on certain payments, such as your student loans.
What are the main disadvantages of a consumer proposal?
- If you can’t afford the repayments, some of your assets may need to be sold to cover your debt. These are typically high-ticket items, such as your car or home.
- Student loan debt must be over 7 years old.
- It will only cover unsecured debts.
- If you miss payments, you might have to file for bankruptcy.
- All of your creditors and the court will have to approve it.
- It can be more costly than the alternative of filing for bankruptcy.
- It is marked on your credit report.
What to be wary of – harassment regarding your debt
Unfortunately, many individuals are in danger of being ripped off when it comes to filing for a consumer proposal.
Those companies that state that a consumer proposal is a simple way to get out of debt and claim that they can take you through the process may not be as legitimate as they initially seem.
Not only may they charge you hefty fees, but they won’t have the experience or qualifications to do this successfully.
Only a licensed trustee can legally file a consumer proposal for you – so avoid these profit companies if you can.
You don’t want to be taken advantage of and to have your financial situation worsened.
Therefore, you’ll want to take the following actions:
- Contact a Licensed Insolvency Trustee to discuss your financial situation and whether a consumer proposal is suitable for you.
- Avoid consultants that work on commission.
- Read reviews and customer testimonials surrounding the experience of the trustee.
- Only pay a trustee, not anyone that’s unqualified or inexperienced.
A Consumer Proposal: how can it affect your credit?
One of the most common questions that people have surrounding consumer proposals is how it affects their credit.
An important element to consider, it’s something that you need to understand from the get-go before you take the leap and opt for this solution.
Many people don’t realize that the moment you file for a consumer proposal and start to repay your debts, it will state that you’ve begun the process on your credit report.
A note that sits within the public records area of the record, anyone that has access to it can see that you’ve filed for it.
Alongside this, filing a consumer proposal could result in an R7 credit rating being listed.
A rating that’s reported by your creditors, it showcases that your payments are being paid through your trustee.
Once you have settled your debts, it will be marked as complete.
Although it does have an effect on your credit report and rating, if you’re able to budget effectively and repay all that you owe, you’ll be able to successfully rebuild your credit over time.
Should you choose a consumer proposal or file for bankruptcy?
If you’re still uncertain which route to take, it’s a good idea to look at the pros and cons of each before settling on a decision.
It’s undeniable that both options can help you to regain your stability and get the fresh start that you deserve.
But, at times, there is one option, in particular, that’s more suitable.
Yes, the process surrounding personal bankruptcy can be more efficient, but the fact that you lose all your assets and it’s difficult to rebuild your credit makes a consumer proposal arguably a better option.
However, the disadvantages that come with this too can be significant.
No matter what your financial situation, filing for bankruptcy shouldn’t be the first option that you look towards.
Although, at times, once you’ve looked through all of your options with your trustee, it may be decided that it’s the best one for you.
Regardless, throughout this journey towards financial freedom, you must remember that a trustee will help you to discover a solution.
Which is why it’s so important to contact a trustee and get the process kick-started as soon as you can.
With you from the beginning, the trustee will work with you to create a repayment plan that’s customized to you.
Enabling you to repay what you want in a flexible timeline, it’s the first proactive step that you should take.
When you’ve then completed the plan and your creditors are happy that you’ve carried out all of your duties, the debts will be eliminated and you can start to rebuild your credit.
Assisting Toronto residents with debt relief advice since 1999
For over 20 years, Bankruptcy Canada has been offering Toronto residents advice surrounding bankruptcy and other debt relief options.
Helping them to uncover which debt relief solution will work for them, our advice along with the guidance from our partnered trustees could prove to be invaluable in the long term.
Assisting people to regain their financial stability and a new start, the tailored advice is unlike anything you’d have received before.
Whether you’re in a payday loan cycle or are trying to escape a particular type of debt (e.g student loan, credit card or tax debt), we’re your number one choice for advice every time.
Discover out more today
When you’re struggling with your finances, you need to find a debt relief solution that works for you and you alone.
And while bankruptcy may look like the only option that’s available, it’s important to look into what other choices you have.
Which is where consumer proposals come in.
However, despite their benefits, they aren’t the most suitable option for everyone.
So to find out more about the various options and consumer proposals in Toronto, don’t hesitate to speak with one of our local and Licensed Insolvency Trustees today.
Confidential, with no risk or obligation, they can meet with you and discuss your situation.
Get in contact today by either calling (877) 879-4770 or by emailing them.
Your proposal payments will be based on how much you owe, as well as your income and the creditors to who you owe money.
Only your unsecured creditors can be listed in your proposal agreement.
The monthly payments will fit within your budget and will also be fair to your creditors.
When a person declares bankruptcy their creditors won’t receive as much money as in a proposal, so this is why they will agree to such an agreement with you.
When making a proposal you will often repay as little as 30% of your total unsecured debts.