We are all familiar with the term ‘debt’. It’s a weight that many of us carry, and it can often feel like a never-ending cycle. However, there are legal solutions available to help manage and overcome this burden. One such solution is a consumer proposal. This article aims to shed light on the Eight things you might not know about consumer proposals.
Understanding Consumer Proposals
A consumer proposal is a legal agreement set up by a Licensed Insolvency Trustee. The proposal is a compromise to pay creditors a percentage of what is owed to them or extend the time to pay off the debts, or both.
Key Benefits of Consumer Proposals
Here are some major advantages of consumer proposals:
- They are a legal solution regulated by the Government of Canada.
- They consolidate all debts into a single, manageable, interest-free monthly payment.
- They protect your assets from being seized by creditors.
- They can be paid over a maximum of five years.
- They immediately halt all collection activities.
- They can settle unsecured debts up to $250,000.
While these are the fundamental advantages, there are other lesser-known features that make a consumer proposal a unique debt solution.
1. Transparency in Fees
In a consumer proposal, there are no hidden costs. All fees and disbursements are predefined by law and directly collected from your monthly payments.
2. Freedom from Pre-payment Penalty
Whether your proposal is structured for five months or five years, there’s no penalty for settling it beforehand.
3. Flexible Payments
Consumer proposals allow for variable payments. You can make higher payments during your peak earning periods and lower payments during times of reduced income. This is particularly beneficial for individuals with seasonal or fluctuating income.
4. Incremental Payments
Consumer proposals offer a ‘step-up’ payment option. You can start with modest payments that gradually increase over time. This is a suitable choice if you anticipate an increase in income during the proposal term.
5. Decreasing Payments
On the other hand, consumer proposals also provide a ‘step-down’ payment option. You can start with higher payments that gradually decrease over time. This is an ideal choice if you foresee a decrease in income over time, such as nearing retirement.
6. Asset Sale Payments
Consumer proposals allow for payments from the sale of assets. This means you can repay your proposal faster or make your proposal payments more affordable by incorporating the sale of assets (like your house, car, investments, etc.) as part of the proposal terms.
7. Modifiable Consumer Proposals
Consumer proposals are flexible. If there’s a significant change in your circumstances (like job loss, considerable reduction in income, divorce, etc.), it’s possible to amend your existing proposal. Creditors will then vote on whether to accept the amendment.
8. Tax Debt Forgiveness
Consumer proposals offer relief from tax debt. Any tax debt up until the date of filing the proposal is dischargeable. The proposal administrator will prepare and file a provisional tax return on your behalf.
Is a Consumer Proposal the Right Choice for You?
A consumer proposal is one of several strategies to help you achieve financial stability. If you’re considering a consumer proposal, contact your local Licensed Insolvency Trustee for an assessment of your options. They can provide unbiased advice to help you weigh the pros and cons of each solution, ensuring you feel supported and confident in making a decision that suits your unique financial needs and goals.
