How To File a Consumer Proposal With Your Creditors
A consumer proposal is an effective way to resolve debt issues and a popular alternative to filing for bankruptcy.
Despite this, few people know what a consumer proposal is, how the process works or what level of financial freedom it can offer.
If you’re experiencing financial problems or you’re struggling to repay your debts, it’s important to understand all the options that are available to you.
With numerous debt relief solutions on offer, you could be closer to resolving your financial troubles than you realize.
Need Help Reviewing Your Financial Situation?
Contact a Licensed Trustee for a Free Debt Relief Evaluation
What is a Consumer Proposal?
A consumer proposal is a legal agreement that is made between a debtor and his or her creditors.
According to this agreement, you would partially repay your debts in exchange for them being fully settled.
Essentially, a consumer proposal enables you to clear your debts by only paying back part of what you owe.
Governed by the Insolvency and Bankruptcy Act, a consumer proposal is more than an informal agreement or an attempt to repay your debts.
Once in place, you must adhere to the terms that have been agreed upon.
Due to the legal nature of a consumer proposal, it’s vital that you seek advice from a qualified debt counsellor or a licensed insolvency trustee before you decide to move forward.
Who can make a Consumer Proposal?
Anyone in debt can make a Consumer Proposal but you can’t do it directly.
Instead, a licensed insolvency trustee will need to submit the proposal on your behalf.
This is because your proposal should contain careful calculations regarding your income and expenditure.
Your disposable income will be used to calculate what percentage of your debts you can repay and over what period of time, for example, so only licensed insolvency trustees are permitted to issue proceedings for a Consumer Proposal to be made.
To be effective, however, the vast majority of your creditors must agree to your proposal.
While some types of debts are exempt from Consumer Proposals, the vast majority aren’t.
This means you could successfully minimize your total debt and secure a workable arrangement to repay part of the debt over a reasonable period of time.
In general, Consumer Proposals shouldn’t last for more than 5 years, so your proposal will need to be based within this timeframe.
Failure to stick to the agreed terms renders the proposal redundant, so you would need to try and find an alternative form of debt resolution.
What are the benefits of Consumer Proposals?
There are a significant number of advantages associated with Consumer Proposals, which is why they’re such a popular way of resolving financial problems.
If you choose to file a Consumer Proposal, you’ll benefit in numerous ways, including:
Only repay some of your debt
If a Consumer Proposal is accepted, you will only be required to pay back some of your debts.
Once the agreed payments have been made, these debts are treated as settled and you will not need to repay the amount that was previously outstanding.
Student loan collections are paused
Although student loans cannot be included in Consumer Proposals, collection activity is paused while a proposal is in place.
This means you won’t be required to make student loan repayments while your Consumer Proposal is ongoing.
As well as giving you the opportunity to keep hold of more of your income, this could also enable you to start saving for future expenses and repayments.
A key benefit of Consumer Proposals is the ability to stop having interest added to your debts.
Often, it’s high levels of interest that make debts unmanageable, but you won’t need to worry about your total debt constantly increasing while you’re making payments under a Consumer Proposal.
Alternative to bankruptcy
Many people choose to make a Consumer Proposal rather than filing for bankruptcy.
As Consumer Proposals are only present on your credit file for a minimum of three years after the Proposal is completed.
In contrast, a bankruptcy stays on your file for a minimum of six years.
As many people are reluctant to file for bankruptcy, making a Consumer Proposal can be a viable way to manage your debts without declaring yourself bankrupt.
Making a Consumer Proposal
Although there are many benefits associated with Consumer Proposals, there can be drawbacks too.
Before you make any major financial decisions, it’s important to access impartial advice.
At Bankruptcy Canada, we’ve been helping people to overcome financial issues for more than 20 years.
To speak to a trustee in confidence today, contact us now on (877) 879-4770.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal