Quebec Consumer Proposal
A Guide to Consumer Proposals in Quebec
It’s no secret that many Canadians are struggling with the amount of debt they have incurred in recent years.
The past several years have seen Quebecers increasing their consumer debt, rather than paying it down as they had been in previous years.
If you are struggling with your consumer debt and feel like you’re taking one step forward and two steps back, you are likely well aware of how quickly consumer debt occurs.
Instead of spiraling into anxiety, or thinking you have no options to get your financed righted, consider that one of your options is the consumer proposal.
If you’re not unsure of what a consumer proposal is, how it may negatively or positively affect your debt, and if it’s the right choice for your financial position, keep reading to have these questions answered.
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What is a consumer proposal?
At the most basic terms, a consumer proposal is a proposal set forth by a Licensed Insolvency Trustee in which the aim is to reduce the total amount of debt you owe.
It is a legally binding agreement, and if you do not make the appropriate payments, the proposal is essentially dissolved, and you will owe the previous amount of debt.
To set up a consumer proposal in Quebec, you must enlist a legal trustee, who is governed and overseen by the Canadian government.
He or she will work with your creditors to negotiate a proposal that is intended to benefit both parties.
The goal is to have your debt reduced as well as have your interest frozen.
When your creditor agrees to the proposal, you may make payments to your trustee who will pay your creditors directly.
In Quebec, as in the rest of Canada, you may find that you may be better off filing for a consumer proposal instead of filing for bankruptcy.
What are the advantages of filing a consumer proposal in Quebec?
There are a variety of factors that may make a consumer proposal more appealing than that of bankruptcy or debt consolidation.
The first benefit is that a consumer proposal stays on your record for a short three years after your debt has entirely been paid off.
In comparison, bankruptcy has a longer effect on your credit, staying on your record for seven years after your bankruptcy has been discharged.
The very obvious difference is that if it takes you four years to pay off your consumer proposal, it would still amount to affecting your credit for seven years, while a bankruptcy will be cleared after seven years regardless of any actions taken.
A second advantage is that unlike a bankruptcy, with a consumer proposal, you will be able to keep your assets as long as you continue to make the payments set out by your licensed insolvency trustee as agreed upon by your creditors.
A bankruptcy typically requires you to surrender your assets to eliminate your debt.
Thirdly, and the most obvious of the advantages, is that your creditors will do one of two things: allow you to reduce the debt, or have you pay over a slower period of time.
In some instances, your debt may be reduced as well as having you pay smaller amounts over a longer stretch of time.
This is entirely dependent on your income and assets.
When a consumer proposal is put into place, interest is no longer collected on the debt and any incessant creditor calls will end on those debts.
Additionally, your wages are no longer garnished for these debts.
What are some of the disadvantages of a consumer proposal?
The most obvious downside to filing a consumer proposal is that only unsecured debts may be claimed.
Any secured debt, such as a mortgage or traditional car loan, can not be claimed in a consumer proposal in Quebec.
Another disadvantage is that you will still need to continue making payments, and if you are in a position where you are no longer receiving income, this could be a substantial problem.
If you default on a consumer proposal, you are breaking a legal agreement.
With a consumer proposal, you are able to receive credit and financial counseling, so make sure to discuss whether a consumer proposal really is the right step for you if you are unsure about making payments in the future.
Also, you need to consider that a consumer proposal will affect your credit, and while it remains on your record, it is not possible to qualify for a loan, either secured or unsecured.
Should I file a consumer proposal?
There are several things to consider if you are eager to file for a consumer proposal, such as if you are willing to let this affect your credit, if you have enough income to continue making payments for several years, and if your debt is unsecured.
You may be able to file a consumer proposal if you do not qualify for a Canadian debt settlement program and owe up to $250,000.
If you are married, you can owe up to $500,000 and may be able to claim a consumer proposal.
If you have a co-signer for any of your loans, you need to speak to them before trying to claim a consumer proposal.
They will still be responsible for the debt, so it may make more sense for them to transfer the loan into their name to continue making payments.
Depending on the state of your relationship, this could reduce your debt without negatively affecting your credit.
Is a consumer proposal the right option for your financial situation?
If you’re not sure, set up a no-obligation meeting with a bankruptcy expert at Bankruptcy Canada.
We’ll be able to provide answers to any questions you may have, and begin going over all your financial information.
Debt counseling by a licensed insolvency trustee is part of any consumer proposal or bankruptcy claim in Quebec, and will help you understand the complex legal aspects, as well as set you up for a better financial future.