Consumer Proposals – Reduce Debt And Protect All of Your Assets
If you find you’re falling behind in credit card payments, and are struggling to make ends meet, you have options outside of bankruptcy and debt consolidation.
One option you may want to consider is to file a consumer proposal with the legal help of a Licensed Insolvency Trustee.
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What exactly does a consumer proposal entail?
A consumer proposal is a legally binding process that is regulated and handled by a licensed insolvency trustee(LIT) that is less severe than bankruptcy.
Your trustee works with you to create an offer (the consumer proposal) for your creditors.
This proposal outlines what percentage of the debt you can pay off, or extends the time to pay off the debt; this option can give you up to five years to pay back your debt.
This allows you to slowly pay back your debt, without needing to claim bankruptcy.
Other key benefits to this debt payment option are that future interest is entirely removed from your unsecured debt, wage garnishments are stopped, collection calls are halted, and you are able to keep your assets as long as you continue to make payments as structured in the proposal.
It’s important to remember that a LIT is government-supervised and administered, so their goal is to have both you and your creditor’s benefit in mind.
When you begin making payments, you will do so via your trustee, who will disperse the funds to your creditors.
How will a consumer proposal affect my credit?
A consumer proposal will affect your credit score, however, it remains on your credit history for only three years, in comparison to a bankruptcy claim that remains on your credit for seven.
What are the things I need to take into consideration before filing for a consumer proposal?
If you file for a consumer proposal, there are strict requirements you’ll need to abide by.
First of all, if you fail to make payments for three months, the proposal is annulled.
Another limitation you need to consider is that it only allows for unsecured debt.
A common example of unsecured debt is credit card debt.
A consumer proposal does not pertain to things like car loans or mortgages.
Is a consumer proposal the right option for me?
In short, a consumer proposal may be right for your debt if you want to avoid filing for bankruptcy, have some income to pay off your unsecured debt over a longer period of time at a reduced rate, are looking to affect your credit rating for a shorter amount of time than bankruptcy, and you are not looking to consolidate the debt on secured debt.
If you’re curious if a consumer proposal might be the correct pathway for your debt, reach out to Bankruptcy Canada to see if one of our Licensed Insolvency Trustees or debt experts can help counsel you through your debt journey.
It can be overwhelming to think you don’t have options when you’re financially constrained, but you do.
Give us a call today for a no-obligation chat to see how we can assist you in your financial future.
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