The Top Ten Questions About Consumer Proposals

Our Main Consumer Proposal Questions

Dealing with financial difficulties can be daunting, especially when faced with unfamiliar terms like “bankruptcy”, “unsecured debts”, and “asset liquidation”. Fortunately, for individuals grappling with sizable debt, an array of options exists to help navigate these troubled waters. One such alternative to bankruptcy is a consumer proposal. While it shares certain similarities with bankruptcy, a consumer proposal is generally less intrusive and offers more flexibility. This guide aims to answer the top ten questions about consumer proposals.

1. Is a Consumer Proposal the Same as Bankruptcy?

No, a consumer proposal is not the same as bankruptcy. While both are legal processes designed to provide relief to those burdened with debt, they differ significantly in their approach and consequences.

Under bankruptcy, you surrender most of your assets in return for discharge from your debts. A consumer proposal, on the other hand, is a formal agreement between you and your creditors to repay a portion of your debts over a specific period, without the need to surrender your assets.

2. Who Can Help Me Choose Between a Consumer Proposal and Bankruptcy?

Making a decision between a consumer proposal and bankruptcy should be made in consultation with a financial professional. It’s crucial to speak with an expert who represents your interests rather than those of your creditors.

Only a Licensed Insolvency Trustee (LIT) – previously known as a bankruptcy trustee – can file a consumer proposal. LITs are federally regulated professionals who provide advice and services to individuals and businesses with debt problems.

3. Will My Debts be Wiped Out Under a Consumer Proposal?

In a consumer proposal, your debts are not entirely erased. Instead, you negotiate to pay a portion of your debts, interest-free, over a period of up to five years. However, some debts, such as penalties from legal proceedings, alimony, and child support, may not be included in a consumer proposal.

4. Will I Need to Liquidate My Assets?

No, a consumer proposal protects your assets. Unlike bankruptcy, which might require you to surrender certain assets, a consumer proposal allows you to keep them. If you wish, you may sell them voluntarily to pay off your proposal sooner, but this is entirely optional.

5. How Will a Consumer Proposal Affect My Spouse?

A consumer proposal filed by you doesn’t directly affect your spouse. However, if you have joint debts, you might consider filing a joint consumer proposal. This will provide your spouse with the same opportunities to clear their debts.

6. Can My Wages be Garnished Under a Consumer Proposal?

No, one of the significant benefits of a consumer proposal is that it halts any wage garnishment as soon as it’s filed. This protection provides immediate relief and allows you to manage your finances better.

7. What If My Income or Living Situation Changes?

Unlike bankruptcy, a consumer proposal does not require you to report any changes in your income or living situation after filing. Any additional income you earn after filing the proposal is yours to keep, and will not affect your repayment plan.

8. How Will a Consumer Proposal Impact My Credit?

Filing a consumer proposal will affect your credit score. If your score is high before filing, it will drop. However, if you’re already missing payments to your creditors, your score may already be low. Remember, you can recover your credit score, but you can’t recover the money spent on high-interest payments for your debts.

9. How Long Will I be Making Monthly Payments?

The length of your repayment period under a consumer proposal depends on the terms of your agreement. However, a consumer proposal cannot exceed five years. If your financial situation improves, you can pay off the proposal sooner without any penalties or the need to renegotiate the terms.

10. What Happens If I Default On My Payments?

If you default on your payments and get more than three payments behind, your consumer proposal is annulled. This means your creditors are free to pursue you for the original amount owed, plus interest.

Concluding Thoughts

Facing financial difficulties can be stressful. However, understanding your options can help you make informed decisions. A consumer proposal is a viable alternative to bankruptcy, offering a structured and manageable way to deal with debt. If you’re grappling with significant debt and considering a consumer proposal, consult a professional to discuss your situation and determine the best course of action.

For more information on consumer proposals or to discuss your unique financial situation, contact our team of experts today. We’re here to help you navigate your financial challenges and start fresh, Starting Over Starts Right Now!

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