Advantages Of A Consumer Proposal Explained
As one of the most popular debt solutions available in Canada, consumer proposals are frequently used to reduce debt and make it more manageable.
Although making a consumer proposal is often the best way for an individual to resolve their debt problems, it’s important to get personalized advice before you make any decisions.
By seeking assistance from a professional, you can learn more about all the debt solutions that are available to you.
Once you know what the advantages of a consumer proposal are or how a bankruptcy works, for example, you’ll be able to make an informed decision regarding the type of debt resolution you’re looking for.
Remember – always seek advice from a reputable source, particularly when it comes to financial matters.
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What is a Consumer Proposal?
To understand the benefits of a consumer proposal, it’s important to determine exactly what it is first.
Governed by the Bankruptcy and Insolvency Act, a consumer proposal is a legal process which can be used to reduce your outstanding debts.
When you make a consumer proposal, the vast majority of unsecured debt can be included.
With the help of a licensed insolvency trustee (LIT), the amount you will need to repay will be calculated.
However, you can reduce your total debt liability by up to 75% when you make a consumer proposal, so there is the potential to drastically cut your overall liability.
Furthermore, when you make a consumer proposal, it prevents interest and subsequent charges from being added to your accounts, so the amount you owe won’t increase over time.
However, these aren’t the only advantages of a consumer proposal.
If you do select this form of debt management, you’ll find that there are a number of benefits associated with making a consumer proposal, including:
You only need the majority of your creditors to accept your proposal
If you can’t persuade all of your creditors to agree to your proposal, there’s no need to panic.
Providing creditors holding more than 50% of the outstanding debt agree to the proposal, then all of the other unsecured creditors are bound by the terms too.
Managed by a Licensed Insolvency Trustee
A consumer proposal must be handled by a licensed insolvency trustee, so you won’t have to manage the details of the agreement.
Furthermore, you won’t have to have on-going contact with your creditors or liaise with them in any way.
Creditors can’t take legal action against you
Once you have filed a consumer proposal, your creditors can instigate legal proceedings or sue you for non-payment of a debt.
This means a proposal can prevent you from having to attend court or from having CCJs made against you.
A consumer proposal protects your assets
Unlike bankruptcy, making a consumer proposal won’t put your assets at risk.
Even though your debts will be substantially reduced if you make a proposal, you won’t be required to relinquish your assets in order to make repayments to your creditors.
There are no surprise income charges
If your proposal is accepted, the amount you will pay remains fixed in accordance with the agreement.
If you subsequently receive surplus income or your financial situation improves, you won’t automatically have to pay more to your creditors each month.
Student loans can be included
Providing you have been out of school for at least seven years, student loans can be included in a consumer proposal.
As many other forms of debt relief do not include government-based loans, this could certainly be beneficial for a significant number of people with debt issues.
With so many benefits associated with consumer proposals, it’s easy to see why so many Canadians choose to use this form of debt relief.
As well as minimizing the amount you owe, the ability to retain your assets and reduce your monthly payments means that making a proposal could enable you to keep more of your monthly income and escape the burden of spiralling debts.
Are There Any Drawbacks to Making Consumer Proposals?
Although there are plenty of advantages associated with consumer proposals, there may be one or two drawbacks you need to consider as well.
As a consumer proposal requires you to pay back some of the debt, they do usually take longer to be discharged than bankruptcies.
While a bankruptcy remains on your credit file for longer, it will take longer for your consumer proposal to be discharged, depending on how much you’re paying back in total and what your monthly repayments are.
In addition to this, a consumer proposal is listed on your credit report and could, therefore, have an impact on your credit score and your ability to obtain credit.
However, if you’re already struggling with debt, it’s highly likely that your credit report has already been negatively impacted.
Although making a consumer proposal may make it extremely difficult to obtain credit for the foreseeable future, it needn’t have a long-term impact on your financial standing.
In fact, making a consumer proposal now and improving your financial performance will give you the opportunity to rebuild your credit score more quickly.
While keeping your existing debt is likely to result in missed payments, increasing interest rates and sky-high charges, making a proposal will enable you to reduce these payments, get your finances back on track and stop any additional costs from being added to your accounts.
Should You Make a Consumer Proposal?
If you’re considering making a consumer proposal, it’s important to talk to a licensed insolvency trustee.
As only a LIT can make a consumer proposal on your behalf, you will need their assistance in order to move forward with this form of debt relief.
However, consulting a licensed insolvency trustee gives you the opportunity to learn more about the process and what it could mean for you.
With personalized advice available, you can find out exactly how a consumer proposal would affect your debts and your financial situation.
To talk to someone now, contact Bankruptcy Canada today 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