If you’re grappling with the burden of outstanding debt in British Columbia, you might be considering several debt relief options, including bankruptcy. However, before you make a move, it’s crucial to explore all available alternatives. One such option is a Consumer Proposal. To help you understand this option better, we’ve collated and answered some common queries about Consumer Proposals in British Columbia (BC).
What is a Consumer Proposal?
A Consumer Proposal is a formal legal agreement made between a debtor and their creditors. This arrangement is sanctioned by the Canadian government and allows debtors to repay a fraction of their total debt, leading to full satisfaction of the owed amount. In simpler terms, it provides an opportunity to negotiate a deal with creditors. This strategy can often lead to significant debt reduction, sometimes even up to 80%.
Consumer Proposal vs. Bankruptcy
Even though Consumer Proposals and bankruptcy are both debt relief options, they are not the same. Unlike bankruptcy, a Consumer Proposal doesn’t require you to surrender your assets, and you also avoid the need to declare bankruptcy. There’s no requirement to report your monthly income or expenses, making it a less intrusive process compared to bankruptcy.
Debts Covered Under a Consumer Proposal
A Consumer Proposal is a comprehensive solution, covering a wide array of unsecured debts. However, it’s worth noting that not all types of debts can be included in a Consumer Proposal. Here’s a list of unsecured debts that can be bundled into a Consumer Proposal:
- Credit card debt.
- Overdraft charges.
- Payday loans.
- Personal loans.
- Department store cards.
- Lines of credit.
- Tax debt.
- Student loans (if it’s been seven years or more since you’ve been out of school).
The Four Stages of a Consumer Proposal
When you choose to file a Consumer Proposal, you’ll go through four essential stages:
- The Payment Plan: The initial step involves deciding the monthly payment you can afford to make to your creditors.
- The Creditor Vote: Post-filing of the Consumer Proposal, creditors get a chance to vote on whether they accept the terms or not.
- The Payment Process: After approval of the proposal, you can start making payments.
- The Credit Repair Process: Once you’ve paid off your debts, you receive a Certificate of Full Performance, which legally extinguishes your dischargeable debts.
Do You Qualify for a Consumer Proposal?
To qualify for a Consumer Proposal, you must be a Canadian resident or conduct business in Canada. Moreover, your debt should range between $1,000 and $250,000, excluding your principal residence’s mortgage amount.
Consumer Proposal: An Attractive Debt Relief Option
A Consumer Proposal can be an appealing debt relief solution due to several reasons:
- It allows for zero interest on unsecured debt.
- It stops collection actions from unsecured creditors.
- It results in one affordable monthly payment that covers all unsecured debt.
- It allows for flexibility in completing the payments as soon as possible, leading to a better credit rating.
- It enables you to retain control of your assets and tax refund.
- It does not involve any additional fees.
In conclusion, a Consumer Proposal could be the ideal solution for BC residents struggling with mounting debt. If you need professional guidance in navigating your financial hardships and finding the best debt reduction solution, consider reaching out to a Licensed Insolvency Trustee in your area. They can help you understand the intricacies of Consumer Proposals and guide you towards financial stability.
