Consumer Proposals: A Detailed Explanation

If you’re struggling with debt, you may have heard of a consumer proposal but are not quite sure what it entails. A consumer proposal is a debt relief option open to Canadians who are struggling to keep up with their debt payments. It is a voluntary debt repayment plan that gives you the chance to pay back all, or a portion, of what you owe to your unsecured creditors over an extended period. In this blog, we’ll be explaining the basics of a consumer proposal, who qualifies for it, and other important things you need to know before making the decision to opt for a consumer proposal.

Am I Eligible for a Consumer Proposal?

Before making the decision to file for a consumer proposal, it is vital to ensure that you meet the eligibility criteria. One of the most crucial eligibility requirements is having an unsecured debt of at least $5,000 up to a maximum of $250,000 (excluding your mortgage). A licensed insolvency trustee will also consider your expenses to income ratio to determine whether a consumer proposal is right for you. You must also establish that you have a stable income that can cover the proposed payments for the term of the proposal.

How Does the Consumer Proposal Process Work?

The consumer proposal process involves several steps before it is approved by your creditors. You will start by consulting with a licensed insolvency trustee to determine whether a consumer proposal is the right debt relief option for you. If so, the trustee will help you develop a proposal based on your income and expenses. Once you have approved the proposal, your trustee will file it with the Office of the Superintendent of Bankruptcy, who will notify your creditors of your intention to file. Your creditors will then vote to accept or reject the proposal. Once the proposal is approved, you will make regular payments to your trustee, who will then distribute the funds to your creditors as per the agreement.

What Are the Pros of a Consumer Proposal?

One of the significant benefits of a consumer proposal is that it allows you to consolidate your debts into a single, manageable payment. It also puts an end to collection calls and legal action from creditors. Instead of paying off your entire debt, you will only pay a portion of what you owe. This means that you may be able to clear your debt for less than what you owe, and your credit rating may not be affected as severely as with a bankruptcy. Moreover, once you complete the proposal, your credit score will start to improve.

What Are the Cons of a Consumer Proposal?

One potential disadvantage of a consumer proposal is that it may require upfront costs and fees. Moreover, you may have to forgo taking out secured loans for several years as part of the agreement. A consumer proposal is also recorded on your credit report for 3-7 years, though it may not have a lasting impact on your credit rating. Another disadvantage of a consumer proposal is that not all debt qualifies for a consumer proposal. For example, secured debts like mortgages, car loans, or student loans are excluded from a consumer proposal.

Alternatives to Consider?

If a consumer proposal doesn’t sound right for you, there are other debt relief options you can consider. Debt consolidation loans can reduce your interest rate and monthly payment, making it easier to manage your debt. Credit counseling plans can help you restructure your debt with your creditors and reduce your overall payment amounts. Bankruptcy is also an option for those who feel they are not suitable for a consumer proposal.

Frequently Asked Questions?

It is understandable that you have many questions and concerns if you’re considering a consumer proposal. Some frequently asked questions include how a consumer proposal affects your employment, whether you will owe taxes during or after the proposal, and how long it takes to complete a consumer proposal. It’s best to consult with a licensed insolvency trustee who can answer any questions you might have and offer personalized advice.

Contact an Experienced Insolvency and Financial Restructuring Firm

If you’re dealing with debt, there are many options to consider when deciding how to manage it. A consumer proposal is just one of the many options you can consider. However, it may be the right choice for you if you are looking to consolidate your debt, reduce your payment, or put an end to legal action by creditors. To make the most informed choice, consult with a licensed insolvency trustee who can help you determine the best course of action based on your financial situation.

Bottom & Associates provides clients with high-quality debt solutions that are tailored to their individual needs. Our team of experienced professionals have an in-depth understanding of the Canadian legal system and will guide you through every step of the proposal process. Whether you’re struggling with credit card debt or other unsecured loans, J. Bottom & Associates can help you achieve financial freedom and peace of mind. Contact us today at 604-540-1920 or visitour New Westminster, Port Coquitlamor North Vancouver, BC location today to get started!