Our Experts Explain How a Consumer Proposal Can Break the Debt Cycle
Are you struggling to pay off unsecured debt? Rest assured that many debt consolidation options are available, including filing a consumer proposal. This powerful debt settlement tool significantly reduces the amount you owe and makes it easier to repay your debt over the next few years.
If you’re wondering how much debt a consumer proposal can eliminate, read on to discover the answer from J. Bottom & Associates Ltd. Our team can help you weigh all your options—including personal bankruptcy, debt consolidation, and credit counselling—to help you decide if a consumer proposal is the best solution for your situation. With more than 55 years of combined experience, our financial trustees are equipped to provide simple, accurate, and actionable solutions to help you overcome your financial struggles. Call us today to learn more!
Cutting Debt with a Consumer Proposal
When considering how much debt a consumer proposal can eliminate, it’s important to understand what type of debt this settlement option applies to. In short, virtually all unsecured consumer debt between $5,000 and $250,000 can be consolidated using a consumer proposal, including:
- Credit cards
- Lines of credit
- Personal loans
- Payday loans
- Some student loans (after you have been out of school for at least seven years)
- Tax debts
- Business GST/HST debt
A consumer proposal helps you repay an agreed-upon portion of your debts to your creditors with no interest, fees, or additional penalties. You repay your debt in predictable monthly payments over three to five years. In general, cutting your unsecured consumer debt by 50 to 70 percent is a reasonable expectation.
Factors Affecting How Much Debt You Can Eliminate
For a consumer proposal to be successful, a Licensed Insolvency Trustee must propose a repayment amount that works for both the creditor and the debtor. For the creditor to agree, they must receive more than they would through bankruptcy. And for the debtor to succeed, the payments must be affordable and reasonable, given their financial situation.
Your Licensed Insolvency Trustee will consider the following factors when determining an appropriate repayment amount to offer your creditors:
- Bankruptcy comparison: To give creditors a basis for comparison, your Licensed Insolvency Trustee will calculate how much creditors could expect to recover if you filed for bankruptcy instead of making a consumer proposal. This provides a starting point to begin formulating an offer.
- Your ability to repay: Your income, expenses, and family size are the most significant factors when determining reasonable repayment terms. In situations where it’s not feasible to repay anything due to very low or uncertain income, your Licensed Insolvency Trustee may recommend bankruptcy consolidation instead.
- Your total debt: You may be unable to pay off your debts in full, especially with interest, but your Licensed Insolvency Trustee will assess if you can afford to repay 30 to 50 percent of your obligations with no added interest.
Consumer Proposal Examples
No two consumer proposals are exactly alike. With this in mind, consider the following real-world examples that demonstrate how offers vary depending on the debtor’s income, overall debt, and other individual circumstances:
- A 43-year-old debtor accumulated $9,000 in unsecured consumer debt over periods of unemployment. The consumer proposal cut this person’s debt by almost 50 percent to $4,800, which he repaid in $200 monthly installments for 24 months.
- A 70-year-old widow took on $17,000 in consumer debt to cover the increased living costs she experienced after her husband passed away. Her consumer proposal cut her obligations to $6,300, over a 60 percent reduction. She repaid it in $150 increments over 42 months.
- A debtor had nearly $84,000 in debt brought on by unemployment and supporting extended family. He faced minimum credit card payments of $1,400 per month and owed income taxes to the Canada Revenue Agency (CRA). The consumer proposal settled the debt to just over $28,000, a nearly 70 percent reduction. This debtor became debt-free after making $470 payments for 60 months.
- A person had over $140,000 in debt, comprised mostly of medical bills associated with her husband’s cancer treatments and CRA-related tax debt. Rather than making monthly payments, her consumer proposal offered a lump sum of $36,000, cutting her debt by over 70 percent.
Find the Right Debt Solution with J. Bottom & Associates Ltd.
Whether you’re overwhelmed by credit card debt, medical bills, or student loans, J. Bottom & Associates Ltd. can find a debt solution that works for you. As a Licensed Insolvency Trustee, we have the knowledge and skills to help you regain control of your finances and get a fresh start. Contact us in New Westminster, North Vancouver, or Port Coquitlam today for your free consultation.