I’m finding that I meet with more people every day who have heard of consumer proposals, and are interested in them as an alternative to bankruptcy, but it seems many are not completely sure about what they are or how consumer proposals work.
- A consumer proposal is a legal arrangement, under the Bankruptcy and Insolvency Act, that can be made between you and your creditors.
- It will help reduce your debt load and improve your cash flow. Settlements for as low as 30 cents on the dollar are common.
- It consolidates all your debt into one monthly payment.
- It is usually the most affordable debt relief option, offering the lowest monthly payments.
- Your monthly payments are based on what you can afford.
- There is no interest on a consumer proposal.
- A proposal can only be offered by a licensed Trustee in Bankruptcy (acting as a consumer proposal administrator).
- There are no other ‘government’ debt settlement programs out there, except a proposal offered through a trustee.
- You do not need to pay an upfront fee to consult a trustee or to file a consumer proposal. Payments do not need to begin until the proposal is actually filed
- The trustee’s fees are PART of the proposal itself.
- A consumer proposal can help protect your assets. An example is a house – let’s say you have $10,000 equity in your home and you are concerned you would lose the house in a bankruptcy. If you file a consumer proposal and your creditors accept the deal, you keep control of your house! (Of course you still have to pay the mortgage and property taxes.)
- A consumer proposal can help you avoid ‘surplus income’ in a bankruptcy. If your income is relatively good (or very good), bankruptcy can actually become expensive. If you file a consumer proposal and make more income later, you do not have to pay more into the proposal.
- A consumer proposal helps you keep your tax refund. If you file personal bankruptcy, you lose your tax refund for the year you file, at least. If you file a consumer proposal you keep any refunds you receive.
- You can still renew your mortgage when in a consumer proposal (assuming you are keeping up with your payments).
- The creditors vote on the proposal, with every dollar of debt worth one vote – if 50% plus one vote are in favour of the deal, all creditors are bound by it.
- A proposal offers protection from your creditors. This means that all creditors must leave you alone if your proposal is accepted – no more phone calls or legal actions!
- Your consumer proposal administrator deals with your creditors once you file, you don’t have to.
- You don’t have to report your income to the trustee during the proposal.
- A consumer proposal provides for two sessions of money management counselling with a qualified credit counsellor, who will help you set up and maintain a budget, and give you some tips and ideas about how to safely rebuild your credit rating
- A consumer proposal comes off of your credit report in three years, after you have completed it.
- A consumer proposal must be completed within five years.
- You can do a lump sum proposal to your creditors, if family is willing to lend you money.
- You can pay it off early.
- You may be able to obtain a secured credit card during your proposal. This can help you rebuild credit while you are completing your proposal.
- You avoid filing bankruptcy. This can be a great option if your employment is affected if you declare bankruptcy and offers personal satisfaction to many.
There are a lot of reasons why a consumer proposal is a good option for many people looking to eliminate their debt and avoid bankruptcy.
If you would like to talk to a consumer proposal administrator, all our bankruptcy trustees offer a free, no-obligation consultation. Contact a Canada Consumer Proposal Administrator near you.