Why Don’t More Canadians Consider Filing a Consumer Proposal?

Douglas Hoyes, Consumer Proposal Administrator

Douglas Hoyes, Consumer Proposal Administrator

My firm, Hoyes, Michalos & Associates, partnered with Harris/Decima, the large research organization, to survey Canadians about their attitudes toward credit cards.  We did the survey because I know that if all you are doing is making a minimum payment on a credit card, you risk being in debt forever.

We discovered that of those Canadians carrying a balance, 1 in 4 say it will take more than a year to pay off their outstanding balance, and 1 in 20 say they may never be able to pay off their credit card debt.

With that level of credit card debt, you would expect that Canadians are looking for debt management options, and they are.  Here are the options that Canadians carrying a balance on their credit cards have considered to eliminate their credit card debt:

Reduce expenses56%
Increase income32%
Talk to a credit counsellor10%
Do a debt settlement4%
Go bankrupt3%
Do a consumer proposal3%
Other19%
Don’t know14%

Not surprisingly, reducing expenses and increasing income were the two most considered options, and I agree, if you can cut expenses or increase your income (through a second job, or by working overtime) that is exactly what you should do.

What is surprising is that only 3% of people would consider filing a consumer proposal as a strategy to eliminate credit card debt.  Why is the number so low?

It’s possible that people don’t believe that a consumer proposal is a good option, but I disagree.  There are many advantages to a consumer proposal, which is a legally binding deal where you often pay considerably less than the full amount owing.  Once the proposal is accepted the credit card companies can’t sue you or garnishee your wages, and your payments are fixed, even if your income increases.  It’s a great deal.

I suspect that people don’t consider a consumer proposal because they’ve never heard of it. If 14% of people don’t know what they can do, and only 3% have considered a consumer proposal, it appears that what we need in Canada is more education about your alternatives for dealing with debt.

A consumer proposal is not the correct option for everyone, but if all you can do is make the minimum payment on your credit cards, it may be time to consider a consumer proposal, so I suggest you contact a consumer proposal administrator for a no charge initial consultation, and explore your options.

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