Filing a consumer proposal has become a popular option for people who are unable to pay their debts in full. And yes, you do require a licensed trustee to file a consumer proposal.
It is always an option for you to informally propose some kind of compromise or settlement to a creditor on your own. However, ceasing collections is voluntary and you are unlikely to receive that co-operation unless you can pay a significant portion of the debt in a very short time.
A consumer proposal is different because it is a formal proceeding pursuant to the Canadian Bankruptcy & Insolvency Act. The advantages of a consumer proposal are obvious:
- Your creditors are legally required to cease all collections activity
- You retain control over all of your assets
- It deals with all of your unsecured debts
- You are not required to repay the full amount of the debt
- Payment terms can be structured to fit your circumstances, with a total period of up to five years
Understandably, creditors don’t really want you to file a consumer proposal. Their preference would be that you repay the full amount of the debt as well as the agreed upon interest. However, they will usually agree to a consumer proposal when they see that it is better than the alternative, meaning that you would file bankruptcy and they would receive even less.
Can you file a consumer proposal on your own? The answer is no. You require the assistance of a trustee. Any proposal you personally make to your creditors does not carry the power of the Bankruptcy & Insolvency Act.
Can you hire a consultant to file a consumer proposal for you? Again, the answer is no. However, this question touches on a point of controversy.
A common tactic is for unlicensed debt consultants to advertise that they can help you with “government programs” to help reduce your debts by up to 70%. Some of them will go out of their way to note that they are “not a trustee.” All they are referring to is a consumer proposal. The controversy is that you would be charged a consulting fee of a few hundred to a few thousand dollars, and then referred to a licensed trustee to actually file the proposal. There is no need to pay that consulting fee when you can contact a trustee directly for no upfront cost.
The bottom line is that a large percentage of people these days are struggling with debt payments. For many of those people, a consumer proposal is a good option to deal with their money problems. One of the challenges is finding the right person to help you through the process. Your best choice is to talk to a licensed trustee because a trustee is required to review all of your options in an open and unbiased manner.