When I meet with people in my Windsor Ontario office to explain how a consumer proposal works, a common question is “what is the catch”. It doesn’t make sense that their creditors would be willing to accept less than full payment on their debt.
Think of it this way. If you aren’t able to make full payment on your debt your balance isn’t getting smaller. Maybe you aren’t even making your minimum payments. Your creditors have to keep calling you for payment and eventually they may even turn the account over to a collection agency or begin court action. All of that takes time and money. If you offer a consumer proposal, they can stop their collection activity.
Another concern people have is they think filing a consumer proposal just puts a hold on the collection of the account. It doesn’t just put a hold on it, it stops it. For instance, if you have $20,000 in debt and your consumer proposal is for $12,000, that is all you pay. It doesn’t mean that you have to pay the reminder of your debt (in this case $8,000) later.
Keep in mind that filing a consumer proposal is a serious commitment. You need to be able to make monthly payments for up to 5 years. It does put on a mark on your credit, but lets face it, if you are behind on your bills you already have a mark on your credit.