A consumer proposal is a Government of Canada federally approved program that allows an individual to make an offer, or proposal, to their creditors to pay back a portion of the debt they owe. This method of debt consolidation must be made via a Licensed Insolvency Trustee as there is no other way to file a consumer proposal. A consumer proposal has become the most popular way to obtain debt relief in Canada.
There are several positive factors that occur when a consumer proposal is made.
- The interest rate on unsecured debt can be reduced to zero.
- Your creditors have to stop contacting you. This is referred to as a stay in proceeding.
- Most importantly, you can usually offer a percentage on the dollar via a monthly payment that fits your budget.
Following the filing of a consumer proposal there is a 45 day voting window where the creditors have an opportunity to vote if they are in favour or against the consumer proposal. Typically, they are in favour because the projected recovery on their debt is larger than what might otherwise be recovered in a bankruptcy filing.
Once approved, there is essentially a contract in place between you and your creditors and you have accomplished a lot. For instance, your overall payments will have been lowered substantially. We often see payments drop by up to 80% of what was being paid previously. You also get to keep your assets. The cost of making the consumer proposal is regulated by the federal government and is included in your consumer proposal payment; call it an all-inclusive. You would get to keep your tax refund so long as you don’t have income tax debt initially. You also avoid having to pay what is known as surplus income if you had made an assignment into bankruptcy.
Is it Right for You?
As with many things in life, there is still a question of timing. When does it make sense to file a consumer proposal? A consumer proposal could be right for you if you are in debt and any of the following apply:
- You need help with your debt but wish to avoid bankruptcy.
- You would like to keep your assets.
- You can afford to make one modest monthly payment.
- Your work or profession would require you to disclose a bankruptcy filing.
- You owe less than $250,000 other than your mortgage.
- Your income might rise in the future.
- You can’t obtain a consolidation loan from your bank.
While some of these terms may sounds scary, schedule an appointment via telephone from the comfort of your home or arrange to come into the office in person and ask questions. Soon you will realize that there is a pathway to a better financial future. Go ahead and make that first appointment, its free!