what is a consumer proposal

What Is a Consumer Proposal and How Does It Work?

I had the distinct pleasure of attending the 2017 Annual CAIRP Conference in beautiful Kelowna, BC back in August. As we were in the winery-rich Okanagan, the organizers invited us to ‘sip and savour’ the knowledge and insights offered by our peers and industry experts.

The conference was packed with panel discussions and presentations, featuring leaders and influencers from within the Licenced Insolvency Trustee profession.

One that I found particularly inspiring, however, was a panel discussion called “Navigating the Landscape of Consumer Proposals.” The speakers educated us on some creative ways to build Consumer Proposals better, and it was incredibly helpful. 

Many people that face financial difficulties aren’t aware of Consumer Proposals or don’t know exactly what they are. Let’s take a closer look at them here, and discuss whether a Consumer Proposal might be a good fit for your needs.

What Is a Consumer Proposal?

In essence, a Consumer Proposal is a deal you make with your creditors to eliminate your debt.

Importantly, Consumer Proposals only cover a portion of your debt. By agreeing to the proposal, your creditors agree to waive the remaining balance. The amount you pay is generally based on both what you owe and your income.

For example, say you owe $25,000 total to 3 different creditors, and you can’t keep up with the payment. You have a steady income but you can’t meet the minimum payments on your debt.

Together, we would sit down and figure out exactly what you can afford to pay each month. This amount would be drafted into a Consumer Proposal and submitted to the creditors. If they agree, you will continue to pay that monthly amount until the terms of the Consumer Proposal are met, at which time the rest of the debt is eliminated.

Is It a Good Fit?

While it might sound like a great option, Consumer Proposals aren’t for everybody. A Consumer Proposal might work for you if:

  • You have a stable income
  • You can afford monthly payments
  • You don’t qualify for a debt consolidation loan
  • You are trying to avoid claiming bankruptcy

If you still think it’s a viable option, then it is important to be aware of some of the disadvantages of submitting a Consumer Proposal:

  • Consumer proposals are on the public record, and show up during credit checks
  • Creditors can reject your proposal, asking for a higher monthly payment
  • If you miss more than 3 payments, the Consumer Proposal is deemed to have been annulled

Know Who to Go to

If you are looking for somebody to talk to about insolvency issues, it is absolutely critical that you understand this one fact:

Only a Licensed Insolvency Trustee has the power to submit Consumer Proposals

Too often I see people after they have been misled by something they have read on the Internet.

At Chase & Associates, we offer a free initial consultation, where we will sit down face-to-face and discuss your financial difficulties to find the best options available to you.

If you think a Consumer Proposal might be the right direction for you, come in and take advantage of my recent learning experience at CAIRP 2017. Book a consultation today and together we can build a healthy financial outlook for you and your family.

Derek L. Chase, CPA, CA, LIT

Being able to offer debt help assistance to individuals and corporations on a more intimate basis was a driving force in completing a “second CPA” by becoming licensed by the Federal Government as a Licensed Insolvency Trustee (previously Trustee in Bankruptcy) in 1997. It is extremely satisfying to be able to witness lives change for the positive due to a restructuring of financial affairs.