Monday, June 29, 2015

What is a consumer proposal?

A consumer proposal is a debt management solution that allows you to settle debts for less than what is actually owed, while still avoiding bankruptcy.  With the help of a licensed trustee you can file a consumer proposal to your creditors to pay a portion of your debt with no interest. This can be a great alternative to bankruptcy for individuals with a stable income that are able to afford their living expenses while still paying a portion of their debt. The following is a brief overview of consumer proposals, for more information please see Section 66.11 of the Bankruptcy and Insolvency Act.


How does a consumer proposal work?

After meeting with a licensed trustee and determining what debt payments you can afford to make, the consumer proposal will be sent to your creditors who will then have the opportunity to vote whether they agree to the terms. If more than 50% of the creditors accept, your proposal is accepted for all unsecured creditors. In general, most creditors are willing to agree to a reasonable payment even if it is less than what you owe so long as they recover more in a consumer proposal than they would if you filed for bankruptcy.


What are the benefits of a consumer proposal?


  •  You are able to keep all assets including your house and vehicles
  •  Interest will stop being charged at the date of your proposal on your unsecured debts
  • You repay less than what you owe, making your monthly payments more manageable
  •  It stops collection efforts, wage garnishee’s and collection calls
  • You may possibly pay lower monthly payments than you would in a bankruptcy if you have a higher than average income
  • You will not automatically lose your tax refunds for past unfiled and current year income tax returns as you would in a bankruptcy
  • There would be a less sever effect on your credit rating.


What will a consumer proposal not do?


  •          Will not eliminate secured debts such as a car loan or home mortgage
  •          Will not eliminate student loans, in certain circumstances
  •          Will not eliminate child support or alimony obligations


Is a consumer proposal right for you?


In order for a consumer proposal to be viable, you have to have sufficient confidence that your income would enable you to firstly meet your living needs while still having enough room to make a payment into your consumer proposal.

To determine if a consumer proposal is an appropriate option for you, it is important to meet with a licensed trustee to see which option would be best for you.

If you would like to learn more about consumer proposals, or to determine if you qualify, please contact our office to set up a no cost initial assessment at one of our convenient locations.