Consumer Proposal Pros and Cons – Is it worth it?

Almost half of all Canadians find themselves with less than $200 to spare by the end of the month, leaving them vulnerable to financial challenges. In today’s uncertain economic climate, unexpected expenses can easily push you into debt, leaving you uncertain about your next steps.

You might be burdened by debt, but you could also have valuable assets you wish to protect. Concerns about the long-term repercussions of bankruptcy may be on your mind. Fortunately, there’s an alternative solution – a Consumer Proposal, which can offer you a fresh financial start.

If you’re grappling with financial stress and struggling with payments, seeking guidance from a Licensed Insolvency Trustee at Harris & Partners is a wise step. They can help you explore options and propose a debt repayment plan to your creditors. Harris & Partners provides expert assistance and complimentary debt counseling to assist you in regaining financial control.

Now, let’s assess the advantages and disadvantages of filing a Consumer Proposal to help you determine if it’s the right solution for your unique circumstances.

Key Points

• Is a Consumer Proposal Worth It?
• Pros of a Consumer Proposal
• Cons of a Consumer Proposal
• Take Control of Your Finances with Harris & Partners

Is a consumer proposal worth it?

Consumer proposals can provide significant benefits in managing overwhelming debt, making them worth considering. Here are key reasons to explore a consumer proposal:

• Debt Relief: Consumer proposals offer a structured way to regain control of your finances, preventing debt from snowballing with fees and penalties.
• Bankruptcy Alternative: If you prefer not to go bankrupt, a consumer proposal is an attractive alternative. It doesn’t require as much financial record-keeping as bankruptcy.
• Debt Repayment: Consumer proposals are ideal if you can’t afford to repay all your debts in full. You work with a Licensed Insolvency Trustee to determine affordable payments over a reasonable period.
• Partial Debt Repayment: If you want to pay back a portion of your debts, a consumer proposal allows you to design a plan that aligns with your financial capacity.
• Stopping Collection Activity: A consumer proposal legally halts all creditor collection activities, including garnishments, providing immediate relief from financial stress.

Consider these factors to decide whether a consumer proposal is the right solution for your debt challenges. Consulting a Licensed Insolvency Trustee is a vital step in making an informed decision.

Pros of a Consumer Proposal

If your debt is starting to feel overwhelming, a consumer proposal might be the help you’ve been looking for. They offered a structured way for you to regain financial control, stopping your debt from snowballing with fees and penalties and pooling all your debts into one manageable, monthly payment.

Other benefits of a consumer proposal include:

• A viable alternative to bankruptcy
• The repayment amount is often less that the total amount of your debt
• Creditor collections are stopped as soon as you file a consumer proposal
• No additional interest accumulates on your debts
• You don’t have to provide monthly income and expense reports
• The monthly payment is fixed and unaffected by changes to your income
• Provides a pause on student loan collections, though interest continues
• Creditor approval is obtained at the start, meaning no court hearings
• The repayment amount it based off what you can afford
• Smaller impact on your credit report
• You can keep your credit cards, assets and tax refunds
• Offers budgeting and money management counseling
• Allows for early repayment via increased or lump sum payments

Throughout the Consumer Proposal process, you’ll benefit from the knowledge and support of a Licensed Insolvency Trustee (LIT). The LIT communicates with your creditors on your behalf and guides you through every step.

Cons of a Consumer Proposal

Before choosing a consumer proposal, it is important to have the full picture. As with any debt help solution in Canada, consumer proposals come with some disadvantages. These are:

• If the majority of your creditors reject the proposal, you may have to resort to bankruptcy
• Consumer proposals typically take four to five years to repay
• Payments are fixed, making it difficult to adjust monthly amounts without amending the proposal and undergoing the voting process again
• Defaulting on the consumer proposal by falling three months behind in payments bars you from filing another proposal until the included debts are fully paid
• A consumer proposal appears on your credit report and adversely affects your credit score for three years post-completion
• Some financial institutions treat a proposal on your credit report similarly to a bankruptcy when you’re rebuilding your credit
• A consumer proposal is only viable for those with less than $250,000 in debt (excluding the primary residence mortgage)

Take control of your finances with Harris & Partners

Not sure if a consumer proposal is right for you? Get in touch with one of our Licensed Insolvency Trustees today – they can talk you through the details and help you find the best debt solution for you.

Dealing with debt is never simple, but the good news is you don’t have to face it alone. With our help you can find your path to financial independence – we’re here to support you every step of the way.

If you want to chat about consumer proposals in Canada, get in touch today.