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How Bad Is A Consumer Proposal?

18 January 2024

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How Bad Is A Consumer Proposal

Dealing with money problems can be really tough. When you owe a lot of money and it feels like you’re sinking, it’s important to know your options. One choice you might have heard of is something called a “consumer proposal.” But how bad is it, and what does it mean for you?

In this blog, we’re going to run you through everything you need to know about consumer proposals. At Harris & Partners, we don’t make things more complicated than they need to be. Instead, we give you the facts you need to make a smart decision about your money. Let’s get into it.

What is a Consumer Proposal?

A consumer proposal is a financial lifeline for those grappling with overwhelming debt. It’s a legal process designed to help individuals regain control of their finances and find a way out of debt while avoiding the stress of bankruptcy.

How does a consumer proposal work?

Let’s delve into the nuts and bolts of how a consumer proposal works.

Step 1: Seeking Professional Guidance

The first crucial step in the consumer proposal process is to connect with a Licensed Insolvency Trustee (LIT). They will become your guiding light throughout this journey, offering expert advice tailored to your unique situation.

Step 2: Financial Assessment

Once you’ve chosen an LIT, the next phase involves gathering your financial information. This step is a pivotal one, as it helps you and your trustee create a comprehensive picture of your financial health. You’ll need to provide details about your income, expenses, assets, and, most importantly, your debts.

Step 3: Crafting the Proposal

With your financial information in hand, your LIT will work with you to craft a consumer proposal. This proposal is essentially an offer you make to your creditors, proposing to pay them a portion of what you owe over an extended period. The proposal must be fair and reasonable, taking into account your income, assets, and the interests of your creditors.

Step 4: Filing the Proposal

Once the consumer proposal is prepared, it’s time to officially file it with your creditors. Your LIT will do this on your behalf. From this point onward, you gain several advantages. First, the proposal immediately stops creditors from taking any legal actions against you. This means no more collection calls, wage garnishments, or threats of legal action.

Step 5: Legal Protections and Negotiations

One of the key aspects of a consumer proposal is the legal protection it offers. Your creditors are legally required to stop their collection efforts and attend to the proposal. They’ll have 45 days to review the proposal and decide whether to accept or reject it. During this period, negotiations may occur between your LIT and your creditors to ensure the proposal is acceptable to all parties involved.

If the majority of your creditors agree to the proposal, it becomes legally binding on all of them, and you can breathe a sigh of relief. You’ll be making manageable monthly payments to your LIT, who will then distribute the funds to your creditors.

Advantages and Disadvantages of a Consumer Proposal

Consumer proposals can be a ray of hope in the dark world of debt, but like any financial decision, they come with their own set of advantages and disadvantages. Let’s explore these pros and cons to help you make an informed choice.

Advantages of a Consumer Proposal

Some of the main advantages of a consumer proposal are:

Disadvantages of a Consumer Proposal

Some of the main disadvantages of a consumer proposal are:

Consumer Proposal vs Bankruptcy

The debt relief solution most often compared to consumer proposals is bankruptcy. Each of these approaches has distinct differences that can significantly impact your financial future. Let’s compare them to help you understand which might be the right path for you.

1. Credit Impact:

2. Asset Protection:

3. Time Frame:

4. Costs and Long-Term Consequences:

For a more in-depth comparison, look at our article comparing consumer proposals and bankruptcies.

Regain Financial Control with Harris & Partners

If you’re considering a consumer proposal or need some advice on which debt relief solution is right for you, look no further than Harris & Partners.

Our Licensed Insolvency Trustees have years of experience in helping people just like you. We know how crushing the weight of debt can feel, but you don’t have to face it alone.

When you partner with us, we take the time to fully understand your situation, giving you a judgement-free space to openly talk about the struggles you’re facing. We are always on hand to answer any question you may have and support you every step of the way.

Get in touch today and start your journey towards financial freedom.