Consumer Proposals in Canada
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What is a consumer proposal?
If you are in need of an alternative to declaring personal bankruptcy you can file a consumer proposal.
A consumer proposal is an agreement with creditors and a resolution under the Bankruptcy and Insolvency Act, outlining the percentage of the debt you owe them and allowing you to extend the amount of time you can pay back this debt.
Consumer proposals allow individuals to negotiate a reduction of their debt and have the more flexible option of spreading monthly payments over a number of years. This monthly payment is calculated according to your budget and unique situation.
Payments are made through the licensed insolvency trustee (LIT) who will pay the creditors on your behalf.
The difference between a consumer proposal and credit counselling (or ‘debt management’) is that with credit counselling, this involves working with a credit counsellor to repay debts whereas in consumer proposals, a licensed insolvency trustee assesses your finances in order to determine what you are able to offer to creditors and all the options available to you.
A consumer proposal as an alternative to bankruptcy is one of the most efficient and safe ways to consolidate debt.
Is a consumer proposal worth it?
There are many benefits of submitting a consumer proposal:
1. Avoid bankruptcy
Consumer proposals can offer a safe way to avoid filing for bankruptcy. In most cases, creditors will accept your consumer proposal if they are paid back more than they would expect to receive through a bankruptcy.
2. Manageable payments and reduce debt
Through a consumer proposal, you agree to a manageable payment package and can dramatically reduce how much of the actual debt you pay back – sometimes by up to 70%.
3. Fixed payments
While through a bankruptcy, the more you earn the more you have to pay back, a consumer proposal involves fixed-price repayments, so you pay back the same amount each month regardless of whether your earning potential increases.
4. Maintain ownership of all your assets
Unlike with a bankruptcy, your assets are protected, including investments and equity in your home. This is one of the biggest benefits of a consumer proposal.
What debts does a consumer proposal help you get rid of?
A consumer proposal can be incredibly useful because it can help to eliminate a large portion of your unsecured debts. These debts may include:
- Credit card
- Tax debts
- Student loans
- Bank loans
Consumer proposals only deal with unsecured creditors, meaning all secured loans must be handled separately. This means it does not affect debts such as your mortgage on your place of residence or your car loan.
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Are you eligible for a consumer proposal?
In Canada, consumer proposals are federally regulated. In order to be eligible, you must meet the following criteria:
- You are able to pay a percentage of your debt.
- You’re a consumer with less than $250,000 of unsecured debt.
- You are a Canadian citizen or own property in Canada.
- Your debts are greater than any asset that you own.
Harris & Partners Inc. can help you file a Division 1 proposal. Don’t wait! There is no reason to lose your house or car unless you wish to give them up. As an LIT, we can help you formulate an agreement that works for both you and creditors.
How to file a consumer proposal
Here are the steps to filing a consumer proposal:
- Meet with one of our Licensed Insolvency Trustees (previously known as Trustees in Bankruptcy), to determine your financial position.
- If it is decided that filing a consumer proposal is appropriate for you and conditions are met; a consumer proposal is filed with your signature.
- Then, your consumer proposal will be reviewed by your creditors. They will decide whether they will approve it.
- If accepted, they’ll send it back for you to review. If denied, then you can consider making changes to the proposal and resubmitting it, determine another way to solve your financial issues, or declare bankruptcy.
- Once the terms of the proposal are filled and all payments are made, the remaining debt from the proposal is completely discharged.
Frequently asked questions
Get in touch with Harris & Partners
Don’t wait for your debts, penalties and interest charges to increase. For most, the first step onto the path toward a debt-free life involves filing a consumer proposal. With fewer, less expensive payments, consumer proposals are a less stressful way to face your debts head-on.
Harris & Partners Inc. is a licensed trustee insolvency (LIT) providing specialist debt relief options to help you manage your financial troubles. We offer a number of debt relief services including debt consolidation and debt settlement.
Harris & Partners are your go-to source for debt help Canada. We have conveniently accessible locations throughout the country. We are determined to use our expertise to help you live debt-free. Get in touch with a member of our team today!