A Consumer Proposal is a contract that’s negotiated with your creditors on your behalf, by a consumer proposal administrator (also called a Bankrutpcy Trustee). A legally binding agreement is put in place to arrange for a partial repayment of your total unsecured debt owing. You’ll pay a portion of what you owe, and your creditors will agree to ignore the balance owing.
These are the 5 main benefits to a consumer proposal
- Most wage garnishments cease immediately
- Interest stops accumulating from the date you file
- Collection companies and creditors can no longer contact you for payment; it’s the law!
- You are not in jeopardy of losing your house or other assets, as in bankruptcy
- You repay only a portion of your debt owing, with a maximum repayment period not exceeding 5 years
If a Consumer Proposal is a viable option for you, it can be beneficial in the following ways:
“Surplus income” is not a consideration, as it is in bankruptcy. This means that your assets are not at risk, and there is no danger that they may have to be surrendered to the administrator as part of your proposal agreement. When the proposal is in place, it does not matter if your income goes up! You owe only what is agreed upon terms of the proposal.
The effect on your credit score is generally less than a bankruptcy. Consumer proposals typically produce an R7 rating, whereas personal bankruptcy will produce an R9. However you should know that Consumer Proposal is dealt the same way as a Bankruptcy by Lenders. always investigate all other options before to choosing to file for bankruptcy.
If you file a consumer proposal, you will be repaying a portion of your debt unlike Bankruptcy where all debt is eliminated
Advantages to Your Creditors
Why would your creditors accept a consumer proposal and accept less than the full amount they are owed?
A proposal will generally allow creditors to recover more than they would in a bankruptcy.
- Having trouble paying all your bills, even though you have a good job?
- Thinking about filing bankruptcy, but not really wanting to?
- Simply looking for more information about ways to deal with your debt?
What do you do?
If you find yourself in this situation month after month, a Consumer Proposal may be one option, Debt Settlement is certainly another and it can avoid Consumer Proposal or Bankruptcy all together.
Consumer Proposal may be an option if:
- You have debts over $5,000, but not over $250,000 (not including your home mortgage).
- You’ve got a good job, and can afford to make some payments each month.
- You just can not afford to repay everyone in full with interest.
- You can’t get a debt consolidation loan because your debts are too high, even with your steady job.
- You don’t want to go bankrupt, because:
- With your income, you would be subject to surplus income penalties.
- You don’t want to lose any of your assets, such as a valuable home or car.
What a consumer proposal won’t do for you:
A consumer proposal will not:
- Allow you to pick and choose the debts to be included.
- Eliminate support and alimony obligations.
- Eliminate student loan obligations.
- Deal with your secured debts, such as your house mortgage and car loan. Your trustee can advise how to deal with these.
More Canadians choose Mortgage Intelligence when buying, refinancing or renewing a first or second Mortgage!