If you’re researching how to deal with your debts using a debt consolidation, credit counselling or even bankruptcy then you’ll also want to consider a Consumer Proposal. Consumer Proposals have gained popularity in recent years, but they’re still a relatively unknown federally legislated solution that Canadians can use to manage their debts. Check out our five reasons to file a Consumer Proposal, Canadians’ number one alternative to bankruptcy:
Repay what you can afford – A major benefit of filing a Consumer Proposal is that the amount that needs to be paid in full settlement of the debt is typically reduced by a significant amount; it is not uncommon for people to repay only 20-30% of what they owed initially. Not only is the amount you need to pay to settle the debt in full often greatly reduced, but your creditors must stop charging interest by law. Accumulating interest is often what hinders people who make regular payments towards their debts from paying off their debts completely.
Deal with all your debts – Instead of juggling several balances, everything can be taken care of by making one simple payment each month, as nearly all creditors can be part of a Consumer Proposal. Where traditional consolidation loans and plans may not address certain government debts like income taxes or student loans, these types of debts and more can all be consolidated under a Consumer Proposal.
Protection from creditors – Because a Consumer Proposal is a federally legislated debt resolution mechanism, it provides an automatic “stay of proceedings”. What this means is that once your Consumer Proposal has been filed by the Licensed Insolvency Trustee, your creditors can no longer pursue you for payments, or collection of overdue accounts – they must only communicate with the trustee. If creditors are seizing your wages or bank account, you’ll further benefit from this stay of proceedings as the garnishment must cease immediately.
Regulated licensing and fees – The Office of the Superintendent of Bankruptcy – Canada oversees all aspects including licensing, filings and fees related to Consumer Proposals – this makes the entire process very transparent. The trustee’s fees are fully regulated and legislated, which means you can feel assured that there are no hidden fees or other charges. To start a consumer proposal, there is no ‘lump sum’ or ‘up front’ fees required. Once you and the Trustee have worked out the monthly payment amount, you make this payment ONCE to the Trustee, and the Trustee sends the proposal out to be voted on by your creditors. Consumer Proposals are a specialized tool that only a licensed insolvency trustee is legally empowered to administer. Beware of imitators!
Rebuild your credit – A Consumer Proposal will provide a “reset” on your credit history, allowing individuals the opportunity for a fresh financial start. Two credit counselling session focused on budgeting and boosting your credit rating are required as part of the Consumer Proposal. Because you’ll have the means to strengthen your credit rating following the Consumer Proposal AND no longer be carrying debts, your ability to meet future financial goals will be that much greater.
The best way to determine whether or not a Consumer Proposal could be a solution for you is to contact a Licensed Insolvency Trustee at Sands & Associates for a confidential assessment. Consultations are always free and you’ll walk away with information about not only Consumer Proposals, but other possible options and solutions specific to your situation.