If you’re new to the realm of debt resolution options, or you feel the need to replenish your financial memory banks, there may just be some fogginess as to what exactly a Consumer Proposal is. Read ahead for some assistance in clearing the air around this increasingly popular choice of debt relief.
JUST WHAT IS A CONSUMER PROPOSAL?
- In a nutshell, a Consumer Proposal is an option that allows you to make changes to what you owe and how you pay it back.
- The way a Consumer Proposal works is by restructuring your debt – generally by reducing the total amount you owe by approximately 70% – while also halting interest charges.
- A Consumer Proposal is not the same thing as a debt consolidation, a credit counseling program or tactic offered by debt consultants.
- The main difference is that you are negotiating to repay just a portion of your total debts (typically 30% or so), rather than the full amount as in a debt consolidation, and interest stops accruing on your debts the day you file.
- Furthermore, a Consumer Proposal can include key debts such as income tax arrears or student loans that simply can’t be negotiated under a debt consolidation or credit counseling program.
HOW MUCH DO I HAVE TO OWE TO BE ELIGIBLE?
- If you owe between $1,000 (not very hard to do) and $250,000 – excluding mortgages on your residence – you are eligible to file a Consumer Proposal.
- If your debts exceed $250,000 a Proposal is still an option, but there will be some difference in procedure.
- A Consumer Proposal typically makes the most sense if your debts exceed $10,000.
WHAT CAN A CONSUMER PROPOSAL COVER?
- In essence, a Consumer Proposal can cover just about any general consumer debt as well as things like tax debt and student loans (provided you have been out of school for more than seven years).
- Yet another upside is that, when a Consumer Proposal is filed, ALL collection action (including wage garnishees) must stop.
- Some debts do however survive a Consumer Proposal. These include: spousal or child support arrears; student loans that were incurred within seven years of filing the Consumer Proposal, as well as; Court fines and Court awards for damages associated with bodily harm or sexual assault, and; debts incurred through fraud or misrepresentation.
WHO CAN HELP ME FILE A CONSUMER PROPOSAL?
- If you’ve read some of our previous blog posts, you’ll already know the answer to this one: ONLY a Licensed Trustee can file a Consumer Proposal.
HOW MUCH ARE THE FEES?
- With a Consumer Proposal, beyond the payments being made to your creditor(s), there is no additional cost. The fees, which are set by tariff as per the Bankruptcy and Insolvency Act, are taken directly from your payments before any funds are issued to those you owe.
Given that it’s a legal option (and an excellent one at that) which provides the means to manage troublesome debt – without filing for bankruptcy – it’s no surprise that Consumer Proposals have become the route of choice for many of those facing debt trouble.