Many people don’t know that they can consolidate almost all their debts in a Consumer Proposal. Unlike traditional or non-profit credit counselling programs, Consumer Proposals can even be used to deal with debt owing to Canada Revenue Agency (CRA), successfully obtaining CRA debt forgiveness for debts including personal or corporate income tax, GST, payroll debt etc.
A Consumer Proposal is the only debt settlement option for government debts in Canada, besides filing a personal bankruptcy.
Here is a brief list of consumer and business debts that can be consolidated through a Consumer Proposal:
- Credit card debt
- Overdraft or line of credit
- Payday loans
- Government debt:
- Income taxes, GST, source deductions, etc.
- Student loans (provincial, federal)
- Privately held student loans
- Shortfalls (vehicle leases or mortgages)
- ICBC debt
- MSP debt
- Private individual / family debts
Are there any debts that can’t be written off in a Consumer Proposal?
There are a very few debts that would survive filing a Consumer Proposal in Canada, these include: court awards for damages connected with bodily harm or sexual assault, child or spousal support arrears, court fines, debt incurred through fraud or misrepresentation, and government student loans if it has been less than seven years since you were a student before filing the Consumer Proposal. (Although if it has been over five years you may make a court application requesting government student loans also be wiped out under a hardship provision.)
Would filing a Consumer Proposal affect my mortgage?
Many people want to know if they can use a Consumer Proposal to settle credit card debt and general consumer debt without impacting their mortgage. The answer is yes, it is possible to deal with your consumer debt without putting your living situation into jeopardy.
Mortgages and vehicle financing agreements typically give the lender a hold over an asset (like your house, in a mortgage), which makes the lender what’s called a “secured creditor”. Most Consumer Proposals don’t offer to settle debts with secured creditors, since often people want to carry on with the mortgage or vehicle loan. If you continue to make mortgage and/or car loan payments, you should have no issues with retaining these assets during the term of your Consumer Proposal.
On the other hand, if you do not want to continue with a mortgage or vehicle lease or loan, the start of the Consumer Proposal can be a good time to allow the secured creditor to take possession of the asset – any shortfall (difference in what you owe and what the asset is resold for) would then be written off in the Consumer Proposal.
Consumer Proposals provide great flexibility and customization options for people to settle and consolidate debt. The first step in filing a Consumer Proposal is to meet with a Licensed Insolvency Trustee – no referral is required!
Interested in learning more about Consumer Proposals? Book your free, confidential debt consultation with Sands & Associates today!